International Expansion is not about Numbers!
Contact : OpenVentures Consulting
www.openventuresconsulting.com
SMEs often think that international expansion is a numbers game and you will often hear them say that they are in 25 or 30 countries. International expansion is not about how many countries you are in but how successful you are in those countries. It is about how much market share you have and about creating a sustainable brand. Actually, in the end, it is probably about how profitable you are in that country!
Profits, however, do not come on the first day in a new market, often you may not see you return on investment for up to 5 years and the challenge is to ensure that you have calculated how long it will take to breakeven and then to become profitable. Surprising, a lot of senior people underestimate the time and budget required to become profitable. This can be because many senior executives need to show growth and entering new markets they feel is an easy way to do that.
Understanding the potential of a market is down to good market research and the market research will show you that this could be a good market for your products/services, assuming that you have asked unbiased questions and looked at total market and not driving the market research in a direction that it will give the desired answers.
Entering a company is not especially difficult, however, growing market share is much more challenging and hence the need for correct information before entry. When I conduct partner selection and find my clients’ new partners, there can be the feeling that now all the work has been done, the partner is installed and now the sales will come in. Whether you go the direct or indirect channel, close collaboration post entry is imperative to success.
A lot of international expansion is opportunistic. A distributor sees your website and puts in an order and you start to ship to that country but whether that distributor is marketing your product/service correctly, you have no control over as you did not choose this entity as your channel in that country. Often, distributors or partners who contact you directly will promise to sell significant numbers of your product. This may sound great but in reality, if it walks like a duck and talks like a duck – it is a duck. New market entry is not simple, if it was everybody would be doing it. Expanding into a country with a poor strategy could cost you considerable both in the short term and long term.
Before running headlonginto a relationship which could be costly. Take a step back. Understand why you believe international expansion is the best way forward. Is it because there is no more growth in your national market, is it because your product/service is moving towards its mature stage in its life cycle. If international expansion is definitely where you believe your company needs to go, then create an export plan. Enter one country at a time, especially if you have limited resources.
Be in just a few countries but be really successful those countries. it will mean less pull on your resources and less strain on your budget.
The road to success is littered with failures. International expansion involves investment and it also involves certain skills and capabilities. Especially in SMEs, these capabilities are often not present and the solution can be to look at engaging an expert. Engaging an expert can significantly increase the success of a company in international expansion. Contact OpenVentures for a confidential discussion on your international expansion plans. Sales@openventuresconsulting.com