If you feel you have maximised your customer base or are seeing decreasing returns in your home country going international can be a great way speed up your growth.
Foreign markets are often under-served but benefit from increasing levels of disposable income. This is particularly the case in the emerging markets of Asia, Russia and South America. Tapping into this reservoir of unexploited customer demand therefore represents a fantastic opportunity for growth. Foreign countries can also provide efficiency savings in terms of lower costs for materials, staffing and manufacturing.
Going international can also help to diversify your risks, so even when your home country is experiencing an economic downturn your international operations might still be producing growth.
Beware, this is not a simple exercise, shifting your focus internationally will incur some substantial setup fees and ongoing fixed and variable costs. You should also be sure that you have an excellent understanding of the foreign market you are targeting. The decision to export should not be made on a whim, but should follow thorough research and planning. You should also be careful that you do not neglect your core local business as you make an execute your plans to export.
What are the key markets for international growth?
The key markets for international growth are those emerging markets that still have low market penetration, and therefore a high level of latent, untapped consumer demand. They also tend to be countries with lower living costs and wages, but that benefit from progressive trade agreements and improving infrastructure and transport facilities.
The current king of international growth in almost every sector is China. With a huge population, the relatively recent introduction of western brands and luxury goods, and a large labour base, the potential growth in China remains high.
Other key markets include the other BRIC countries, Brazil, Russia and India, along with emerging markets such as Turkey, Mexico, Indonesia and Vietnam.
While these are some of the fastest growing and most dynamic economies in which to grow internationally, it is important that you understand your niche in each of these markets. There may be some substantial cultural differences and as a result, may make doing business quite difficult. It would be wisest to focus on markets that you, or someone you work with, understand well.
Which businesses are more successful in international markets?
The most successful businesses in international markets include the likes of Apple, Google, Amazon and Coca-Cola. They’ve each obtained global success in different ways, but they all have a simple, recognisable and translatable brand, they’ve worked hard at cultivating customer loyalty, and they’ve all found ways to make their business models work effectively across international borders.
Successful international businesses are those that have spent time identifying market gaps and opportunities around the world, and have developed business models that can be exported or scaled. The advertising model of Google, for example, is essentially infinitely scalable with little modification, whereas Coca-Cola has had to invest in production and distribution infrastructure in a huge number of different countries.
Where can I get support for growing my business internationally?
If you’re expanding into international exports, UK Trade & Investment is a government agency that can offer you help and advice free of charge. It produces a range of guidance material containing useful information about trading in different countries around the world. It runs a number of seminars and workshops, and can provide you with a face-to-face meeting with a specialist advisor. Government financial support is also available via UK Export Finance.
You might also find it helpful to approach trade organisations within your sector, specialist law firms for legal advice, and any public bodies within your target countries that may offer support and assistance to overseas businesses looking to expand.
How do I merge my business with a foreign business?
Merging two businesses involves pooling their assets and resources into one combined legal entity. If this is achieved by one of the businesses purchasing the other then strictly that’s an acquisition rather than a merger, but in practice most friendly acquisitions are called mergers.
Practical steps will include negotiating ownership stakes in the merged business, combining staffing structures, and identifying efficiency savings by eliminating duplication of effort and exploiting new economies of scale.
There is no legal requirement to notify the authorities before a merger, but the Competitions and Markets Authority (CMA) may investigate the deal if it exceeds £70 million turnover or 25% of a specific market so if you are on the smaller end of the market, you unlikely need to worry about the CMA.
The process is essentially the same for an international merger, but you’ll have to take into account the different rules and regulations of each country. Cross-border mergers are notoriously complex, time consuming and costly, so you should first establish a clear business case for the merger.
You’ll have to select one of the countries for the incorporation of the combined business. You could choose this based on advantageous tax rates or practical considerations. Some countries impose residency restrictions on business ownership which could have implications for you and your investors. You’ll also have to consider whether to keep the structures of the original businesses intact as subsidiaries.
In all cases, obtaining expert advice from an international business lawyer will be essential.
When should I start exporting my product or service to international markets?
Before launching into international exports, first make sure that you’ve established a firm, stable business model that works at home. Consider whether you’ve fully exploited your domestic market.
Next, research possible international markets to identify latent customer demand. Investigate whether your business model can be adapted to the market of your target country. Remember, there can be significant differences in prices, income and regulations that all have to be factored in when you work out whether you could make a profit there.
Before you make a final decision to export, think about whether an alternative approach might be better. For example, you could contract a foreign manufacturer to make your products instead, saving time and money on international shipping.
First, identify global expansion opportunities. The best prospects will be countries or regions where your particular product or service has not yet penetrated, and where there’s plenty of prospects for growth. However, make sure the local population will be able to afford your product and check for any local laws or regulations you’ll need to comply with.
Next, plan how your business model can be adapted to a global market. The simplest way is to export your product, but contracting a local manufacturer or even franchising your brand could better suit your business.
Then plan and invest in a marketing strategy. It can be tricky marketing to a different culture, so enlist local help to refine your message for your new market.