Expanding internationally offers businesses enormous potential for increased sales and market share. Some of the reasons a business might consider expanding internationally include:
- Extending the sales life of existing products and services by finding new markets to sell them in.
- Helping to hedge exposure to fluctuations in existing markets especially where the market is seasonal or cyclical.
- Expanding the potential customer base.
The overriding reason to go global, of course, is expansion and growth. However, going global is not without its challenges and even the largest and best resourced organisations can get it disastrously wrong.
The first step in transforming a domestic business into a global operation is to establish a sound and practical international business plan. It sounds obvious but it is surprising how often businesses fail simply because they have not properly articulated what they want to do and how they intend to do it.
How to Construct an International Business Plan
Step 1 – Desired Business Outcome:
Start by identifying your business goal. If you don’t know where you are going, when you get there you will be lost.
A good international business plan will start with a clear goal because without a very clear understanding of your desired outcome there is no point in going any further. The goal should be expressed in simple terms such as, increase sales in country X by 20%, or establish a self-sustaining business in country Ywithin 2 years, or reduce operating costs in country Z by 30% within 12 months.
From this clear statement of intent all other analysis and planning will follow.
Step 2 – Understand the local environment in which your business plan will be executed.
As in war, so too in business; time spent in reconnaissance is seldom wasted.
Setting up a cross border business presents more challenges than are initially obvious. Even in situations where language and culture are not factors it is very easy to assume that a foreign market operates in the same way as your domestic market. Maybe you will get lucky and it will, more likely though, the market will be just different enough to cost you a great deal of money before you realise your mistake.
Understanding the market in which you intend to execute your business plan is so fundamental to a successful undertaking that it should go without saying but even the best businesses still get it wrong.
For our purposes the foreign market challenges can be divided into three broad categories:
A: Local laws and regulations, for example:
- Are your products or the way your business operates legal?
- Are there restrictions on ingredients or materials?
- Are there different labelling requirements?
- Are there local sourcing requirements?
- Do you need special licenses or permits?
- Are there requirements for local representatives or local staff?
- How do local consumer protection laws impact your business model?
- Are there any restrictions on packaging and advertising?
- Are there mandated local minimum wages or hiring restrictions?
- What are the local data protection requirements?
- Are there any local taxes or duties applicable and how will these impact the price?
- Are there local import grants or subsidies available to help promote foreign investment?
B: Local market conditions such as manufacturing, distribution and pricing, for example:
- Is the market decentralised or controlled by a handful of major players?
- What is the pricing structure and what are the main cost drivers?
- How do clients access the products?
- Where do existing market participants source their products or materials?
- Are there other international producers/suppliers already in the market?
- Is the market seasonal?
- How efficient is the local import process and how long will your goods sit on the docks?
C: Customers’ product needs and appetites, for example:
- Are there similar products (locally produced and/or from overseas) already on the market?
- What drives consumer behaviour: price, branding, origin, reliability, originality?
- How dynamic are consumer tastes?
- What makes your product a more attractive proposition for customers?
Consider engaging a local service provider to assist with this analysis work where language or culture issues are likely to be a factor to ensure you access all available information.
Step 3–Assess your resources:
Once you have a clear picture of the environment in which you will be attempting to achieve your business goal, you are then able to assess the resources you have at your disposal. In other words, assess your ability to meet the challenges of the target market by having regard to:
- Staff expertise – Do your existing staff members have experience working in the new market? If language is a factor, do they have the necessary language skills? Running a project to establish a business in a new country can be challenging (keep in mind the potential considerations listed above), do you have anyone on your staff able to manage the resolution of these issues? If you will carry out the work in the new market yourself, who will you get to manage your current operations?
- Staff capacity – Establishing a business in a new country is time consuming and can easily become a fulltime job. Time zones will mean different working hours. Language issues, travel, coordinating various service providers and local bureaucracy will all take time. Do you have staff with the ability and capacity to take on this extra work?
- Available production resources – If the market takes off, will you be able to supply your new distributors as and when required? There is nothing more frustrating to a business than an unreliable supplier.
- Available capital – If you need to increase production volume, can you afford to do so? Are you able to afford the initial costs of set-up? It may take a while before the new market is paying for itself. The review of the new market requirements will give you some indication of the upfront costs you are likely to incur. Can you meet these expenses without over-extending your financial position?
Step 4 –Develop a Business Plan:
Once you have developed an understanding of what you will need to achieve your stated business goaland assessed the resources you have at your disposal, you are then able to determine whether your goal is viable or whether you need to adjust it in some manner.
Having decided to proceed you now need to articulate a plan for executing your goal in a way that will address the requirements and challenges of the new market while making the most efficient use of your resources. If there is a resource gap you need to adjust your business goalor procure additional resources. Do not be afraid to change your plans or even cancel the project if it makes sense to do so. It is important to continually assess the viability of the strategy and be willing to walk away if it is no longer justifiable.
Once you start to implement your international business plan a range of unexpected issues, problems and factors will manifest themselves. Expect the unexpected; by being well preparedyou can reduce the likelihood of these unforeseen issues derailing your strategy.
Your plan should anticipate unexpected difficulties and be able to accommodate them, especially from a timing or cost perspective. Before you execute your business plan, review it for potentially fatal weak points. These are points where if circumstances do not meet your assumptions the business plan will fail; they might include the cost of finance, or obtaining the required licenses or simply the availability of qualified staff.
Finally, when executing your business plan, it is important to keep in mind the end goal you are trying to achieve and be ready to adjust your plan to accommodate unexpected contingencies. As Mike Tyson famously said, “everyone has a plan until they get punched in the face”.