Why do companies go global? Some want to pursue further successes for their companies, and the other go global as responding to the domestic rivals/ competitors. Thanks to the technological developments and the globalization of the world, international business has become much more common and close to every business owner. It does not mean, however, that you can expand your business outside of the border readily. Without numerous researches and the thorough business plan, there is no success in taking your company to the global world. There is a lot of articles introducing the steps on how to expand the business internationally. But here, you will find “Step Zero,” the most basic but vital things you should consider before deciding to go global.
Why Difficult?: International Business v. Domestic Business
Almost 90% of the companies fails in expanding their business globally. Why? It could be due to the similar reasons as the domestic business failures; such as intense competition, insufficient financing options, or lack of invention just like the failures in domestic business. However, most of the companies fail because of the lack of market knowledge and understandings of the language/ culture. Operating the international business is completely different from the domestic one. You know how the business works in your country. You can make the assumptions on how the following elements work in operating the business.
- Wage and work environment
- Government requirements
- Add/ change locations
- Customers’ preferences
- Payment method
- Social media uses
When you cross the border, however, everything that you’ve taken for granted will no longer fit your formula. The government may have much more strict regulations that prevent you from operating your business as you used to do. Customers in the targeted country may have completely different taste and preference, and there is no demand for your product. Failing to understand the differences of these elements will result in the miserable failure. Therefore, you should get rid of all the assumptions you have had, and take each step of going global carefully and steadily.
Benefits of Operating Business Internationally
Taking your company global is very risky, but there are reasons why many companies still try to do so. If you can manage to put your business on track in the new country, its payoffs are incredibly beneficial for your company.
One of the biggest reasons companies go global is that the international business can boost the sales of your company. There are new/ more resources or knowledge available in other countries. It can help your company to create the better products. Or it may greatly cut your expense in producing your products. Additionally, simply by expanding the business globally, you will gain much larger targeted audience.
Reduce dependence on the current market
Unexpected things could always happen. What if a serious natural disaster occurs tomorrow? What if your country goes into the recession? By operating business across the countries, you can reduce the risk of losing your business all at sudden. When your business is not doing well in one country, you can sift your focus to another country.
5 Questions To Ask Yourself Before Going Global
Going global is not necessarily the best solution for all businesses. Some companies may be more successful when they stay local and concentrate on the small group of the audience. To determine if you should expand your business internationally or not, ask yourself these questions.
1. Will the product be sold well in the targeted culture?
Cultural difference is the huge barrier that you need to overcome. Analyze your own product to see if its features will be welcomed by the targeted group of the audience. And also, ensure that your product does not have any cultural/ religious taboo in their culture. The first impression is very important for your company’s strong brand image; you don’t want to give a wrong impression simply because of the misunderstandings or lack of knowledge about their culture. Determine whether your product is ready to be introduced in the targeted country by comparing the product’s features and the cultural trends.
2. Is the targeted market familiar with your product?
It will be much easier to set up your business foundation if people in the targeted country are already familiar with your product. But don’t worry even if they have never seen your product before. If you are the first one to introduce it to the community, the name of your company/ brand could be equal to the product’s name. Of course, you will need to invest much more time and money in introducing your product, so you have to be ready for it.
3. Do you have enough money to deal with unexpected situations?
No matter how much time you spend on researches, unexpected things will still happen to your company. There are a lot of things you can never know until you actually start operating your business. Ensure that you have enough fund to deal with those unpredictable situations.
4. Can you adopt the price level of the targeted country?
Once you cross the border, you cannot always sell your product at the same price as in your country. Each country has different price standard, and you have to much your product’s price to it. In addition, don’t forget that all other operating expense will change as well. Consider every single cost including, the office rent, employees’ salaries, supplies, transportations, and so on. Ensure that you will still be able to make a profit in stepping into a new country.
5. Do you have the exiting strategy?
Nobody wants to think about failing. It is essential, however, to make a plan on how to exit the market in case your business doesn’t do well in the targeted country. What if your business fails and you’re not ready to deal with the situation? As mentioned earlier, 90% of the companies fail after expanding their business internationally. To minimize the loss, it is essential to think ahead and make the exiting strategies.
Taking your company global is a big move for your company; it is risk-taking, but its payoff is worth it. The key is to conduct thorough researches about the targeted country, especially focus on its society, culture, economy, and politics. The more you prepare yourself, the more likely your business succeeds.