If you’re new to the exporting space, then choosing from the worldwide market expansion strategies that are out there can seem really overwhelming. It’s hard to understand what is the best approach for your business, so I thought I’d go through a few options.
Table of Contents
What is an International Expansion Strategy?
First up the definition as even many leaders are not 100% clear about what this really is…
Strategy (from Greek στρατηγία stratēgia, “art of troop leader; office of general, command, generalship”) is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty.
Wikipedia
That’s a bit abstract so let’s look at it in more detail with regards to doing international business and see how that can be translated into practical steps for your business.
Strategy involves determining how you want your company to operate, including the products or services you’ll offer and the markets you plan to target. It’s about choosing the right mix of offerings that align with your company’s strengths and market opportunities. When we’re talking about worldwide market expansion strategies then there are quite a lot of component parts to be considered within the overall strategy…& you probably will want a “sub strategy” for each of those aspects.
Product Selection
Deciding which products or services to develop and offer is a key part of your global business expansion strategy. This involves assessing the market demand, deep diving into the competitive landscape, and taking a long hard look at your company’s own capabilities to ensure the chosen products will succeed.
How far are you able or willing to adapt products due to the regulatory or consumer requirements of any specific market? Are you thinking of developing new products for your export markets? Or perhaps extending the product life cycle of some which are no longer up to date for your domestic market?
Selecting the right market
Identifying which markets to enter is crucial. This includes analysing geographical regions, demographic segments, and consumer behaviour to pinpoint where your products (or services) will be most successful.
This is a whole science in and of its own right, so much so that I offer a free ebook on how to analyse markets and which criteria you need to consider in detail as a resource for anyone signing up to my email list.
This is such an important foundational part of an international expansion strategy that I also offer a market ranking report as a done for you service, supported by big data. Reach out if this is interesting for you!
Pricing Strategy
This topic is one of my pet peeves because often exporting companies don’t invest enough time to truly consider this. You have to consider production costs, competitor pricing, and customer willingness to pay to establish a pricing model that maximises profitability while remaining competitive.
However it’s not as simple as in your home market, because you also have additional costs to account for and these may not be known to you at the beginning of your expansion journey. There are customs duties, transport costs may be more complex, more stakeholders are involved (who all have to earn a living) and of course there is probably the question of exchange rates.
Exchange rates can fluctuate, and economic conditions can vary greatly from one market to another. These factors have a significant impact on your pricing and profitability. Part of your strategy should therefore include plans for managing these financial risks, whether through hedging strategies or by building flexibility into your pricing models.
You can find some more detailed posts on this topic here:
- Pricing as a tool for product market fit
- Using export price calculations
- Understanding the influence of exchange rates on your international business
The Business Model is at the core of your Global Business Expansion Strategy
Choosing the right business model, be that direct sales, online retail, franchising, or partnerships is one of the core considerations around your global business expansion strategy. Each of these models has its own set of benefits and challenges that must align with your company’s overall goals. (Don’t forget either that whichever of these worldwide market expansion strategies you select for your business, also needs to dovetail with your overall strategy and vision).
I’ll go into various options of business models in more detail below.
Marketing Strategy
This is what many people think of first when talking about an international strategy, and of course, effective marketing is essential to executing a strategy. It isn’t the whole strategy though as you can see from the points mentioned already above. It includes branding, advertising, and promotional activities designed to attract and retain customers in targeted markets and integrates closely with all the other aspects I’ve mentioned.
Specific Implications for International Business
Most of what I’ve included above are the general building blocks for a business strategy, however of course there are elements of strategy that affect more than one “piece of the lego”.
Culture
When you’re expanding internationally, one of the first things you’ll need to consider is how to adapt your general strategy to fit the local culture and consumer preferences. This might mean tweaking your products to better suit local tastes or revising your marketing messages to resonate more effectively with the audience. Even the way you conduct business might need adjustments to align with cultural norms. Essentially, this cultural piece is about making sure your brand feels relevant and respectful in the new market.
The legal aspects
Next, there’s the matter of regulatory compliance. Every country has its own set of laws and regulations, which can be quite different from what you’re used to. Navigating these legal requirements is crucial for your strategy. It’s not just about following the rules—it’s about understanding them well enough to avoid potential pitfalls that could slow down or derail your expansion efforts or even ruin your brand reputation.
