In 2021, global trade hit a record high, generating a whopping $28.5 trillion. The growth trend is forecast to hold in 2022 and beyond.
As an entrepreneur, this tells you one thing: there couldn’t be a better time to start an international business or take your current local business global.
Are you up for the challenge?
Great, but building a thriving global business is easier said than done. The risks are greater. You’ll invest a lot of your time and money, which can go to waste if you make the wrong moves.
To help you find success, here’s a detailed guide on what you should do.
Let’s get down to business!
Evaluate Your Products International Demand
Every business idea, whether it’s for a local or international business, starts the same way: with validation of the idea. This requires market research.
You must determine whether the product you’re looking to sell in the international market has sufficient demand in those markets. Not only that, but the state of competition in those markets as well.
If you already have a thriving local business, it’s easy to assume that customers in foreign markets will warm to your product just like your local market. If you go ahead and expand internationally solely based on that assumption, you’ll be courting failure.
Hire a market research firm with international experience to dive into the markets you’re eyeing and establish whether they’re viable. Alternatively, you can task the researchers with finding foreign markets where your business is likely to thrive.
They’ll also give you a report on the regulatory environment in those markets. You should have a good idea of the permits and licenses your business will need to obtain in order to operate in those countries.
Is Your Business Ready for a Global Expansion?
You’ve established that there’s an internal market for your business. You’re all excited and ready to speed up the process of taking the business globally.
Well, not so fast!
Just because there’s a market for your product or service doesn’t necessarily mean your business is ready to jump in. One of the major reasons small businesses fail is expanding too quickly.
Going global requires vast financial and human resources. If you spend what you have without proper planning, you could run out of capital before the international arm of your business becomes sustainably profitable.
This is why it’s crucial to evaluate your company and determine whether it’s best positioned to expand globally. For example, do you have any employee on your leadership team with business expansion experience? What about your manufacturing or production capacity?
Create a checklist to help you with the assessment. If the business doesn’t tick more than half of those indicators, perhaps you need to consider shelving the expansion plan for now.
Identify Entry Strategies
There are several strategies you can use to enter a foreign market. They include:
- Foreign direct investment
- Joint ventures
- Acquisition (Wholly-owned subsidiary).
Choosing the right entry method(s) is crucial to the success of your expansion plan. You wanted a method that gives you the biggest advantage and eliminates most of the hurdles.
To find a suitable method, consider things like the nature of your product, the location of the market relative to your headquarters (home country), and the associated entry costs.
For example, if you’re a manufacturing company, exportation can be the best entry method. As long as there are no active export/import bans, you can easily ship purchased products to those countries. Alternatively, you can set up a manufacturing plant in that country (foreign direct investment), but this requires more capital than exporting.
If you’re struggling to identify the best market entry strategy for your business, hire an international expansion consultant. They’ll evaluate your business and conditions in the foreign markets, and advise you on an ideal entry method.
Develop a Recruitment Strategy
A global expansion means your organization will need to have an international workforce especially if you’re setting up physical offices in foreign markets. It’s possible to send some of your local workers to lead those foreign offices, but most of the staff will be hired locally. In most countries, it’s a legal requirement that foreign businesses hire from the local labor market.
Hiring and managing workers in foreign markets is difficult. You’re not familiar with the local labor laws and the culture might be different from yours.
What you need is a recruitment strategy that gives that responsibility to another party, a global employment organization service.
PEOs are companies that specialize in human resource operations. The company will be the employer of record in the countries you’ll be operating, which means it’ll take over all aspects of managing your international workforce.
Don’t Be Slow to Adapt to New Challenges
There’s no shortage of challenges when you’re running an international business. Geopolitical issues like elections, conflicts, and changing laws are always a threat to your business.
How quickly and effectively you respond and adapt to these challenges can mean the difference between success and failure. Sometimes withdrawing from a foreign market is the only solution.
For instance, learn from the multinational companies that quickly withdrew from Russia after its invasion of Ukraine. Those that stayed longer risked hurting their brand image.
You Can Build a Successful International Business
It’s easy to admire global companies like Nike and Apple. But what does it take to build such companies from scratch?
It takes research, proper planning, access to adequate capital, expertise, and above all, a fearless entrepreneur. With this guide on how to build an international business, you now know some of the most important steps you need to take.
Browse our blog for more tips and advice for entrepreneurs.