Expanding a company internationally and selling to foreign markets can be a fantastic avenue for growing companies. But don't assume that just because your products sell well in the U.S., they will be successful in other countries.
Businesses that try to expand everywhere at once can risk diluting their focus and stretching their financial resources. It could also ultimately lessen a company's chance of long-term success.
That's why it's helpful for businesses to focus on the countries and regions that make the most sense for their global expansion. Here's how you can get started on your international business plan and pick the best foreign markets for your company.
1. Research the customer's profile and their compatibility.
Identify what type of customer purchases from you now and the need your company currently serves in its current markets. Then determine if that same need and ability to pay for the solution exists in the foreign markets you'd like to target. (The Department of Commerce can be a good starting point for this type of data.)
You can also determine if there will there be cultural differences that can deter people from making purchases. This can be determined by picking a small test group in that country to market to and get their feedback before expanding. Testing also allows companies to gauge the consumer's familiarity (positive or negative) with their products and brand.
2. Check the competitive landscape.
It's important to see which of your competitors are already out there. Learn their sales methods (in person, over the phone, through the internet or by a distributor) plus how their sales are doing. (Some of this information can be discovered at local business chambers in these foreign markets.)
If your company is the first one in a foreign market, this could be an advantage or disadvantage based on the situation. It could be an asset because there may be a tremendous buildup for demand of the product. But it could work against you if consumers aren't ready to buy your product.
Also, be aware of which competitors could jump into the market on short notice. How would your company defend against their entry? Would it be through in-country distribution partnerships or other means?
3. Consider the impact of mobile penetration.
If your company will be marketing or doing business over the internet, you may want to check what percent of the targeted population (or more specifically, targeted customers) has smartphones.
In addition, it's important to familiarize yourself on what other types of infrastructure your product needs in order to sell well in foreign markets and does that country have it (e.g. poor road or air accessibility can affect shipping rates). The World Bank has resources that rate most countries in these areas.
4. Determine the strength of the local economy.
Trends in different countries can vary drastically from the U.S.
When picking foreign markets to explore, consider picking a region where the need for your company's product is either currently strong or projected to be in the future. This can be done by determining what market factors are present when demand for the product is the strongest. For example, home builders and inspectors tend to do well when mortgage interest rates are low.
5. Look at the numbers.
One way to pick foreign markets to explore is by determining where your profit margins will be the highest. (This includes identifying prices, total delivered costs and any subsidies that might be available.)
Finding a place that may result in higher profit margins can give you some room for mistakes.
6. Figure out what your company needs in order to execute.
Being able to deliver and support a product or service to a customer who is 10,000 miles away can be challenging. Finding a local partner to provide support can be a good way to address this obstacle by servicing the customer locally in their time zone.
These types of partnerships typically work best if the partner already offers a complementary product or service. For example, if your company sells accounting software, it may be beneficial to partner with businesses that provide local accounting services so they can distribute or support your product.
It can be hard to get the funds necessary to grow your business stateside, much less to expand it abroad. But you may be able to secure capital for expansion through the Export-Import Bank of the United States, an independent U.S. government agency that has helps finance overseas sales.
Finally, consider seeking legal counsel. Laws do vary drastically across foreign markets, which can either boost or impede your business. Remember, there is rarely a need to rush to enter any part of the world before your company is ready.
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