The Art of Expansion: How to Overcome Global Expansion Challenges

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The Art of Expansion: How to Overcome Global Expansion Challenges

21/03/2022  |  georgev Categories: BlogGlobal Expansion

You may have heard the frequently cited statistic that most new businesses fail during the first year.

But according to data from the US Bureau of Labour Statistics, this isn’t exactly true. 80% of businesses survive the first 2 years, and over half make it to 5 years.

At the ten-year mark, only 35% of the businesses that started are left. Why is that?

One major reason why businesses fail after an initial success is that they try to achieve Global Expansion too fast. Global Expansion can bring transformative benefits to a business, but only if it is done right.

Most businesses will face numerous challenges along the way which may hinder growth or even lead the company to close its doors. But with the right approach, expansion can be successful – and it may even be fast.

Crossing new borders means conquering new challenges. Check out the following guide explaining how to overcome common Global Expansion challenges.

What is Global Expansion?

Global Expansion is when a business takes its operations into a new overseas market. Companies may be fast-growing and want to expand as quickly as possible, while others may plan their strategy for years before moving into a new market.

Companies establish a legal presence in the new market. This can be done by establishing a foreign subsidiary or relying on entity establishment or an Employer of Record solution. These solutions will still allow you most of the control over your company while sharing some of the responsibilities.

Global Expansion is often the end goal for many companies. A survey from Wells Fargo found that 87% of US firms believe that international expansion is crucial for long-term growth.

Benefits of Global Expansion

If your company is considering Global Expansion, you’re likely aware of the many benefits that come with growing your market internationally. Below are just a few of the positive outcomes that may result when you expand your business overseas.

Explore New Markets & Increase Revenue

The main reason that businesses expand globally is that it gives them the chance to explore new markets. Foreign markets have the possibility for new customers, more sales, and increased success.

New markets will allow businesses to introduce products that may not have been successful in their home country. They can also extend the life of existing products and experiment with product variations.

Reduce Dependence on the Current Market

Another advantage of expanding globally is to shift your relationship with your current market. Many companies are reliant on one market for the majority of their sales. If something happens to this market, it will be difficult for the company to survive.

With a global market, companies will have more stability and opportunities to grow. If a competitor becomes too strong in one area, the company can shift their products offerings and start to focus on another market without worrying about closing its doors.

When a company is able to function well in multiple markets, it can quickly pivot its product offerings to the most lucrative market at any given moment.

Leverage New Resources

Different countries typically have different approaches in the workplace. This includes the way they structure their day to the technology they use. By staying in one market, companies will usually only have access to that market’s customs and traditions.

But by working in another country, a company will gain many of the resources of that country. They can use the country’s technology and innovations. Combined with their own expertise, they can become even more successful.

Understanding different business processes and tailoring your business to use the best ideas from each country will put you a step above your competitors. You’ll have a truly holistic understanding of how to sell your product.

Attract Talent

Along the same lines, working in new countries will also expose you to more talent. You’ll be able to meet and work with people who have stars in their market but may be unknown to you.

Expanding globally will allow you to work with leaders in your field from all over the world. You’ll be able to build your company’s global network and gain more opportunities.

There are many advantages to forming relationships with industry leaders in new countries. You may share the same operational or technological knowledge, but they will have a nuanced understanding of the local culture. It is this knowledge that will be the most useful to you in a foreign market.

Get Ahead of Competitors

Many businesses also expand internationally because it puts them one step ahead of their competitors. Being the first to market can often mean that you become the dominant company in that region.

By expanding where your competitors have never been, you can establish your reputation as the market leader in that area. You’ll be able to build a strong customer base of loyal consumers that will make it difficult for newer competition to enter the market.

Questions to Ask Before Starting Expansion

With all of the potential benefits of expanding globally, you may want to get started with your international strategy. But failing to consider the obstacles and costs of your expansion will lead to challenges down the line.

Ask yourself the following questions to ensure that you’re ready to expand, and you’ll save yourself from difficulties later.

What Is the Reason to Expand?

Businesses will often expand to locations that intuitively seem right or that they may have a personal connection to. While you may find success by going with your gut, you have a much higher chance of succeeding if you do a cost-benefit analysis of different expansion areas.

