10 Steps for Expanding Your Business in To an Overseas Territory
"Globalisation" is the worldwide movement toward economic, financial, trade, and communications integration. This is not a new concept and it can be traced back as far as the Roman Empire, and in a truly global sense to the British Empire. In recent years, the idea of globalisation has become popularised, but it is doubtful that the concept ever lost favour with big businesses. What has changed is that selling into overseas markets and opening businesses abroad is no longer the preserve of big business.
For small and developing businesses, expanding into an overseas territory is a major undertaking. One that could disrupt existing business activities. It is, therefore, essential that business owners understand the full impact of expanding into an overseas territory and determine whether the rewards outweigh the risks. Expanding a business into an overseas territory is a complex and dynamic process requiring a deep understanding of the targeted markets, the competition, current local market trends, and local regulations If it is to be launched successfully and to provide drive growth.
Expanding a business into an overseas territory is a complex and dynamic process requiring a deep understanding of the targeted markets, the competition, current local market trends, and local regulations If it is to be launched successfully and to provide drive growth.
Follow these 10 steps to lay the foundation for successfully expanding your business into an overseas territory:
Step 1. Undertake thorough due diligence
Before expanding your business into an overseas territory, let alone going global, it is essential that there is a viable market for your product in that territory and that it will be profitable doing business there. To ascertain if that is so:
Prepare a market segmentation analysis to determine if consumers in the territory will buy your product.
Prepare a product gap analysis against local products. Does your product meet a demand that is not satisfied by a local company?
Perform a SWOT analysis against competitors in the territory.
How big is the market and how long will it take you to capture your targeted sales?
Step 2. Develop a business plan specific to the territory
Each territory has its own unique characteristics due to economic, cultural, governmental, and market conditions. It is essential that you have a strategy and business plan for the territory that drives local success while remaining integrated with the overall corporate strategy and objectives of your business. To ensure that is the case:
Define your short, medium, and long-term strategy for the territory. Set realistic goals to measure progress in achieving them.
Define goals, objectives, and success metrics.
Determine the business model and structure. Decide if you need to set up a separate company, a just open a local branch, or maybe only a sales office.
Develop a top-down annual budget for your business, that includes the budget for moving into the overseas territory.
Develop a project plan that has milestones for moving into the overseas territory.
Step 3. Establish a beachhead team
When expanding into an overseas territory, many companies launch the project with executives from the parent company who try to build a local team from scratch rapidly. While it has its attractions, it is time consuming, risky, and slows time to market. Consider using proven senior interim executives who are native to and familiar with the new territory. This enables the company to hit the ground running, establish the financial infrastructure, quickly validate assumptions, and drive key readiness initiatives while giving the company time to recruit the permanent leadership team.
Step 4. Product readiness
Your product gap analysis will inform you about the necessary steps to be taken to achieve the high-impact product differentiation essential to a successful entry into the overseas territory. These will include:
Reviewing the local government and industry-specific regulations to ensure that compliance and certifications are obtained.
Determine if the product needs to be localised for the territory. Pay close attention to how the name of your product, and the images used to promote it, translate in the local language. There is a long list of famous brands that got this disastrously wrong. That is one club you do not want to join!
Ensure that your intellectual property rights are fully protected in the territory. Some countries are notoriously weak in this area.
Ensure that your product meets local standards.
Who will sell your product and how will you get it to them?
Step 5. Organizational readiness
Cultural differences in the overseas territory, whether it be language, regulations, or customs, require your business to be flexible in its policies and procedures to ensure that employees are engaged and execute the company's plans. The "one size fits all" mindset may be useful in the early days, but it will have negative long-term effects. To successfully accommodate and work with these cultural differences in the overseas territory, you will need to:
Determine the most appropriate organisation structure for successfully executing your business plan.
Develop policies, procedures, and handbooks that comply with local requirements while maintaining a balance with overall company policies.
Develop competitive benefits programmes to attract qualified local employees.
Develop competitive compensation packages based on local standards and customs.
Develop a local information technology infrastructure that is compatible with your head office infrastructure.
Manage payroll and human resource functions. Depending on the size of the operation, these could be outsourced.
Step 6. Establish a go-to-market strategy
The successful selling and marketing of your product in the overseas territory requires a comprehensive, cohesive strategy that addresses your sales strategy, sales delivery, branding and value proposition, your marketing strategy, and pricing. Together these create clear market differentiators that drive market acceptance and revenue growth. You will need to:
Determine your optimum sales model for the territory.
Determine your sales methodology.
Determine whether a new brand should be created or whether you will use the parent brand.
Develop a comprehensive marketing plan and KPIs.
Evaluate your pricing model to ensure that it fits the local economic environment.
Step 7. Enter into local commercial agreements
You will need these if you are appointing distributors or sales agents.
You will need to review industry-specific regulations to ensure compliance and certifications are obtained if needed.
You will also need local commercial agreements to appoint local service providers for general corporate services such as dispute resolution, immigration, customs, and shipping.
Do not forget that you will have to maintain corporate records and governance and it may be necessary to appoint local representatives to help you do so.
Step 8. Finance readiness
A proper finance infrastructure must be set up at the outset and be co-ordinated with your market analysis work. Many businesses miss this important step and do not have adequate policies or information access in place to manage credit risk internationally. It is not unknown for a business to offer worse or no terms to international distributors or resellers, because of a lack of knowledge to correctly assess risk and to set policies or establish financial lending partnerships. Whether done in house or outsourced, this work includes:
Developing a risk management plan which includes provisions to assess financial information, set credit limits and including some provisions for losses or defaults such as credit insurance.
Developing a transfer pricing study.
Assessing the available sources of funding and the associated opportunity compared to the risk for each such as export finance, supply-chain finance, local stock finance, local banking support for financing of your goods to the chosen distributor.
Prepare for and report on sales taxes.
Step 9. Prepare your budget
Your results from the preceding steps should provide you with sufficient data for establishing a business presence in the overseas territory to be able to develop a final budget that is challenging yet attainable, and one that will be owned by your local management team in the territory. Strong financial management is just as important in the overseas territory as it is in your home market. You need to ensure there are robust reporting and control measures in place in the overseas territory that enable the head office to effectively monitor progress and to be able to swiftly take corrective measure if required.
You need to ensure there are robust reporting and control measures in place in the overseas territory that enable the head office to effectively monitor progress and to be able to swiftly take corrective measure if required.
Step 10. Establish close relationships with local businesses
A strong competitive advantage can be gained by creating a supporting ecosystem of products and services complimentary to those offered by domestic providers. Relationships with third parties that are built on these principles can aid the scaling of your overseas organisation while minimising the financial risk. Consider building strong relationships with third parties by:
· Negotiate alliance/partner/distributorship programmes.
· Develop an ecosystem strategy and business model.
· Establish an internal alliance team to manage and foster third party relationships.
Expanding your business overseas is not for the fainthearted, but for some businesses it is an inevitable step as global markets offer them greater opportunities for growth.
If you follow these ten steps and pay close attention to detail and outsource administrative functions wherever possible to do so, the task of expanding your business into an overseas market will be made less difficult and could produce great results.