Supply Chain questions
Logistics and distribution are also key areas to focus on. Expanding internationally means you’ll need to build a reliable supply chain that can handle the complexities of global trade – and 2020 certainly showed that supply chains are not always as robust as we might think. This includes managing tariffs, customs, and ensuring your products are delivered on time, wherever they need to go. Efficient logistics are the backbone of successful international operations, so it’s essential to get this right from the start.
This is also one of the elements that inexperienced exporters believe is the hardest part of international trade, but remember it can also be outsourced to some extent.
Competitive landscape
Understanding the local competition is a critical piece of the puzzle. You’ll need to do a thorough analysis of the market to identify who the major players are, what they’re doing well, and where there might be gaps that you can fill. By understanding their strengths and weaknesses, you can better position your own offerings to stand out and attract customers. Remember that your product might be used in a different way (or different features might be in focus) compared to your home market.
Partnerships
Finally, forming local partnerships can be incredibly beneficial. Partnering with businesses that already have a foothold in the market can provide you with valuable insights, established distribution channels, and a level of credibility that can be difficult to achieve on your own. These partnerships can be the key to a smoother, more successful market entry and long-term growth.
Depending on which business model you select, the partners you need might be lawyers, accountants and banks. Whichever way, you need to learn how to build relationships in the market, and that in turn means you need to have a certain amount of cultural knowledge around how to build trust.
Which of these worldwide market expansion strategies would fit with your company?
Not every strategy is suitable for each company, and the approach you select will depend on your company size, international experience and also the resources that you have available. You need to remember also that these divisions are pretty academic and every company is individual in their requirements.
Global Strategy
A global strategy involves treating the world as a single market and standardising your products and marketing strategies across all countries. This approach focuses on achieving economies of scale by offering uniform products globally.
The advantages are clearly cost efficiencies (localising products is expensive), a more consistent brand image, and streamlined operations (you are inefficient when making smaller batches & switching between products or methods).
The negative side of this approach is that you are less responsive to local preferences and in some cases there could be potential cultural mismatches.
Examples: Large technology companies like Apple and Samsung often use a global strategy, offering the same products around the world with minor regional adjustments. The only real adjustments are for perhaps regulatory issues (eg how is the power supply in the EU vs the US or Korea). Of course, marketing still has to be done in local language and according to local tastes though even if products and sales channels are the same.
A Multidomestic Strategy
In a multidomestic strategy products and marketing strategies are customised to fit the specific needs and preferences of each local market. This approach decentralises management to adapt to local conditions. You could probably describe this as the complete opposite of the previous global strategy.
Obviously in terms of tailoring your approach, this strategy offers high responsiveness to local markets and probably better customer satisfaction.
It comes at a massive cost though as you’re “reinventing the wheel” in each market and usually have less consistency in your brand image.
Example: I feel like there isn’t really a true example of this (it’s more a theoretical model) as it’s just impractical in real terms. Sure, fast-food chains like McDonald’s tailor their menus to local tastes and cultural preferences in different countries but at the same time the look and feel of the brand and the basic business model remains the same.
Transnational Strategy
The idea behind a transnational strategy is to balance global efficiency and local responsiveness (ie. a mix of the advantages of the previous two options). Companies using this strategy integrate global coordination with local flexibility, aiming to leverage the benefits of both global and multidomestic approaches.
This approach means that you can have efficient operations with local adaptability as well as taking advantage of the competitive advantage in diverse markets.
The flip side of this is that it’s complex to manage. It requires strong coordination and a lot of communication. It is however the approach that most medium sized brands at least try to take.
Example: Unilever implements a transnational strategy by standardising some products while customising others to meet local market demands.
An Export Strategy
The name sounds a bit odd, because after all, some of the others involve exporting as well, however an export strategy focuses on selling domestically produced goods in foreign markets. This strategy is often the first step for companies entering international markets and involves minimal investment in foreign operations.
The plus side of this is the low risk and initial investment, making it easy to implement. For example if you have a webshop aimed at your home market and realise you have customers also buying from overseas.
The downside is that it often is practiced with just EXW sales at a fixed “take it or leave it” price and the producer has limited control over marketing and distribution. It’s not always possible to implement either due to regulatory issues (especially in say food or drinks) or due to potential trade barriers.
I’d say this is more of a let’s see what happens approach than a strategy, but many companies work this way for longer than just a test period.
