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Good news: Your business is thriving, and you’re ready to take it up a level. Global expansion is a fantastic option for businesses that are seeking to reach other markets around the world, but establishing a foothold in other countries takes hard work and dedication. Let’s look at some strategies to help you effectively expand operations globally.
What Is Global Expansion?
As you might guess, global or business expansion refers to a company’s efforts to expand business internationally into one or more different countries. A company that operates solely in the United States, for example, might decide to serve customers in Canada and Mexico.It’s often not a simple process to implement global expansion strategies, as import/export regulations have to be considered, as well as marketing strategies adopted to a different culture and language.
7 Ways International Expansion Can Work
When it comes to expanding internationally, there are several ways to go about it. The one you choose depends on both how your company operates and how things work in the country or countries you want to expand to. Here are a few global expansion strategies to consider.
1. Keep Your Home Base in Your Country
With this strategy, your headquarters remains in your home country and you export goods or services to other markets. This keeps your costs low in that you aren’t necessarily opening new locations in other countries, especially if you sell products online. It does, however, mean you need to know the laws and fees for exporting products in each country you’re targeting.
2. Take a Transnational Approach
Another option, especially if you want to have feet on the ground in your new markets, is to keep your headquarters in your country and then open subsidiaries locally. This allows important decisions to be centralized based on local needs and markets.
3. Create Country-Specific Brands
Just because your products have done well in the U.S. doesn’t guarantee they’ll be a hit in another country. There are many factors to consider, including branding, how the product is used, and the local culture.In this case, you can create “sub-brands” that appeal specifically to a given country’s tastes and that use the local language on the packaging and in the brand name.
4. Keep the Strategy Consistent
In some cases, especially with technology, there may be no need to reconfigure your selling and marketing strategy to account for different tastes around the world. If your brand is well-known enough, people will clamor for it no matter where they live.
5. License Your Product
If you don’t want to hassle with finding a local factory to manufacture your products, you can also license it. In this case, your partner is in charge of creating and distributing the products on your behalf. Note that you do lose some control over quality.
6. Franchise Your Brand
Another global expansion strategy is to franchise your brand. In this case, individual investors buy the rights to open a location under your brand name and will use all marketing and operation strategies and processes that you provide.
7. Buy a Local Company
Mergers and acquisitions are additional options to consider if you want to expand your reach globally. The benefit is that you buy into a brand that already has an established foothold in the market. You can choose whether or not to revamp the brand to be more aligned with your larger brand, or whether to keep the local brand as-is.
Pros and Cons of Global Expansion
Business growth strategies for global expansion can be exciting, can’t they? Still, growing globally isn’t right for every business. Weigh the benefits and drawbacks to decide for yourself.
Pros
Cons
• Offers opportunity to increase revenues
• Not understanding local culture can be detrimental
• Economies of scale can provide better profit margins
• Red tape may be costly and complicated
• Creates global brand recognition
• May require large up-front investment
Pros
Naturally, one of the reasons you’re considering international expansion is to increase revenues and profit margins, right? The opportunity for financial success is real if you have the patience, the right strategy, and the funds.And the more products you buy from your suppliers, the lower the per-unit price. If you’re buying for more than one market, you can cut that price lower and lower, resulting in higher profit margins.Another perk is that you can establish your brand as a global one. No longer will it only be recognized in the United States!
Cons
On the other hand, getting a foothold in a new market takes time and finesse. I cannot stress enough the importance of understanding the local culture, because it dictates what they buy and how they buy it. Ignore this and your endeavor could fail.Each country has its own laws and regulations around new companies coming in, so find out what will be required for the international expansion strategy you’ve chosen.This isn’t a get-rich-quick scheme. It will take serious investment, and it may take years to get your money back.
Does International Expansion Make Sense for Your Business?
Now that you know a bit more about the pros and cons of global expansion, here are a few other things to consider to determine whether it’s a good fit for your brand or not.How will our product be received? Again, this goes back to culture. As an example: while a weight loss product might be a hit in the United States, it might not work as well in a country like India, where the focus is not so much on losing weight.What hoops will we have to jump through? Again, look at the bureaucratic process, regulations, and fees before investing in this endeavor. And try to find out what the timeline is to get your product approved for the market in another country so you can plan accordingly.How will we need to modify our products? Your first step will be in translating all packaging and labels into the local language. You may also need to change the name of the product so it resonates with a non-English-speaking audience.Who are our competitors? Do your homework in the country you’re targeting to know who is already there in your market. What are their strengths and weaknesses? What gaps can you fill?Are there government incentives? Some governments offer foreign companies incentives to open locations and create jobs in the country, and this could offset some of your initial investment.
Financing Global Expansion
If you’re sold on the idea of international expansion, read on, because it’s time to look at options to fund this operation. Not only are there business expansion loans available, but you might also find a partner willing to help you move into a new market.
Business Loans
Your first option is applying for a business loanthat will cover all or most of the costs of expanding into a new market. There are a variety of loan options available, from a line of credit to a million-dollar loan, depending on your needs and credit profile.
Equity Financing
If the idea of borrowing money doesn’t appeal, consider equity financing. Investors who are excited about helping you expand into other countries provide capital in exchange for equity in your company. Ideally, that equity will be worth more than the initial investment after you’ve gone global!
The Takeaway
Expanding your business globally is a great way to grow your brand and introduce your products to new customers. It will take time, money, and a carefully-planned strategy, but with luck, you’ll have new customers in new countries before you know it!When it comes to your financing options for global expansion, Lantern’s got you covered. Explore small business financing with a single application.
Frequently Asked Questions
What is global expansion?
Why is global expansion important?
How do you achieve global expansion?
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About the Author
Susan Guillory
Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
