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GettyBack in 2015, Target Corporation decided to close all of its 133 stores in Canada.
At the time, Target’s chairman and CEO, Brian Cornell, admitted it would take until at least 2021 for the Canadian venture to become profitable. The company reported approximately $5.4 billion in losses during the final quarter of 2014, with an additional $600 million needed to close the Canadian stores.
It’s a striking story — one that should give any business owner pause before deciding to expand into international markets.
Keep in mind that Target is a corporate behemoth with a loyal customer base in the U.S. Yet they had major trouble migrating across the border due to issues with their supply chain, infrastructure and brand equity in Canada.
This is just one example of an international expansion gone wrong. But if you’re thinking of taking your business into international markets, you should know that, while those markets can be huge sources of revenue, they can also contain quite a few potential pitfalls.
Here’s what to consider before you hop aboard the international express.
Don’t rush into it.
You’re always going to understand your own market better than a foreign one.
So, you’re almost certainly going to run into cultural, legal and regulatory differences at every step. If you rush into an expansion head-on, you’ll entangle yourself in any number of these differences, stunting your momentum and wasting your time solving avoidable problems.
For a young company, the problems may not be limited to the new market, either. Will this move potentially reduce your existing client base? How much will it increase your team’s workload? How many people will you need to hire to compensate? You need to have answers to all those questions before making your decision.
Because if you jump into a situation you’re not prepared for, you’re setting yourself up for failure.
Hire people who have global business experience.
If you don’t have experience in international markets, it’s important to bring on people who do.
These hires may already speak the language, understand cultural norms or have connections within the country, which are all important for a successful expansion. They also may have a better idea of how to market your product or service within that country. Advertising in the U.S. is very different from advertising in China, for instance, and understanding industry differences can make or break your venture.
For example, our chief revenue officer is from Sweden. He understands the preferences and working styles of the country, as well as the cultural requirements for doing business there. And that kind of knowledge is enormously helpful when it comes to establishing good relations in a new market.
Learn the country’s cultural norms.
You can learn a lot about a country and its norms simply by talking to experts or doing some research on Google. But if you’re serious about breaking into a market, you need to go there and experience it firsthand.
Meet with people who operate in your industry. Discuss the realities of working in that specific country and what an expansion would actually look like. Speak with your target clients to ensure you’re not making false assumptions about what they need and where their pain points are. There will be differences in the way businesses and people operate.
For example, in Japan, there’s a specific etiquette regarding business cards and how you’re supposed to receive them. If you immediately file it away in your wallet or pocket, it’s considered offensive.
When you make a point to experience and learn about the country you want to do business in, you’ll avoid several unpleasant surprises down the line.
Be aware of how international work will affect your team.
It’s not just the leadership team that has to adjust to working in international markets. The rest of your team will also be affected by the expansion, and it’s up to you to help prepare them for it.
If you’re a small company, working in a new market overseas can stretch your team pretty thin, especially if you don’t have support in multiple time zones. No one wants to take calls at 2 a.m., but it can happen if you haven’t adequately prepared for a time zone difference.
A lot of team-related changes will depend on your product. If you’re putting out a piece of software that costs $20 but has 2 million users, you’re likely going to need outside support for customer service. But if your software costs $20,000 a month and you only have a small number of users, you’ll basically have to be available 24/7.
Think carefully about your team’s capabilities ahead of time and you’ll save yourself a lot of headaches and late-night calls.
Prepare for unexpected costs.
Most expansion costs come from regulations or licenses specific to each individual country. Every government has a different license to obtain or fee to be paid if you want to work within their borders.
However, depending on your industry, you may have to consider inherent costs that come with doing business in a certain country. For example, in the shipping industry, Brazil is notorious for losing packages and has a standard loss rate between 10% and 20%. Sometimes, the packages are stolen; sometimes they’re seized without notice. Other times, the customs officer just likes what’s inside and takes it home.
To someone who’s unfamiliar with the system, it seems completely ridiculous. But if you want to ship anything to Brazil, it’s a cost you have to take into consideration.
These tips aren’t meant to discourage companies from exploring opportunities abroad. It’s just wise to take your time and comb through the potential problems and opportunities within the new market. The fewer surprises you have to deal with, the greater your chance of a successful expansion into international markets.
2019-12-30 12:44:54Z
https://www.forbes.com/sites/forbesbusinesscouncil/2019/12/30/what-to-consider-before-expanding-into-international-markets/
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