Growing in foreign markets is complicated. I get it. It’s not something that you can do overnight, however by avoiding the most frequent mistakes your international expansion can be successful.
Most companies have growth goals, whether they are selling physical products or services. These expansion aims often mean that entrepreneurs and company owners look across their borders for further opportunities.
There are many mistakes that you can make when expanding your business domestically. However the number of possible errors (& the costs involved) increases considerably as soon as you also start to take your business international. Companies tend to forget in their euphoria about the project that it is complex to expand internationally.
Some of those mistakes are merely tiresome, expensive and time consuming, but others could destroy your business or even land you in prison.
So what are some of the most common mistakes that companies make when expanding into international markets? What do you need to consider to assess the risks and increase your chances of success? These are my top frequent mistakes in international expansion, although they are broken down into many mistakes as they each have several components.
Mistake #1: Lack of Self Awareness
Many leaders are so focused on the “Action! Go, go, go!” approach that they don’t really reflect before beginning new projects. The main thing for them is that they are doing something and that feels like progress…
What is your why?
That seems to be such a buzzword amongst small business advisors right now, that it almost hurts my fingers to write. Then again it’s an important question: why do you want to expand into new international markets? Just “to earn more money” is too general.
Of course there are a multitude of valid reasons for doing this. (Hint: reaching frequent flyer status or because you always wanted to visit Rome are not 2 of them):
- Maybe you have exhausted growth possibilities in your home market & are looking for new growth opportunities
- Perhaps you want to extend the life cycle of a hero product
- To service a proven demand if you are receiving frequent enquiries
- you might be wanting to spread your risk by not depending on a single location for your results
You shouldn’t expand internationally (without further reflection) to support poor results on your home market. You need to get to the root of those issues at home first.
If you have growth in your home market, do you know what are the drivers of that growth? Think about what are the key components of success for your business right now. Are they something that you believe you can replicate or leverage in your target international market?
For example, what are your core competencies? What are the skills and qualities that your team brings to the table which help to make you unique? This could be the speed of your customer service or a technological advantage.
Once you know this, you can consider whether those abilities will help you to expand internationally. Will you be able to get new clients? Does your product allow you to give customer value? Could those advantages be easily replicated by a competitor?
Besides considering what problems or pain points you can solve for your end consumers, think also about how attractive your company is for a potential import partner. Not only in terms of margins you can offer and prestige, but also as to how easy it is to do business with you.
How does success look?
Have you decided how success in an international market should look? Have you defined SMART (or SMARTER) goals? Check my post about goal setting if you don’t remember what the acronym stands for. You can use this for company goals as well as personal goal-setting.
Mistake #2: Not having a laser sharp strategic focus
It’s essential that you consider how a new market would fit into the overall picture of your company strategy. International expansion isn’t a decision to be taken lightly – success needs to be seen as a long-term objective. It also shouldn’t be an emotional decision so you need to base it on data. You can find a lot of factors that you should consider to make this decision in my free ebook. Sign up in the form below if you don’t have that already.
A lot of companies act on a trial and error basis which can work out, but usually takes longer and costs more money. In this scenario, problems come up along the way due to a lack of planning. For example, surprises about pricing, costs, regulatory questions or information about the competition.
Fuzzy behaviour also includes statements like, “we’re going to focus on Asia”. Now that’s a big chunk of the world – around 60% of the global population. Define specific countries!! Each country has it’s own specifics and almost everyone hates to hear that their market is just like country A or B. To learn more about deciding which international market to enter, download my free ebook on the topic.
Mistake #3: Failing to read the market correctly
Research prior to entering a market is key. Don’t assume anything! It’s no good going into the project with rose-tinted glasses – you need to be aware of what difficulties await you.
Don’t assume anything!
This is probably one of the most frequent mistakes when it comes to expanding internationally. Companies assume that tactics that work well in their home market will work in their new chosen market too. No! A market might be similar to your home market in some ways but even so it will have it’s own language specifics, culture, regulations and consumer habits. Let’s face it, countries have regional differences too. Or would you expect markets in New York and California to “tick” in the same way?
Misunderstanding the opportunity
Just because a country is large, doesn’t automatically mean that the potential for your product is equally great. China is a huge market but the competition is also unbelievable if you’ve never experienced it before. That doesn’t mean the potential doesn’t exist, it’s just not a “streets paved with gold” scenario by any means. If we continue with the example of China, it’s easy to underestimate the regulations. You might have to change your product specifications and entire business model in order to be successful selling there.
