Have you ever heard about the Business Model Canvas as a tool for evaluating your international business? Maybe you’re asking yourself, why use models at all? Well for a start, a model helps YOU gain clarity. If you don’t have clarity about what value your product offers and which kinds of customers you offer solutions to, how do you expect to communicate that to others? (Especially once you enter into international markets where linguistic and cultural expectations may be drastically different to those of your home market).
Models can offer a simple visual overview of many aspects of your business, cutting through cultural differences and explaining clearly what you are about. It means that all of your global teams can easily gain a unified view of what are the values and structures of your business. Let’s be realistic, business plans can often be tedious and a lot of detail to read through, but using this depiction of the business model allows us to rapidly summarise our ideas in a structured way that you can easily share with others.
So, what is the Business Model Canvas & what’s special about it?
The Business Model Canvas is a method developed by the Swiss business owner and professor Alex Osterwalder. It is used to support in the development or redesign of innovative and/or complex business models by focusing on 2 main areas:
- Your value proposition as a company
In this way, you can create an overview of the key success factors for your business and this model allows you to present that on a single sheet of paper. Personally, I’d prefer at least A3, but in theory it can be done on one sheet of A4.
How is the Business Canvas Model Structured?
The model itself is made up of 9 elements and can be displayed on a kind of poster as mentioned above.
If you are just planning your entry into new markets, working through these elements can really help you clarify where you really stand, who you are addressing and how you anticipate making money in that market.
Which customer groups are you looking to reach? That sounds like an obvious question, but remember those clients may not be the same ones that you are serving in your domestic markets. Who are your perfect clients, or export buyer personas? Think about how the customer journey should look. This may involve some research as it can differ considerably from your domestic situation. How do you want to interact or contact your clients in a new international market?
A product which is a mass market proposition in Europe can easily be a high end offering in a country with low purchasing power and high tariffs. eg Cambodia.
Probably the easiest customer segment to define is if you have a very niche offering for a specific problem. Still, remember that especially in international business, the devil is in the detail so you still need to review it.
Do you segment within your target customers? If you have a wide range of products, you may need to decide which target customers you are going to focus on in your new market. Do you need to change your parameters for your new market? eg. if you target households with an income of < €80.000 in Europe, what would be the equivalent in Nigeria, Bolivia or Japan?
This model is designed for dealing with complex business situations so if you have a diversified customer base you also can use this. Eg Amazon who is offering e-commerce, but also cloud services.
Same goes for multi-stage businesses such as credit card companies. On the one hand they need to convince companies to offer their solution as a method of payment, and on the other, they need to sell cards to consumers.
What problems will you solve for your clients? What value will you offer them? This can be one of the trickiest in my opinion to get right for international markets as customers may have needs that you didn’t even realise. What sets you apart from your competition?
Again, remember that your advantages in an international market may come from different directions to at home. If you have 5 major competitors in your home market, but none who are officially imported into your target market, then you could have a first mover advantage, or a kind of Blue Ocean.
Whilst it’s really a bit like Mission Impossible these days to have a product which doesn’t exist anywhere else in the world, there are plenty of ways that you can offer value to customers. By turning the way the service or product is delivered around can create an advantage (think Netflix or Über). You might offer price savings, or alternatively you might have a home market advantage. If you want to position your clothing brand as stylish, then coming from Italy is going to be more of an advantage than being say from Belarus.
Will your clients even recognise that they have the problem you are looking to solve? If they are not aware of having a problem, you may have more work to do to convince them of the value of your offering.
Can you explain your value proposition as a high level concept? Ideally you should be able to summarise in just 3 words. (And of course, you then need to know those 3 words in the languages of all the markets you are targeting!).
How are you working now? Which channels work best for your products? Do you know the costs associated with the different channels in your target market? Eg. in Austria, where I live, infant nutrition is usually sold in drugstores or in food retail chains. In many markets around the world however, specialist baby stores are the norm and preferred option for mums. In China, baby stores are extremely strong, but online is a really popular channel too, which is growing fast.
Channels play an important role in how your clients will experience your company so it’s vital to consider how they want to buy the products or services. Don’t forget to consider that costs can vary across channels enormously from one country to the next – you don’t want nasty surprises.
How do customers expect to interact with your company? This will determine which structures you need to put in place. Or if yo can’t create those structures for some reason, you may need to re-evaluate your business model as to how you want to position your products on the market.
Maybe you think I sound like a broken record, but think about how cost intensive the management of your customer relationships will be. If you offer private banking services, you probably have individual client consultations whereas if you want to sell me a bar of chocolate I need considerably less advice in advance.
How do these relationships fit into your existing structures? If you have a product which sells on a community based model, you need to find out if your ideal clients would be open for that in your new market.
Sources of Income
Obviously an important “meaty” topic. How do your customers pay for your products? How would they like to be able to pay for them. How much are customers prepared to pay for your value propositions? With which currencies will you be dealing?
Each of your defined customer segments can generate one or more revenue streams. Those could be for example by sales, rent, service or partner deals.
Whilst this is a critical part of the business process where ever you are operating, the cost of mistakes becomes significantly higher in international markets. Are your clients creditworthy? Have you set up your business structures (contracts, commercial conditions, due diligence etc) in such a way that your partner in your export market can pay you? What happens if they default on payment? Will your contract offer you enough protection or do you need to consider credit insurance? Depending on the channels and products you are offering, you may at some point be faced with the question of what to do with goods which the customer wants to return or customs won’t allow into the country.
