One question that I hear daily is “How does a company decide when it should move beyond its home market?” Recently those questions have started coming from smaller firms, all of which are thinking about how they can sell their specialty, low-volume products internationally.
This is one case where size doesn’t matter. Every company, regardless of its size, faces the same questions when they consider global markets. So which type of company is a good candidate for going global—and which isn’t? And once you decide to expand internationally, what can you do to help your executive team avoid the pitfalls often associated with international expansion?
Who needs you anyway?
Whenever I speak with anyone looking to do business outside his domestic market, I start with a few basic questions: Who needs what you sell? Whether it’s a physical product or a service, is there some demand for what you offer? If there isn’t any demand today, can you think of why someone might buy what you sell in the future? Can you translate that potential demand into some kind of marketing campaign that you can afford?
Let’s look at a simple three-step process to help you decide.
1) Do other markets need your products? Think of going global as a business problem much like deciding whether you should open a store in a nearby city or build another manufacturing facility. In those instances you would run through a cost-benefit analysis and determine the return on investment. You should do the same for any global expansion. What do you expect to get out of it? Can you quantify the benefits? Do the math to see if your reasons for going global would pass muster with your investors, bank, or partners.
2) Can your products be sold outside your home market without extensive adaptation? Check into product specifications (for example, 110/220 volts.), national regulations and laws, liability, cultural applicability, local competition, and so on.
3) Do you have the ability to promote, sell, deliver, and support your offerings beyond your domestic markets? This last point is critical. Your company might have a great product, but how do you get it into the hands of willing consumers? Will your potential buyers even hear that you exist?
Beyond the “buy now” phenomenon
Most companies that I talk to about going global react to some external phenomena like a spike in Web traffic from another country. Others follow up on opportunities that their boss sees while vacationing outside his home market. Still others actively research other markets in search of more customers. What almost every company does is add up the populations in each country and say, “Wow, there’s 6 billion consumers out there.” In their initial enthusiasm many forget that those 6 billion people live in about 200 countries, speak a lot of languages, and use many currencies.
Therefore, your globalization business plan needs to say more than “we’ll post a ‘buy now‘ page in three languages and wait for the credit-card payments to start flowing in.” Selling globally is not as simple as selling domestically. When you market to someone in another country, you have to think about how he will pay for it, who will ship it, whether customs will intercept it, and how the customer will contact you if he has a problem. And of course, if there are any problems, you have to deal with them across language, time zones, currency, and different legal systems.
* Language When you go global, you have to deal with the language issue, even if the person is in another English-speaking country. I regularly talk with colleagues in England, Canada, and New Zealand and learn some new difference every day. Also, if potential buyers don’t speak English, they may not find you. So you need to market in other languages, thereby increasing the complexity of your advertising, Website content, and search engine optimization.
* Currency The transaction you offer may be denominated in dollars, but your customers will pay using their credit cards and thus be billed in their currency. That is often a problem. In addition, when you ship to them, your products might be held up in customs. For example, my firm recently had to pay 140 euros to get a box of marketing fliers out of Spanish customs.
* Legal systems European countries have strict regulations about what you can do with customer information. Besides privacy, you will also encounter different laws about selling over the Internet, by telephone, or by fax.
Although it sounds like it, I didn’t mean for this column to discourage you from looking to global markets for your next growth spurt. Instead, I wanted to emphasize that going global is not a simple case of counting up all the people in various countries, advertising your products in other countries, and translating a couple of Web pages. Rather, you need lots of advice, planning, and execution skills. You need to understand that going global is a strategic business decision, not unlike the many other strategic decisions you make on a daily basis. If you approach global markets with the same rigor, discipline, investment, and commitment as you do other strategic decisions, you will dramatically increase your chances of success.
Don DePalma is the founder/president/chief research officer of the research and consulting firm Common Sense Advisory and author of “Business Without Borders: A Strategic Guide to Global Marketing.”