Business abroad expansion plan

Once the domestic market has been mastered, entering foreign markets is a natural growth step for many successful companies. How do you plan to expand your business overseas to be just as successful? An effective technique is to draw up an internationalization plan.

Business abroad expansion plan

Previously, entering international markets was mainly the prerogative of only large corporations. Today, this process has become easier. Access to a large amount of information about countries of destination, the ability to contact stakeholders or consultants, as well as economic globalization —all this has brought country borders closer and made it easier for companies to cross them.

However, even here there are difficulties, many of which are not obvious at first.

It is common for an entrepreneur to experience a certain euphoria after achieving success in a local market. This feeling prompts him to look for new foreign venues where he can achieve the same stunning success. Business is an entity that tends to expand when it is flourishing. At this point, businessmen go to foreign markets in search of the same success as in the local market, but apply the same processes there — this is a big mistake!

Entering a new market — it is an action that requires careful planning and analysis. If you want to be as successful abroad as you are at home, you need a plan to internationalize your business.

What is an internationalization plan?

Internationalization Plan — it is a strategic document containing a company's action plan for entering a certain foreign market. There is an opinion that this plan — just a formal document, and that what really matters is the entrepreneur's experience in their market. Indeed, deep expertise in its industry, products and customer needs — it is the beginning and engine of good internationalization, but it does not guarantee success in new markets. Why?

Because moving into a new foreign market means the impact of economic, cultural, legal and social variables that are not present in the home market. For this reason, you should consider in advance what obstacles may arise for your business in the country of destination. This is the guide to follow when doubts and questions arise during the process of entering a new market.

So, let's consider what main sections should be in terms of implementing your business going abroad:

1. Exploring the opportunities and position of the company

This is a flashback moment. An analysis of the opportunities, resources, threats and weaknesses of your business that have developed to date should be carried out.

The most common method for completing this item is to conduct a SWOT analysis and its varieties.

2. Defining goals

After you have analyzed the situation in your company, you should set the goals for your business going abroad, that is, "What do you want to achieve?". You should avoid general descriptions and choose clear and relevant goals. The analysis in the previous step will help you make these goals realistic.

On the other hand, goals should be reviewed periodically. They are a guide and an element to measure the success of your work. For this reason, it is so important to be able to measure them, because the distance to these goals will show you how far you have come in terms of the success of your business entering new markets.

3. Selecting a potential market

Once you analyze the situation in your company and understand where you want to go, you ask the following question: where do you want to locate your business?

There are various methods for choosing the most suitable foreign market to start expanding your business there. This is a key point in the plan development process, especially for those companies that do not have enough own financing. Sometimes these companies have a "magic bullet" to go out and "shoot" in the international arena, therefore they need to prepare their plan with due attention and perfection.

There are different criteria for choosing a destination market. For example, ease of access to value chains or the cost of logistics. Some of the most common methods are to find a market where your product or service has a large potential demand, or to find a market where social, legal and cultural distances are shorter.

When you are at this stage, you must choose one of the — diversification or contracting. Diversification is about entering a large number of markets, thereby spreading the risk of failure. On the other hand, contracting is to focus all efforts on entering one market for a consolidated position and then expanding the markets after the underlying market is consolidated.

4. Input channel selection

The next question is: how to enter the countries that you have identified in your plan?

The login method will be based on:

  • the degree of risk you can take;
  • the degree of control you want to have over the business;
  • the future benefit you wish to receive.

The most commonly used channels are the ones we will explain below:

  • Contract of sale. This is a type of contract whereby the parties supply goods or services in exchange for a remuneration, which may vary, but is usually an economic reward.
  • A franchise agreement. This is when one party, called the franchisor, authorizes the use of its brand and shares its know-how with another party, known as the franchisee, in exchange for financial compensation (a one-time lump-sum fee and regular royalties).
  • Distributor agreement. This is a contract whereby one party produces certain goods and the other is responsible for trading them in different geographic locations in exchange for a fee. The distributing party assumes the risk of these operations. This contract allows for rapid international expansion of the manufacturer, but also less control over their own product compared to other contract types.
  • Agency contract. This is a contract by which one party instructs another to promote certain products or services in certain locations in exchange for a financial reward.
  • Joint Venture Agreement. This is when two or more companies reach an agreement to penetrate a particular market, usually one of them is present in the target market. The goal is to take advantage of the knowledge of a company that is already operating in this market, so that it is she who "leads the foreign company by the hand"; in exchange for a reward.

5. Product customization

Next question: what will you sell?

You can change the product depending on the market in which it will be sold to meet the needs and tastes of customers, or sell the same product or service in all markets.

Absolute adaptation to the target market does not guarantee success, but you should always consider certain red lines and the incompatibility of our product with the target market. Textbook example — a meat company that wants to go international but cannot sell pork in a Muslim country.

So, in this product customization process, the biggest hurdle you face is the cultural barrier as it covers the tastes, needs and customs of your target audience.

6. Communication Policy

How do you let your target audience know that you exist? Choose an appropriate communication policy.

Marketing plays an important role in this section of the plan, which in turn takes into account the cultural factors of the market in which you operate. You must present your product well, connect it with the values, mentality and other local attributes of the country you want to enter, and, accordingly, with your target audience.

It is useless to launch sales to other markets if consumers do not know your products. For this reason, you must establish a communications policy that lets you know what consumers in that particular country need. It is important to keep in mind the social paradigms and cultural realities of the target market.

7. Economic plan

How much sales do you expect to get in the destination market?

Here you need to set goals of an economic nature, such as a commercial margin. In this section, the commercial experience of the local market is very helpful, as it will determine the sales model in the target country.

Thus, to enter foreign markets, you need an internationalization plan — a clear action strategy that indicates your next steps based on real information from the market you are targeting. Then you will be able to take your business abroad with success. Since such planning requires special knowledge and skills, it is wiser not to do it completely on your own, but to invite specially trained professionals for it. For example, such as REAB team.

4/1/23
Julia Taraday, REAB Consortium
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