Are there areas that have a hole in the market that you could fill? Those could be lucrative options. You may find that your business does not yet have a product that would fill global needs, and you don’t have a valid reason to expand.

Do I Have Enough Capital?

It’s exciting to expand your business globally, but you should not begin the process until you have enough capital to do so. It is easy to burn through funds and end up with a half-finished effort that ultimately fails.

Keep in mind that it takes quite a lot of money and resources to turn your business into an international operation. Be prepared to invest more than you originally plan for as issues and unexpected costs arise.

You don’t want to dip into other funds or company assets to support your growth. Look over your finances and decide if now really is the right time to begin global expansion.

What Are the Cultural Differences?

Do you have an understanding of the cultural differences in your new market? If not, do you have the resources to learn more about them?

Be honest about how much you truly know about this new market. If you’re not familiar at all, give yourself time to conduct ample research. And even if you do have familiarity, you will still need to conduct a market analysis to find gaps in the market.

Do I Have Overseas Contacts?

Expanding your business globally with no local support is a guarantee that you will struggle. If you want to minimize the challenges you face, consider if you have contacts in that country.

Having a foreign network will give you access to foreign industry leaders who can answer your questions and provide the resources you need. Left to navigate the foreign market on your own, you will not be as effective in resonating with your audience.

Without any contacts in a particular country, think twice before you begin expanding there. It may be wiser to first focus on building your contact list there so you have relevant resources once you do grow.

Am I a Domestic Leader?

Think about your current position in the market. If you think you have reached most of your domestic potential, international expansion seems like the next logical step.

But if you still have a lot of potential to grow in your current area, you may be better off staying there. It is better to be a leader in one market than existing in three markets poorly.

Can I Offer Support Across Time Zones?

Depending on your location, your time zone may be quite different than the country you’re targeting. Whether you’re making deals with clients or offering customer support, you will need to have team members available to communicate.

Consider how much support you will be able to provide. Are you willing and able to hire a new department? Do you have the resources to create an overseas team?

Overcoming Common Global Expansion Challenges

If you’re thought about the questions above and feel as though you’re ready to pursue a global expansion strategy, you should be aware of the common obstacles many businesses face when growing their business overseas.

Below are 6 common global expansion challenges and tips to solve them.

Challenge #1: Gathering the Right Team

Many companies are excited to expand and will want to do the process quickly. As a result, they will build a team without doing the proper research. They may put together a group of people who are not qualified to be making decisions in the new foreign market.

Ultimately, they will end up causing problems for the company later when they don’t know how to gain trust from new markets.

A strong team will make your global expansion much more successful. Allowing proven senior executives to take the lead while the company looks for the best team will lead to much more success.

Attracting the right Talent means appealing to people’s career goals. The number one reason why people change jobs is for a career opportunity.

Engage your ideal candidate by emphasizing the opportunities that will come with joining your global expansion team. Show them that you are working toward the common goal of growth.

In some cases, businesses may not want to wait to select the perfect team. They may face a time crunch and need to act quickly.

When this happens, building a great team fast can be done with the help of Global PEO Services. PEO stands for professional employment organization, and global PEO services have a strong global network to help companies build international teams.

Businesses needing to create that perfect team should partner with a PEO service to find the right people to work in the appropriate market. Having an initial team that is qualified will make the expansion process run much more smoothly.

Challenge #2: Selecting the Right Target 

Many companies find that they have trouble fitting in with the local market. It may turn out that there is a competitor who monopolizes the market. Maybe the target audience is simply not interested in the company’s offerings.

The best way to ensure you’ll fit in with local markets starts way before you begin designing and producing your product. It goes back to the beginning of the expansion process.

The solution: do your research. If you don’t fit in with local markets, it’s mostly because you have inadequate knowledge of how it operates.

When researching an international business expansion strategy, the first thing you need to do is your due diligence. Do a deep dive into the market and into your target audience.

One way you can do your research involves conducting a market segmentation analysis. Break down the foreign market into smaller parts so you can better understand what’s going on. You’ll also learn if you have a chance of being successful in your segment.

Find your competitors. This includes both direct and indirect competitors who could affect your sales. Look for gaps in the market that you could fill, and notice where their offerings may be stronger than yours.

SWOT Analysis

Lastly, conduct a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities, and threats.

Your strengths are the internal components of your business that would help you thrive in your new international market. Maybe it’s the expertise of your team or your truly unique product.

