Today's global environment offers many opportunities for businesses, whatever their size, to expand their operations overseas.
Growing internationally can be highly rewarding but it requires careful planning to ensure that your business survives the challenges and pitfalls it is likely to face and, more importantly, lasts the distance and develops a long-term and sustainable business model.
When planning to go international, there are a number of factors which should be considered, including an analysis of your current business situation and the current competitive environment, your business's long-term growth strategy, as well as an analysis of the opportunities available to you in your target markets.
Following are some practical guidelines which should be considered.
- Assess your readiness to expand your business internationally - Do not grow for growth's sake. While it may sound easy to, say, export to the UK, it will not make any sense if your local infrastructure is consequently tested.
- Look to stabilise growth locally before expanding overseas - Ask yourself whether you have saturated the local market. What is your business strategy for growth? And, where does international expansion fit within this strategy?
- Consider your existing distribution and supply arrangements - Determine whether you have the tools, resources and human capital to expand internationally. For example, do you have access to working capital to adequately support the expansion, and do you have the capacity to support the increased demand for your product or service? Also, do you have the requisite expertise in dealing with overseas customers?
- Conduct a competitor analysis, both at a local and international level - It is important to gain a full understanding of your market, and your position within it, in order to assist with expansion plans. Consider who else is offering a similar product or service, where they are currently supplying to, and how successful they have been.
- Undertake market research - Conduct a thorough risk assessment of the issues associated with the markets including currency / exchange rates, economic and political environment, and cultural differences.
Seek information from relevant government bodies regarding changes to political environments in the target country and monitor these risks. Speak to your bank with regard to secure payment options and foreign exchange risks you may be exposed to, and how you can protect yourself from these risks.
Laws and regulations can also differ from country to country and it is important to obtain advice on how this may affect areas of your business including contract, importing and distribution arrangements.
Consider what your staffing requirements will be in the country you are entering and whether you will need to employ locally, or post local staff overseas. There may be restrictions in place around this, as well as issues in relation to entitlements, payroll and expatriate re-location.
- Ascertain whether there are also specific compliance issues existing within the market, and seek advice on how these can be best managed or mitigated.
- Identify the best structure from an income tax perspective for the expansion, consider any existing tax treaties between the target market and your own country, and what local tax liability you may carry in the target market.
- Ensure that you have prepared good financial forecasts with respect to your expansion plans and that these are robustly tested. If you are not sure, it is better to be conservative in your assumptions.
- When entering the market, use agents to start with. Don't try and do it all yourself. For example, agents at a local level will be able to utilise existing distribution networks, saving you time and money.
- Do not lock yourself into contractual arrangements unless you have a certain degree of confidence as to the longer-term outlook for success. It can be very expensive to break forward agreements.
Be patient and have a medium to long-term view, setting yourself realistic lead times. Depending on which market you are in, some countries are harder to break into than others.
Make sure you are well prepared and properly briefed and ensure that you have addressed all of the issues raised in your market risk assessment. Ultimately, it will come down to your overall business strategy, the degree of competition and the demand for your goods or service, and a decent amount of good fortune along the way.