Think about the market prices of what you want to sell. Have you considered all the parameters like transport costs, customs clearance, duties etc which can all add up? Lots of people have been caught out with that since the UK left the EU for example and online orders have cost significantly more than the face value price.
Which key resources does your business rely upon or use in order to operate and provide services?
- Physical: buildings, vehicles, machines. Do you need something special for your international markets eg a special machine to code products?
- Intellectual (IP): trademark registrations (remember these can be for individual countries – especially important for China), patents, partnerships, customer data (think about data protection. How will you secure this? In many countries it’s not allowed to store databases of personal data of clients outside of the country)
- Human: do you need to think about specific locations in order to be sure of having the right pool of employees (eg creatives, pharmaceutical industry, IT…)
- Financial: Do you have enough cash? (Believe me, lack of cash flow can kill an expanding export business), do you have access to credit? Did you work out a clear financing strategy?
What Key Performance Indicators (KPIs) are you going to use to measure success in your new market? And how are you going to measure that data to ensure that it is an objective indicator of progress?
It’s vital to understand in advance how the costing will look for your new market. If your product needs a different kind of plug, or you need to comply with different safety standards these can swiftly eat into your profits if not considered from the beginning. You should know which activities are the most cost intensive and what your individual resources cost for each market.
Without a clear picture of what the numbers can look like, you’re driving in the dark with the lights off down a mountain road with 400m drop offs…You need to have your core activities, partners and methods clearly defined so that you can analyse this in full detail. Export markets are not necessarily more expensive than your home market but they may have a lot more different cost types for you to keep track of, which makes the business more complex to manage.
Do you know what price you are going to charge in each country? Is it worth doing a bigger production run and spending a bit more on warehousing? How much are you going to spend on product development and marketing?
Have you calculated everything through to make sure that your market oriented pricing will cover the structures defined in the Business Model Canvas and leave you with a profit?
Which activities are necessary for your product offering? What about for your customer relationships? How about in order to secure your revenue streams?
If you are producing a turnkey solution for a specific market, then your production may be a key here. However if you are delivering a product that you produce also for 20 other markets, your key activity may revolve around a certification that will allow you to import and sell in your new target market
Do you need to have a team who are focused on distributor acquisition or do you need to build a community of early adopters for your software solution? Define clearly what are the activities that you need your partners to carry out as this is an important stage of the sales process.
What about your whole marketing plan? What are the key steps to move forward in your market expansion?
Who are the key partnerships your business leverages or relies upon for success? Here you should also include the resources or value your business gets from these partnerships.
Having the right partners in export markets is really a key to success. You need to be sure that you have a range of “support services” that you can rely on for accurate information about new developments. Here you may need experts on customs, logistics, regulatory, localisation, tax, legal to name but a few.
Depending on your market, the partnerships that your distributor has can also be key to your success. eg knowing the right people to get rapid processing of your registration application or for getting listings in a supermarket.
Have you also considered alternative forms of collaboration for your international expansion? These could be for example foreign investors or a joint venture. It doesn’t fit for every business model, but for certain markets it could ease your entry.
There are any number of websites who will offer a free powerpoint template that you can download so that you can create your own Business Model Canvas for your export markets. There are also online collaboration tools which can be very helpful for working on this virtually, such as Miro or Conceptboard. There are also a number of free resources available on Alex Osterwalder’s Strategyzer website.
The best books on this topic are:
(NB these are affiliate links)
Pulling it all together
This kind of visualisation can be really helpful to clarify both where you stand now and where you’d like to be in the future. It can be especially useful if you do this exercise in a team for your export markets. It’s interesting to ask different regional managers to fill this out for their areas for the existing situation, and then to compare before you perhaps move on to brainstorming what the ideal business model should be.
If you want to use this tool as a basis for further business decisions, you need to make sure that the customer offer and the value offer are congruent with one another. The presentation on a single sheet allows you to easily check if you are contradicting yourself in any aspects of your plan.
Models are fantastic vehicles for simplifying complicated structures and especially the Business Model Canvas is almost deceptively simple in its appearance. It’s up to you though to fill it with life! Whatever you do, don’t neglect the relationship aspect of your international business. Often business plans are more the domain of the financial department and decisions may be made on the basis of figures alone. However the Business Model Canvas offers you a tool that allows you to work on ideal solutions in a team so consider how the various relationships play into your success.
You should discuss how success should look. What is success? is often not clearly defined at the beginning of all kinds of projects and in my experience that ALWAYS leads to the goalposts being moved part way through. That’s not necessarily a problem but it should be done for the right reasons and not just because you didn’t clearly define the targeted outcome from the beginning. Make sure you know where is the point of no return in your cost structures and think about what is the level of cost investment at which you need to pull the plug on the project. At the very least, you should know whether conditions within your market expansion have changed so as to make this irrelevant.
Finally, remember that this is a living document. It doesn’t belong in a drawer somewhere, but on the wall where you can be reminded of it every day. Periodically it should also be reviewed so that if there is a gap in expectations you can also work out which steps you need to take to close that. You need to take your International Business Model Canvas and work out an action plan to turn it into reality. If you need help with that, I’d be happy to support you – please reach out.
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