Going global is an enormous opportunity for any organisation and is a well-travelled road for many companies who have navigated it successfully. For plenty of others though, the journey has been filled with pitfalls, potholes, stalled endeavours and plenty of high-profile crashes.
International expansion requires a solid strategy for structured and sustainable overseas growth. That much is clear. However, the horizons that may glimmer offering rewards from establishing a successful global footprint soon become misted by an array of complexities while ensuring domestic activities and objectives are not compromised.
What is an international business expansion strategy?
An international expansion strategy is essentially a formal business plan that lays down how an organisation intends to enter an overseas market or markets. It includes clear timelines, resources required and set budgets while outlining how risks will be mitigated and revenue growth and profitability be achieved.
While global expansion and international expansion are largely interchangeable terms, there are key differences between them depending on the objectives of the organisation. Let’s consider some working definitions:
- International expansion: How an organisation enters a specific overseas market. Often this will be by adopting head office processes from the domestic operation and managing the foreign expansion from that head office.
- Global expansion: How a networked multi-country organisation, adopting global best practices, including those relevant from the parent company operations, intends to enter multiple foreign markets.
A company may have the vision to implement a full global expansion strategy but often this will be through incremental steps of international expansion. This develops the required maturity, learning and adjustment of objectives to achieve entry into multiple foreign markets.
Why you need an international expansion strategy
Without a robust strategy, the international and global expansion will inevitably be doomed to failure. Delays, extra costs and wasted resources are very real possibilities. There are also numerous examples of well-known brands who have attempted to enter foreign markets and subsequently been forced to retreat with their tails between their legs and something of a red face.
The reasons any business with overseas expansion aspirations needs an international expansion strategy align closely with what their high-level objectives should be. It will seek to achieve several international expansion business benefits, namely enabling the company to do the following effectively:
- Expand into the right markets at the right time for both the business and the market itself.
- Determine market entry strategies and operational and organisational models.
- Scale the business faster and beyond the constraints of domestic borders.
- Increase revenue and profit.
- Utilise time, money, capital and resources in an effective way.
- Mitigate risk and ensure compliance with varying local and international regulations
- Access a wider and more diverse talent pool of human resources.
Above all, strategies for global expansion give a clear structure and guidance for those who will have responsibilities for executing parts of it and taking oversight for it as a whole. It is a roadmap, an action plan and a coherent timeline with assigned responsibilities.
It’s also important to note that a foreign expansion plan is not an add-on to the overall organisational strategy. Clear company-wide objectives and goals enable you to see where international expansion fits into, perhaps drives, the overall company vision. This helps to set priorities for international expansion, set appropriate and realistic budgets and give clear timeframes as to how growth into global markets fits into business plans.
An international expansion strategy also enables a what-if analysis with clear options appraisals should it require review due to unforeseen or unplanned events. Such a strategy also enables the organisation to structure its overseas operations with teams established and assigned responsibility for sections of the plan.
Forms of international expansion strategies to consider
The basis of an international expansion strategy will fundamentally be driven by the foreign market entry method chosen. What will work for one company and for different countries and markets may not be suitable for all. Aligning market research, company goals and the budget and resources available will determine which approach is right for the company at a given point in time.
So which option should you use to expand internationally? The main types of overseas expansion strategies are as follows.
1. Licensing and franchising arrangements
A licensing or franchising agreement enables other companies to use your intellectual property. Often this will be a brand or product. Such a strategy enables another company to assume much of the risk of operating within a given market. They will bear the losses but also share a proportion of revenues and profit with you.
Such arrangements are not without risk, however. Your reputation can be hit by a poorly performing or ill-regarded partner. Alternatively, it can also enable an accessible way to build brand and product recognition in other parts of the world and benefit from the local expertise and knowledge of a company already operating in foreign markets. Licensing and franchising arrangements apply differently the world over which will need to be fully understood before even thinking about applying such an approach.
2. Mergers & Acquisitions
Essentially mergers and acquisitions are straightforward concepts to understand. One organisation joins with or buys out / gains a controlling interest in another. Mostly, your company is able to retain the existing infrastructure and management along with their inherent knowledge and expertise. You also gain the other company’s manufacturing or service facilities, distribution channels, market share and customer base.
Mergers and acquisitions are complex though and can be very costly. They are high risk but also high reward. Appraising the tradeoff between risk and reward can be a difficult equation in itself. Seamless integration of systems and processes is something of a nirvana and most commonly this will require a lot of work, time and investment.
3. Entity Set-up, PEO and EOR
Entity set-up is precisely as it sounds. An organisation establishes an entity, most often a physical presence in the guise of a registered business within another country. This can be a very successful means of international expansion but it does present significant challenges. The biggest of these is often the cost associated with the establishment and running of such an entity.
Employer of Record (EOR) and Professional Employer Organisation (PEO) are two models associated with entity setup that aim to mitigate risks and costs. A PEO is essentially supporting your own HR function whereby the people you hire in the foreign country are your employees. EOR models operate by acting as the legal employer of the people hired in the relevant country. Staff sign an employment contract with the EOR but you can work with them to determine the wages and performance requirements of those hired.
The decision on whether to adopt an EOR or PEO approach to overseas workers often comes down to growth plans in the medium to long term. If your goals are limited to remaining within a particular country and its markets then a PEO may make sense as you retain full legal responsibility for the workforce while offloading some HR responsibilities to concentrate on your core functions. An EOR arrangement enables a company to better expand across borders into multiple nations without the need to establish entities in each country.
4. Other forms of global and international expansion
The above are fully-fledged business models for expansion into overseas markets but are by no means the only means by which companies operate in foreign countries.
Joint ventures are an option whereby each partner shares rewards and risks. Perhaps in its simplest and easily recognisable form, global expansion by exporting goods to an overseas market is often the fastest mode of entry into international business. This can be by direct selling or with your own salesforce or selling your goods via an importer. There are several other mechanisms, such as partnerships and strategic alliances, plus combinations of those methods above to suit the individual needs of a company and its ambitions.
How to create a successful international expansion strategy
A successful international expansion strategy is rarely a simple one and there will rarely be a one-size-fits-all approach that works for different businesses, countries and markets.
Success – and you will need to define what ‘success’ looks like for your organisation – often depends upon the following factors:
- Remembering the basics: Market research, competitive analysis, marketing strategies and clearly defined budgets are essential. Underpinning all of that is the need for feasible timelines with commitment dates to map your strategy around. That may sound obvious but all are often ill thought out with efforts subsequently floundering.
- Implementing a localised infrastructure plan: Align products and offerings with local clients and market needs. Your approach to recognising local culture can elevate or eviscerate overseas expansion plans. Correctly positioning the right foreign base with the right employees and executives who understand local regulations, taxes, vendors and partners cannot be underestimated.
- Dispersing your talent: A headquarters that is richly resourced and has a depth of skills, experience and knowledge may be a wonderful thing when operating in a single market, but your overseas satellite operations should not be deprived of aptitude, expertise and capacity as a result.
- Staying on top of global change: Business climates change quickly and impact in different ways in different parts of the world. Geopolitical shifts emerge rapidly and are often impossible to predict. Dedicate resources to monitor challenges and be prepared to adapt.
How Seamless can help with your international expansion strategy
Whether you’re still at the stage of appraising your global growth options or have already determined that overseas expansion is to be a core part of your business plans, there’s no need to navigate the plethora of complexities alone.
A trusted partner like Seamless helps navigate these often murky and choppy waters to enable you to stake a company flag in a foreign land and begin building an overseas business empire. Discover more about the benefits of an international expansion strategy by getting in touch with our experts today.