Laying the Groundwork for an International Expansion
Undertaking an international expansion is a major decision that business leaders have to make. The growth of online commerce and technology over the past decade has made growing your overseas operations easier—and in many cases, essential to staying competitive.
As a business leader, you'll need to understand what's driving your company to expand globally. You'll also need a firm grasp on signs that indicate now is the right time for this project.
Is your business ready?
Ideally, you'll want to avoid waiting until global expansion has become a necessity. Moving proactively will set you up for success through greater control and more careful planning.
As with many business decisions, there are many goals and factors to weigh. You may want to increase market share or revenue, get a hold of top industry talent, or stay ahead of domestic economic conditions. Key indicators on business performance will help you determine if global growth makes sense right now.
Solid domestic performance
A cross-borders operation requires you to optimize resources. Strong profits and operational efficiency can boost the chances that your expansion efforts will succeed. Revenue doesn't need to be growing substantially—the key is for the company to be well-established and stable in its domestic market.
Many companies aim for 3 to 5 years of strong financial performance and stability before expanding overseas. Unique company factors, such as business type and product line, will determine how long your track record should be. A reputation of excellent performance can also open doors for healthy international partnerships, helping you build the supply chain and logistics infrastructure you need.
Rising demand or interest abroad
If you've observed demand for your products or services in other countries, expansion can be a practical choice. Or perhaps there's an observable consumer need that no competitors are currently filling.
Strategic marketing can spark demand when there's limited knowledge of a product in a particular market. Again, good profits and other strong financial metrics can position your company to invest in researching and captivating new customers.
Hedge against domestic conditions
A slowdown in domestic sales could indicate the local market has hit saturation. Global expansion could help renew growth in this case. You might also want to secure your company's place internationally if competitors could easily replicate your products.
Seeking out opportunities in international markets can also help you adapt to industry transformations. Keep a lookout for significant changes, such as technological advances, shortage of suppliers or regulatory policies.
Launching an international business expansion strategy
The key to building brand recognition in a new market is to use a laser-like approach. Focus on a region rather than the entire world. Whenever possible, start new market penetration one country at a time. This way, you'll put less strain on resources as your company becomes familiar with local logistics, culture, marketing channels and other relevant business factors.
Preparation and due diligence can go a long way toward avoiding fumbles and costly mistakes. Gather the expertise you need in the new market to discover what you don't know. Map out a plan that includes how you will handle:
- Growing your list of quality suppliers
- Increasing production
- Managing new cash flow and profitability benchmarks
- Navigating regulatory and banking relationships
Consider making changes to meet the target market's expectations for top-notch customer experience. For example, can you ensure culturally appropriate communication across all channels? You'll also need to identify technology and banking options for orders, payments, delivery and troubleshooting that make sense for the new customer base.
As you explore these questions and challenges, you may find a foreign acquisition is a viable business solution. Depending on tax codes and interest rates, it might be easier to finance a business acquisition in an overseas market than a domestic one.
Whether you choose to export or acquire, start a discussion with your banker as early as possible. Exploring your financing options in light of your international expansion goals can help you make smarter long-term decisions.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.