Market opportunities for your new venture are now immediately global, thanks to the pervasive access to the Internet and social media communication. However, this doesn’t mean that you can treat the world as one big homogeneous market, ignoring the vastly different cultural, economic, and political realities. Scaling worldwide is like hyperlocal on steroids.
Many businesses, large and small, have stumbled in this area. For example, Starbucks’ first efforts to expand to Israel and the Middle East failed miserably due to a totally different “coffee culture,” which they failed to accommodate adequately. Even the venerable McDonald’s was unable to recognize that in Bolivia, their price per meal was off the charts compared to indigenous alternatives.
Thus, as an advisor to small businesses and startups, I have put together a list of strategic recommendations that will give you a solid roadmap and keep you on track as you expand your business beyond your local environment and country:
- Don’t let experience in local markets drive global assumptions. Global expansion is never merely a multiplier applied to local results. Do your homework in each new market and validate it with a controlled experiment before spending big money on a rollout. In foreign markets, due to lack of available data, this may require feet on the ground.
- Check historical data for economic and political stability. Many international markets have a history of sudden or cyclic changes that could dramatically increase your risk or cut your opportunity. Prepare backup plans to minimize risk if you find that there is the possibility of sudden change or that your target market has shown an inability to deal with economic shocks.
- Evaluate local transportation, energy, and financial services. These factors can change your customer value proposition or your cost of doing business in that region. To accommodate local issues, you may need to adjust your business model. For example, you might need to eliminate free shipping or add a customized support contract.
- Factor in currency exchange costs and variability. Smart business owners have learned to lock in exchange rates, manage accounts receivables carefully, and engage local financial organizations who know how to handle transactions in this environment. Currency exchange considerations are especially critical in local contract negotiations.
- Accommodate the local cultural traditions and ethics. The local culture affects not only the decisions a business owner must make, but also how the customers view your business. Failure to accommodate these will cost you money and could leave you red-faced. I recommend that you hire people in each local market to manage your business.
- Investigate local alliances and partnerships. One of the most effective ways to expand your business and grow in unfamiliar markets is to join forces with another company oF a similar size and market presence that’s located in a territory you would like to enter. Don’t forget to evaluate your competitors for “coopetition” alternatives that benefit both.
- Be proactive by building rollout strategies with local experts. The last thing you need in a new market is dealing with early mistakes and trying to repair a tarnished reputation. Strict local barriers and labor laws have hurt Uber and Airbnb, leaving lasting consequences. While overseas counsel can be expensive, it is well worth the investment to help your business avoid costly penalties. Consider finding reputable PEOs for each region of interest, for example, here are Canadian PEOs with high reputations.
- Enjoy the challenges and learning opportunities. International expansion is often seen as one of the best learning experiences for business owners, as well as an enjoyable travel opportunity for you and your family. Don’t forget that you are your most important business asset and that your business must be satisfying and fun.
Don’t look for any magic formulas to expand your business globally. The challenges are continually evolving and are, at their root, a product of social interaction, economic evolution, and political dynamics. It will always take smart business owners, armed with the latest knowledge, proper homework, and modern analytic tools, to minimize the risks and maximize opportunities.
Tapping into global markets, especially the large and under-developed ones, not only promises market growth beyond your most optimistic vision but also empowers people around the world to share in a better economic future.
It’s time to make the global opportunity part of your business plan today.