Product/market fit is vitally important. There might be a huge demand for “kitchen equipment” but if your product doesn’t meet the electrical requirements then you won’t be able to sell.
Not all markets work in the same way
You have to do the research in advance. Check as many sources of information as possible including asking locals and consulting experts. How do people do business in your market of choice? What are the channels for selling your product? Do people expect certain kinds of marketing? If you mostly sell by referrals in your home market, you have to figure out a way to replace those in your international business.
Mistake #4: Launching before you’re ready
If you don’t do the necessary preparation before you launch in a market you are literally asking for trouble. That’s not to say that you can’t resolve some things as you go along (that will be necessary) but you need to do the groundwork before you start.
I know, if you have an enquiry from Italy, you want to get on with selling but a sound financial plan will help reach sustainable growth. It’s expensive to enter into international markets, so you need to be sure you know what to expect. Not having the necessary cash flow can stunt your expansion from the beginning. Underestimating the cash needed is probably the most frequent mistake in international expansion.
I once talked to a company who heard from a market expert that they needed to budget €2 million for all the supermarket listings they wished for. This seemed extremely high to the CEO, so he only budgeted around a quarter of that, based on his experience in the home market and some export countries. Unfortunately, the €2 million turned out to be realistic meaning it took almost 3 times as long to reach the initial targets because the finance wasn’t available. He needed far longer to get listings as the cash wasn’t there.
Have you budgeted for all the incrementals? These can really add up, especially if you don’t do the research in advance to find out which costs you can expect. Do you need to pay for laboratory analyses? What have you agreed with the client about logistics? (who pays for what?). How will you finance your marketing?
Make sure that you don’t lose focus. Plan what you need based on solid preparation and don’t deviate too far from that unless you have sound evidence to prove the necessity.
Don’t be measly when it comes to the team
Skimping on the team is a false economy. Does your existing team have the expertise and bandwidth to handle an additional market? Especially in the initial phase, new markets mean a huge amount of additional work & presumably nobody in the company is sitting around waiting for new projects right now.
If you don’t have the expertise in the team, make sure you either get them training, hire an additional specialist or call in expert help. Same goes for if capacity isn’t there. If you need to bring in extra people, you need to decide whether to take on new staff or hire consultants. Local staff in the new market can be an option (although often complicated) but make sure the are also suitably compensated.
Have you really ensured you have a good product/market fit? Can your production cope with the additional capacity required? What about all the specialist departments who are involved in managing such a project – are they all adequately resourced? Do you need do adapt your sales or marketing channels? You should be able to answer yes to at least most if not all of these questions before you go into new markets.
Marketers need to ensure that they can actually market to people in the countries they’re looking to enter, which means considering details like how to display local currency, being able to email customers in their time zone, and supporting the languages customers speak.Nataly Kelly
Don’t underestimate the cultural and time issues
Working across time zones can be complicated and stressful for everyone involved. It may need compromises on both sides or even general adjustment of working hours. You need to be clear about your expectations and make sure that your team is on the same sheet.
If your teams are working across cultures for the first time, it will be a steep learning curve. This can lead to frustration if both sides have different appreciation about what constitutes “on time” or how tasks are to be completed. Training can help with this.
Do you have systems in place?
Having strong systems in place can help to navigate an international project more successfully. These don’t need to be super-complicated or formal – a checklist of documents required can help avoid mistakes. Exporting is complicated enough, without making it harder than necessary for yourself. Also, you never know when a member of the team might be out of action. You don’t want your container to be stuck in the port in Los Angeles because Judy fell off her bike at the weekend. Systems will help your team to manage such situations.
Make sure you avoid these frequent mistakes in international expansion
Global expansion is becoming increasingly important. It offers businesses and entrepreneurs the opportunity to gain a competitive advantage by targeting the right international markets and adapting their products and strategies to appeal to local customers. This can greatly increase your profitability and financial results over the years.
Doing international business is complicated though and can be full of pitfalls for the unwary. By avoiding these frequent mistakes international expansion can offer numerous opportunities for your company.
So be sure to have a clear strategy, do the research, proper planning and preparation and execute flawlessly, then you can enjoy the ride. It won’t always be an easy journey but a rewarding one, even if you need to be flexible along the way.
If this all sounds interesting but you don’t know where to start, please reach out to me for a chat and I’d be glad to help.