Expanding your business overseas is an arduous and stressful process. It involves careful consideration, planning, research and execution. There are many factors to consider when looking at entering a new market because with the great opportunity for growth comes significant risks as well.
If you have been looking at other potential markets or are even considering taking the plunge into the international market here are some key tips to consider before and throughout the transition into a new market.
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Is your business ready?
The first thing you should be considering is whether your business is ready for this massive move into an international market. Many entrepreneurs make the inexperienced move of trying to do it all at once and expand into an international market when they haven’t even established a loyal customer base from their domestic operations. Effective international expansion involves financial stability and a steadily growing cash flow.
Have you done your research?
The next step is to conduct research. There are so many levels of research needed to maximise your potential for success. You will need to do market research in the new market to help you understand uncertainties, such as whether there would be a demand for your products, to understand whether there are already competitors with similar products existing in the market.
You should also be analysing recent historical data, future forecasts of the economy and starting to immerse yourself in the financial media of that country because an understanding of the potential fluctuations in the economy is vital.
Understanding some key factors will underpin your success when expanding overseas:
Economy & Market
- Who are my competitors? Who are my customers?
- What types of local experts should I employ? Is it worth forming local partnerships or Alliances to gain extra knowledge or easier penetration into the new market?
- Will you need to alter your delivery and shipping services now that you’re international?
- Are your technological resources able to operate effectively?
- What is the cost of entry and the cost of operating?
Culture & Society
- How is the local culture different from you home culture? Is cultural immersion and training necessary?
- Do work practices need to be altered to be most effective in this country? Are there different workplace norms?
- How much are customers here willing to pay?
Have you done the necessary planning?
One major factor in successfully moving your business overseas is whether you can financially support the venture. As with most business decisions you should be working out exactly how much everything is going to cost. When you are budgeting for overseas expansion you will have to consider costs that you haven’t had to deal with previously. Not only the overhead costs of setup in the new country, but you will also need to conduct research to understand how much employees will need to be paid and what the laws are around job termination.
The cost of customs and import tariffs can also be extremely high and will need to be factored in. Currency fluctuations can also be unpredictable and can significantly affect your ability to do business. Seeking help from a currency exchange specialist such as OFX will help you with your expansion overseas. OFX provides several risk management solutions for currency fluctuations. Offering a range of different solutions including forward contracts, limit orders and FX options. These options will help to provide you with some protection against market volatility as you expand your business
What’s your best method for entering the market?
Look within your business and look to see what employees you have, and what systems you have that will adapt to the international market and what you may need to change.
Once a business owner starts to understand where they will be expanding overseas and the market they are entering, the next key step is to consider what’s needed for the business to effectively transition into the new market.
They will need to look at their current employee base. Are there individuals with experience taking a business abroad, or with experience in the area you are entering? It is often useful to hire a local expert to assist you with your transition and help with understanding local work practices and culture. In saying this, sometimes it may make more sense to form partnerships or alliances with local businesses. Finding a solid partner can be a huge benefit to navigating the market and the necessary supply chains you may need to alter once you arrive. It will also help you with brand recognition as a good partner will already be recognisable in the market.
Critical success factor
Maintain focus on your original value proposition and don’t try and do everything at once. You need to ensure you nail your fundamentals and don’t abandon your domestic business. There are many companies out there, like OFX, who have experience and can help you with the process of expanding internationally.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.