A company moving from its domestic market to the global market can’t simply expand production and hire new staff. The world is a complicated and diverse place with distinct markets for goods and services. Growing companies need to develop global business strategies that account for their financial, branding, and growth goals. A successful global business strategy anticipates beyond introduction in one market to potential growth around the world.
Defining your global goals
The starting point for any global business strategy is to explain why global expansion is desirable. This explanation should factor into every section of the final plan because of the effort, time, and money involved with expansion. It is also important to infuse your expansion rationale into strategy documents for outside audiences. You will likely maintain internal strategy documents but need public-facing documents for current and prospective investors and business media interested in your plans.
There are several clear-cut reasons for pursuing a worldwide corporate strategy. A company with a new product or service that fills a universal need should detail how their innovation would revolutionize an industry. Startups and small businesses in nascent industries may see opportunities for quick growth in select foreign markets. International growth by an industry leader may accompany the decline of competitors due to corporate or financial failures. A global strategy document may also be necessary due to acquisition by a foreign company or merger with another firm.
Business strategy plans typically project revenues, costs, and other considerations at least three to five years into the future. A global strategy is more complex especially if a company considers growth into multiple markets. This complexity means that business executives need to consider growth, decline, and static scenarios in each new market. Global strategies should also account for potential new competitors and changes in consumer tastes. These challenges help forge more detailed answers to the question, “Why are you going global?”
Study the competition
Once the reasons for expansion are clear, market research in prospective markets should be the next step. An automaker or mobile phone manufacturer may know the big names in a particular region but lack the depth of knowledge necessary for smart investment. A good first step is to identify cities, countries, or regions that fit best with your company’s target demographics. You can also gather information on non-targeted markets with similar profiles for comparison and future expansion.
Research should identify the leaders and upstarts in each targeted market. This review should take into account revenues, share prices, recent developments, and other statistics for a complete summary. After research is complete, it should be clear if there is market saturation for your industry. A target market with plenty of industrial players could mean death on arrival for a new competitor. For example, a cosmetics company looking to expand into South America may target Colombia over Argentina based on the absence of strong competition for consumers.
Year-to-year revenue and profit information also indicate whether an industry is on the rise or decline in a particular market. Global ambitions are more likely to succeed in markets with the recent growth in revenues for a particular industry. An international growth strategy may be dashed against the rocks if economic conditions and market saturation mean declining revenues in a targeted country. Companies big and small may also consider countries where particular industries have bottomed out, presenting “buy low, sell high” opportunities.
Understanding the business infrastructure of a targeted market also allows a company to understand the competitive landscape. A well-established network of suppliers, natural resources, and specialized employees can ease the transition into a new country. Markets that lack professional services and distribution networks increase costs for expanding companies. At this stage, companies can also identify fixers and consultants in target markets who can aid with expansion.
Learning new markets
A common mistake for companies entering new markets is transplanting its ideas into foreign cultures. Opening an office, translating marketing text into a different language, and dropping products are not guaranteed to succeed. Consumers around the world may have similar needs but make purchases within the contexts of distinct cultures and histories. The best global strategy documents address how the company will adapt to a different market rather than how it will parachute into a new place.
Executives and entrepreneurs should start by cultivating on-the-ground assistance for prospective markets. This cultivation can begin by contacting corporate recruiting agencies to find translators, business students, and industry experts in targeted countries. These professionals complete legwork on office locations, staffing possibilities, and suppliers that would be expensive for existing staff. Companies can also work with corporate consultancies in targeted regions to identify potential issues with adaptation.
A global strategy plan should also point out the assumptions made by companies of their domestic consumers. Shorthand and cultural references are often used in advertising that appeals to customers in home markets. These references may not translate well to a foreign market with different references. Companies also have to account for cultural sensitivities to particular words, colors, images, and sounds. Creative professionals from the targeted country can be consulted to understand the amount of cultural adaptation required of a company.
A good international expansion plan should explain how an unknown brand will grow into an industry player. In the 21st century, social media engagement is critical for reaching new consumers. Retailers and customer-facing startups can use pop-up events to create buzz for their brands. Companies should engage with business newspapers and specialized media outlets for advertising possibilities. It is also possible to test a company’s products and services in focus group settings during the planning stages.
Research new market laws and taxes
Learning about new cultures and finding potential areas of growth are the fun parts of global strategy development. The potential pitfalls of international growth emerge when discussing corporate law and taxation in each new market. An important baseline consideration for any business expanding into a new country is the desired presence in the new market. As in your home market, you can choose to ship directly to customers, work with a third-party company skilled in international shipping, or establish a location in a new market. These presences are listed in order from easiest to hardest, though all require some research into feasibility for a particular industry.