Your weaknesses are your internal factors that could cause problems. Weaknesses include friction between team members or difficulty following through on strategy.

Opportunities are external factors that benefit your business. In terms of global expansion, opportunities could include a recent decrease in foreign tariffs or a change of laws.

Threats are external elements that may hinder your chances of success. Threats could include factors like strong competitors or rising input prices.

Challenge #3: Creating & Refining Products

Another obstacle that companies face is creating the right product for foreign markets. They struggle to decide what to make, how to make it, and how to present it to customers.

If you want to ensure that you gain a share of the foreign market you will need to use the research that you conducted from step #2 to create the right product.

Your gap analysis should have revealed the holes that exist in the market. Use these holes to differentiate your product and set you apart from your competitors.

In the eyes of the customers, you are an unknown entity. To gain their trust, you need to offer a product that is unique and of high quality.

Preparing your product means focusing on localization. Localization is the process of adapting your products and services to the local market. This means changing your packaging or translating a name to communicate more effectively with your target audience.

If you do not localize your product to your target market, it is unlikely that you will succeed. Remember that your product should fill a need for customers. This will look different for each market.

For instance, a retail company should not sell the same clothing to buyers in Greece as they do in Russia. The two are completely different markets with different needs.

Challenge #4: Preparing Your Organization

You’ve selected a great team to lead your global expansion initiative, and your products have been adjusted accordingly. What’s next?

It’s time to prepare our organization for expansion. Many businesses struggle with getting everyone on the same page. What results is a process that is much less smooth than it could have been.

One key way to get everyone on board is to be as transparent about the process as possible. Transparency builds trust, improves morale, and ultimately boosts performance. Happier employees who trust the company they work for will work harder to succeed.

Another crucial element is to offer training opportunities. There will likely be significant cultural differences that come up at some point. You’ll need to take into account these differences and explain them clearly to employees.

Providing training programs to employees will ensure that everyone is as comfortable as possible with the new market. Training should also include a non-judgmental zone for employees to ask questions and learn about their new markets.

Don’t hesitate to ask for feedback. Many employees will have insight into the expansion process and how it could be the most effective for everyone.

Challenge #5: Bringing Offerings to Market

But even a business that has a great product may not succeed in a foreign market with the wrong communication. Businesses often struggle to connect with local audiences and market their products.

The first thing that businesses should understand is that 79% of people prefer to shop in their own language. Even though English is one of the most spoken and taught languages in the world, it often isn’t the best first choice for foreign websites and products labels.

Update your website for each country with multiple language options. Also, ensure that you have a support team for each country that can communicate with customers in their native language.

Spend some time learning about cultural differences that could change the meaning of how your market your product. A casual greeting in one language could be offensive to another.

Also, take into account small nuances of language that affect how you present your product.

For instance, British English and American English are similar. But in British English, the date is always placed before the month. In American English, the date comes after.

You may want to outsource your customer service if you don’t have the resources to hire a new team. In this situation, PEO services will be helpful for your business. Many global PEO agencies include global customer services.

Challenge #6: Legal Compliance

Compliance issues are one of the main challenges for companies looking to expand. Each country has its own set of laws, which can vary differently from the next. Fail to conform to these laws, and businesses face serious penalties.

In order to expand to another country as smoothly as possible, you will need a team with strong legal knowledge to help you avoid any legal troubles. Government agencies will often require strict documentation before letting you expand into their country.

If you don’t have the resources to hire a full-on legal team, you do have another option.

You may know where we’re going with this one: look for PEO services. Global PEO services have expertise with international expansion. Companies like Bradford Jacobs can help businesses expand to two dozen countries.

A PEO’s services extend beyond just offering benefits and HR responsibilities. Global PEO services also include sharing legal responsibilities and liabilities. A global PEO service will help you make sense of foreign requirements and get you started on the path to selling.

Succeeding with Global Expansion

If you’ve been thinking of taking your business global, you’re not alone. But what will differentiate you from all of the businesses that fail is a knowledge of how to overcome the common challenges that many businesses experience during the expansion process.

Have global expansion in your sights?

Reach out to the Bradford Jacobs team. Our team has expertise in building businesses in over a dozen countries with the help of our PEO services and strategies.

Contact us to learn more about how we can work together.