Examples: Many small and medium-sized enterprises (SMEs) start with an export strategy to test international markets. Effectively it’s often the model when a company sells online to overseas consumers.
Licensing and Franchising
Licensing involves granting a foreign company the rights to produce and sell products under your company’s brand name. Franchising is similar but involves a more comprehensive package, including brand, operating systems, and ongoing support.
The advantages of both these models are the low investment needed, relatively fast market entry and the access to local market expertise.
The downside is that you have less control over the quality and operations, which could potentially lead to a brand dilution.
Examples: Fast-food chains like Subway and retail brands like Nike or Intersport use franchising to expand globally. Beer or soft drinks are often produced under licensing agreements as they are extremely expensive to transport around the world.
Joint Ventures and Alliances
A joint venture involves forming a partnership with a local company to share resources, risks, and profits or even technology. This might be relevant for working on huge projects or in markets where there is a legal requirement to work with a local partner. Strategic alliances are similar but may not involve creating a new entity.
A JV or strategic alliance means you gain access to local knowledge, whilst sharing the risks and costs. It also usually brings you improved market access.
You shouldn’t underestimate the potential for conflicts between partners here or the complex management structures which are involved. Listen to the HBR Ideacast series “The Rise and Fall of Carlos Ghosn” from 2021 for insights into the kind of tensions and cultural differences that are at play.
Examples: Car manufacturers like Toyota or Renault often form joint ventures with local firms to produce and sell vehicles in foreign markets. Airlines often form strategic alliances to strengthen their route offering – like say Star Alliance of the Lufthansa Group. Or there are countries which force joint ventures in certain industries so in Turkey for example, both Carrefour and IKEA were pushed into forming a joint venture with the Sabanci Group.
Wholly Owned Subsidiaries
A wholly owned subsidiary is the “gold standard” if you like of overseas expansion: it involves establishing or acquiring a company in a foreign market, giving you full control over the operations, marketing, and strategy.
Clearly it’s an advantage to have complete control over how you run all the aspects of the business. It means you can more easily be consistent in your global strategy and your IP protection (intellectual property) is less of an issue.
The main thing that puts companies off doing this in all their markets are the costs. Having wholly owned subsidiaries means you need to make a high investment and you’re also exposed to high risks. (Depending on the market, those risks can be substantial if there are diplomatic problems between your country and the target market).
Sometimes companies assume that they have to be looking to open subsidiaries if they want to expand systematically abroad, but realistically it’s not an option until you reach a certain level of sales and company awareness unless you’re forced into it by the government of the country you want to work in. Also, don’t underestimate how complex the management gets when you have a team working in a different market.
Examples: Tech giants like Google and Amazon establish wholly owned subsidiaries in various jurisdictions to maintain full control over their international operations. However, also medium sized FMCG companies often have their own offices and sales teams in several countries around the world.
So how to choose?
As you can see, each strategy has its own set of benefits and challenges, and the choice depends on various factors including your company’s goals, resources, and the specific characteristics of the target markets.
Also, most companies (apart from maybe the very largest) work with a mix of strategies depending on their sales potential in a market and how intensively they want to focus on it. These divisions are quite academic and you have to always tailor the strategy to your specific requirements.
So you might find European companies having subsidiaries in some key European markets and working with distributors in other countries. Even so a transnational approach is usually what works best for my clients. If you were a hairdresser though, you probably would only be able to expand internationally with a franchise (or wholly owned subsidiary) model.
Weigh up your position in the market, the additional potential that could be available for your products or services, the level of localisation you are willing (or able) to make and how strategically important that market is for you. What is your taste and tolerance for both risk and investment?
This was relatively speaking a “quick overview” of the options available to you – you can see it’s a relatively complex topic which is the cornerstone of your international expansion so worth investing time and energy to get it right for your business.
Thinking that working with a consultant would accelerate your international expansion?
If you’d like to learn more about working with me for support on your internationalisation projects or personal export knowledge, you can book a 30 minute international clarity call here.
If you haven’t already signed up for my free e-book about how to select which international market to enter next, you can do so here, or using the form below.
If you enjoyed this content please share it on social media or recommend it to your network.
Pin this post for later!
Kathryn firmly believes that business is done between people, and therefore places her focus on building strong relationships that form a solid foundation for doing business.
When she's not travelling around the world, Kathryn enjoys playing clarinet in her town's wind orchestra or sharing her love of the outdoors with her Scout group.