Global business expansion is on the dream list of most, if not every company in the world. There’s something thrilling about the thought of taking your products to other markets, and of meeting the world through your ideas. And then, of course, there’s the promise of tapping into the new revenue streams that global business expansion brings.
But, as Steven Thompson, Vice President of Brigham and Women’s Healthcare in Boston notes: your company will often make costly mistakes before learning how to navigate foreign territories. If you’re considering global business expansion, look over a few of these “what-not-to-dos” from those who have learned things the hard way.
1. Don’t chase a booming market
One thing that the recession of the last few years has taught us, is that markets are fickle. The popularity of emerging markets are especially prone to change: we’ve seen money rushing into the BRICS countries when the US economic prospects were low, and rushing out just as quickly every time positive jobs figures are announced in America, or word about tapering is phrased in a certain way.
“If your overseas growth plans depend on certain economies continuing to boom, you could be in serious trouble if and when the boom fizzles,” Thompson cautions. Instead, consider your long-term prospects in a country and plan to go in for the long haul.
2. Don’t overlook cultural and linguistic nuances
The subtleties of a different culture can make the difference between a clinched deal and a failed one. You might have the best product in the world, but if you don’t bow at the appropriate time, defer to the right person, or kiss the right cheek, you might unknowingly be kissing future income goodbye.
You also need to understand the new language you’re dealing with – not in the “look up the word in the dictionary” kind of way, but in the way that only a local can.
“Avoid embarrassment – use Parker Pens” was the slogan of the company some years ago. But when Parker Pens’ global business expansion took them into the Latin American market, they translated the slogan into “Avoid pregnancy – use Parker Pens”. This ironic embarrassment could have been avoided if they had engaged the services of the locals rather than “translating” their business themselves.
3. Don’t replicate your business model
Speaking of translating, don’t think that your existing business model will translate onto the new market – it won’t. Take the things you think you know and be prepared to re-look at each of them: your customers, your competitors, the legal framework in which you operate, your distribution model. To the locals, it’s the only way of doing business, but to you, global business expansion will mean doing business as you’ve never done it before.
4. Don’t underestimate the time and money you’ll need
One way of looking at it, is that most successful business models will eventually make it in the global space – if they are willing to take the losses that come with trial and error. How many trials and errors are you willing to weather? How deep are your pockets, and what is your tolerance for risk?
You can bank on almost nothing in this new environment, other than that the unexpected will be your constant companion. Things that you never envisaged will go wrong, and projects will last longer than your most generous estimates – for reasons that you can’t anticipate. When it comes to planning for your global business expansion, plan to take longer and cost more than you think.
If your company is contemplating global business expansion and you are looking for the expertise to help you make key strategic decisions, The Finance Team can assist. Our finance professionals have helped companies to expand into new markets successfully. Their experience can help shape yours into a successful one.