Deciding to open a location in a foreign market triggers numerous legal considerations for business. Foreign companies may need to arrange for special licenses and certifications prior to opening their locations in a market. A new location requires staff members that may need employment contracts to comply with local law. Staff payrolls may also vary significantly in countries based on minimum wage requirements. Depending on a company’s industry, additional documentation may be necessary for heavily regulated products or services requiring licensure.
Businesses entering new markets should also understand the practical differences between civil and common-law contracts. American companies establish contracts under the country’s civil laws, which rely heavily on specific contract language to determine contingencies in transactions. Civil-law contracts offer clear prescriptions for judicial relief and contract law is rarely addressed by legislatures. By contrast, much of the world uses common-law contracts that are more broadly written with gaps filled in my local and regional regulations. This difference requires legal expertise that may not be covered by in-house legal counsel.
A global business strategy should also explain how a company complies with taxation requirements. The final strategy document needs to account for existing taxes as well as proposed tax changes in the near future. Your business should research treaties between your home country and potential markets to avoid repetitive taxation on the same profits. Some countries are known as tax havens for companies that incorporate within their borders. Ireland saw $106 billion in corporate profits shifted to the country in 2015 due to low corporate tax rates. Singapore, the Netherlands, and Caribbean nations are also known for favorable corporate tax policies. As with legal advice, in-market accountants may need to be retained to handle tax filings and financial disclosures.
Reduce your financial exposure
Few companies enter the international market relying solely on existing revenue sources. A growing company may go public with an initial public offering, thus raising capital for global growth. Profits from a successful new product or service may be used to launch work in a foreign market. Companies should also seek investments from target markets to reduce overheads and ensure buy-in from local organizations.
Prospect research from company staff or an outside consultant may reveal previously unknown investment opportunities. New investors in a foreign market may be looking for a fresh face on the scene to increase investment potential. Established investors might look to diversify their holdings or enter new areas of investment created by expanding companies. The research process may also uncover government grants or tax concessions for companies working in high-demand industries. A combination of funding sources within a new market can reduce the potential risks of expansion.
Be flexible with your products
Your market research will likely tell you that certain products and services work in different countries. These preferences can be connected to product pricing, store environment, cultural beliefs, and strong regional brands. A company can also be too aggressive with expansion and face significant challenges in the long term.
For example, Target added 124 stores across Canada over a 10-month period in 2013. By January 2015, the retailer announced plans to close all of its stores due to projected annual losses from 2015 to at least 2021. This failure was attributed to far-flung locations and a failure to recognize that discount retailers are abundant in Canada. Target also invested heavily in brick-and-mortar stores at a time when consumers in North America are overwhelming shopping online.
Fast-food retailers like McDonald’s and Pizza Hut offer positive examples of how to expand through effective global strategies. As of June 2018, McDonald’s maintained at least 36,000 locations in over 100 countries. This substantial worldwide network of stores is possible because the company offers its versions of local foods. In Japan, diners at McDonald’s can purchase cod roe-flavored fries and ginger pork sandwiches. The McKroket in the Netherlands and the McAloo Tikki burger in India are additional examples of local treats made into fast food.
Pizza Hut has also taken localized approaches to its restaurants at more than 9,000 restaurants across the world. The company’s restaurants in Dubai focus on a high-end dining experience, while its Australian locations are designed like diners. In addition to standard pizza toppings, Pizza Hut offers chicken shawarma pizzas at Middle Eastern locations.
Fortify your home market
A global business strategy primarily focuses on growth into new markets but should not ignore what got a business into a position to grow. The finalized strategy should include a section on goals and innovations in existing markets. Research into international growth is a perfect opportunity for a business to also consider how it can improve its core business.
An element of fortifying your home market is understanding how expansion impacts your financial situation. A business with potential growth in new markets can overreach in seeking potential customers, leaving its core business without sufficient financial resources. An incomplete global strategy can allocate research, development, and marketing resources into areas with low-growth potential. Existing customers may also be turned off if they perceive a company as taking their purchases for granted.
A company’s global strategy must explain potential growth areas at home and abroad. Your review of target demographics should project how well your current and future products perform with prospective customers. These projections should take into account economic changes, costs, and competitor trends. Your company may realize that a large investment at home and a trial investment abroad may be preferable to a global spree.
Aston University’s online MBA program teaches future entrepreneurs to do the hard work necessary to complete this level of planning. This MBA program teaches students about the global business world, financial strategy, and entrepreneurship.