Julia Langkraehr’s Blog

Is international expansion the right step?

In order to grow your business sometimes you have to look beyond your country borders.

If you are considering expanding into another country, ask yourself these three questions:

  1. Is my business in a mature market?
  2. Has it reached market saturation?
  3. If the answer is yes to both, then where is the most advantageous and attractive market to diversify?

Here are some tips to help you determine a strategy to expand your business internationally.

Understand your company’s total market share

The first step is to understand where you are positioned in your sector and how you are going to grow your business in your current market.

How big is your market and what will it take for you to increase your market share in order to dominate the market in your sector?

Are there new potential customers, or do you need to win business from your competitors?

Anticipate when you reach market saturation

Once you understand your market share, project where your industry is in terms of market maturity.

What are the barriers to entry for new or existing competitors?

Is your product, good or service being commoditised?

Is there downward pressure on margins, and are the margins shrinking?

Is there any opportunity to acquire or merge with a competitor? Does 1+1=4 in terms of:

  • the economies of scale
  • complementary products, goods and services
  • overlap in customer base
  • the ability to attract new customer in an enhanced offer?

Anticipate when you reach market maturity

Is your sector likely to grow or shrink?

What are the key indicators for growth, stagnation, or decline?

If you have the perfect products, goods or services, with the best customer service and customer retention, and there is no upside or growth, have you reached market maturity in your industry?

Do you need to look at a new geographic region due to market conditions in order to diversify and grow?

Research potential countries

If you have determined you are in a mature market, research countries where there is potential for growth.

Look for double digit increases in:

  • growth of population
  • middle class
  • disposable spend
  • consumer credit

These might be markets or countries which are under developed, or developing and which might have a low barrier to entry.

Potential markets to consider are BRICS (Brazil, Russia, India, China and South Africa) and MINT (Mexico, Indonesia, Nigeria and Turkey)

These countries share similar profiles in terms of a young and growing population and useful geographic placement.

Produce a competitive market analysis

It is essential to analyse your competitors, including their market share, USP, customer base, scale and size.

One option is to hire a consultant or company which has knowledge and experience in the target country. You will need data and statistics in order to analyse the potential market and where your company would fit.

You might consider conducting independent focus groups to provide market research which outlines the obstacles and/or entry requirements for a specific market and/or country.

Do personal research

It is important to spend time talking to customers, clients and suppliers in the target market, city and country.

Attend industry trade shows and conferences in order to collect additional market data from industry experts who are local and working in the market.

Make sure you are have an affinity to the country, culture and history. No point in identifying a growing market where you wouldn’t want to spend time.

Research and produce a prospect list for each country

It is important to be able to grow to a significant size over a short period of time in order to establish the brand, company and market position.

Your prospect list should outline the strategy, tactics and action plan needed in order to identify and research potential customers and the size and scale of the opportunity.

Evaluate market entry possibilities

Based on your competitive analysis, your prospect list, your face to face data collection and your market research, determine your best market entry strategy.

Here are some company structures for you to consider:

1)      Licensing: Are there local experienced business people who have similar or complementary backgrounds who would be interested in becoming a licensed partner and sharing the risk of starting up a company to sell your business, product or service?

2)      Franchising: Could you franchise your business concept or service in multiple countries or regions? Do you have the size, scale, profitability and success to attract potential franchisees? You will need proven processes and procedures that can be documented and replicated in multiple markets in order to meet franchising requirements.

3)      Partnering: Is there an existing company which offers a similar or complementary service and/or operates in the same sector and is non-competitive that could offer your product, goods or service to their existing customer base?

4)      Wholly owned subsidiary: Does the market research you have conducted support creating a wholly owned subsidiary and operating in a new country? Most countries have government departments such as GOV.UK which provide guidelines for setting up a business.

Once you have answered these questions and analysed these factors, you should be in a good position to determine whether international expansion is the right next step for your business.