Blogpost: Watch out, pitfalls ahead!

Preparing too little too late.

International expansion is not an afterthought. It is Chefsache. An early assessment of expansion plans will guide strategies, internal operations and decisions to build an international company. In addition to analysing potential new markets, the impact of expansion on the existing operation must also be clearly mapped. This does not have to take ages, but it does require the right attention and clear choices. If you start without good preparation, there is a high risk of delay and extra costs. And that is what you want to avoid at all times.

Going abroad for the wrong reasons

Companies whose core business isn’t thriving in their domestic market or who can’t identify sound investment opportunities may be tempted to enter the global market. Although it may be tempting just to take the plunge and enter an emerging market, it is worth bearing in mind that internationalisation must be a strategic choice rather than a leap of faith. Be clear about the objectives of expansion and monitor progress. Prevent a foreign branch from becoming a ‘nice to have’ destination for free cash or even worse: a cash drain.

Lack of focus on the ideal geography and market segment

The world is a big place, and it is appealing to just start with international expansion. However, to be successful, it is important to make clear choices about geography and market segments where the company’s products and services can deliver the most value. After achieving market success and penetration in one area, this success can be efficiently and profitably replicated to new markets.

Going at it alone without using local partners

Although you may have delved well into the do’s and don’ts of international expansion, local customs in the new market to be entered, the legal situation and the way of doing business abroad are generally very different from those in your home market. It is quite a challenge to sort it all out and tackle it yourself.
To speed up your launch into the new market, it is wise to leverage on partnerships or alliances with local service providers and entrepreneurs. They know the local dynamics, sales channels and decision-making processes. Also, they often have access to networks that provide rapid access to prospects, customers, investors or other market partners. And that helps, please don’t believe that you don’t need a warm introduction because your product or service sells itself. You do.

Lack of connectivity

Although the local team must have a clear mandate and enough room to operate, the company’s senior management must retain a strong link with the international branch. Not by going through spreadsheets or making the local team accountable to the detail but by listening to their concerns and offering ideas and advice and insights. Take the time to build a bond and invest in a good business relationship. In this context, also pay attention to the right form and tone of communication.

Don’t think about localisation

In addition to general market research, you should also look at local product or services preferences, favoured local marketing channels and customer behaviour in your target market. Cultural standards vary widely, and you and your product need to be able to adapt to local conditions.

Ineffective sales execution

Many companies had a sound business plan, a clear market focus and value proposition and perhaps even good supporting partners, but never managed to achieve international success. The majority of these failures can be attributed to ineffective sales execution.

Problems with sales often arise from an ineffective choice of sales channel or team. Or due to the lack of a clear, effective sales process and supporting supply chain.

Ineffective risk management

Managing regulatory differences is perhaps the most complex issue to oversee in relation to international expansion. When a company enters a new market, it must adapt to the laws and regulations of that country and act accordingly. Therefore it is essential to understand local laws and regulations, for example, in the area of taxation and privacy laws.

Although regulations abroad may, at first sight, appear similar to those in your home market, there can be significant differences in the claims culture, taxes and legal systems. If you, as a company, are insufficiently prepared for this and do not have a good risk and compliance framework, a strategically good choice to enter a foreign market can turn out be a major failure.

Conclusion

Perhaps after reading about all the failures and challenges you may encounter when you want to expand internationally, you no longer feel like going abroad with your company. But that would be a shame because let’s be honest: global expansion offers you a ton of opportunities.

With the right preparation and well-planned execution, international expansion offers numerous opportunities for your company. You can make the strategic choice to grow internationally. But the answer to how you do that is: not alone! Find an experienced partner who guides you through the process and helps you leverage on the opportunities abroad. And by this, we don’t mean just taking care of the legal stuff but a business partner in the true sense. A fellow entrepreneur.