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12 February 2020

Business Development: Strategies for Going Global

Strategies for going global is the next instalment in BizSpace’s exciting business development series. This guide covers reasons why you might want to develop internationally, business strategies, marketing advice, and common issues that arise for companies that expand abroad.

Why Go Global?

Have a good think about why you want to expand internationally at this point. The decision to move into a foreign market is huge and could have far-reaching consequences.

Before you go any further, it’s really important to make sure that you’ve penetrated your home market sufficiently. Domestic expansion is usually a lot easier and cheaper than developing on an international scale. 

That said, international expansion can be an excellent opportunity. Here are some reasons why businesses decide to move into international markets:

  • The business has reached market saturation in its home country. This means that the company has matured to a point where it’s no longer possible to expand any further in its current market.
  • Some firms expand abroad to increase and diversify their customer base whilst increasing the size of the brand’s footprint.
  • Conditions are more favourable in the new target market. For example, taxes may be lower or resources may be more readily available.
  • Talent acquisition may be a motivator. Perhaps the business has identified a pool of talented potential employees in its target market and wants to capitalise on this.
  • Competition could be scarce in the target market – there could be a sizable market that is not being tapped by any existing players.
  • The company may be looking to establish new sales cycles. Whilst its product may be seasonal in its home market, it could be used all year round or at different times of the year in the target market. Capitalising on both could smooth out sales fluctuations.

International Strategy

If you’ve decided you want to expand abroad, then you need to establish a really solid international strategy. There is easily scope for an entire textbook (and more) on this subject, but we’ll try and run through some of the essentials in this guide.

It’s pretty likely that your domestic strategy will need to change a lot before you can expand abroad. The same strategies and tactics rarely apply unanimously to all different markets.

At the broadest level, there are three types of philosophy when it comes to international strategy:

  • Multidomestic
  • Global
  • Transnational

 

Multidomestic

This is all about adapting to local conditions. Firms that adopt a multidomestic strategy will customise their offerings, making sure that they fit with consumers’ preferences in the target market. They’ll also fine-tune their marketing to make it chime with locals (we’ll come on to this later).

Multidomestic strategies can be great for rapidly increasing sales in the target market by really listening to what your customers want. However, tailoring your product can be costly. You’ll also lose the economies of scale that would have come from producing the exact same product en masse.

Nestlé is a classic example. The brand offers different products in each of its target markets, making sure that they all appeal to local tastes. Nestlé’s marketing and sales strategies also differ across its various target countries such that it can excel in local business conditions.

 

Global

Pretty much the exact opposite of a multidomestic strategy. Here, we’re looking at a business that operates super efficiently yet doesn’t really adapt to local conditions at all (which can be problematic).

Producing the same product many times over means a firm can benefit from low cost per unit, but the product might not appeal to consumers in every country. Branches in different countries will be highly dependent on the company’s HQ, adopting pretty much the same approaches that are prescribed to every branch.

A famous example of a business that adopts a global strategy is Apple. The Apple brand is the same wherever you go. It offers the same products and even uses the same advertising messages. As well as making production much cheaper, this gives Apple the advantage of a really strong brand identity.

Transnational

Somewhere between these two extremes, we find the transnational strategy. Sure, this approach provides the best of both worlds, but is it practical to have your cake and eat it when it comes to international business strategy?

The simple answer is yes. Firms adopting a transnational strategy aim to be responsive to local differences, but also achieve efficiency in production. Often, this means producing a relatively similar product for all different countries but tailoring marketing and sales to regional conditions.

Another important difference is the structure of the organisation. There is an independent unit for each country, but all of the units share knowledge, expertise, and resources. Unilever is a great example of this: it has many scattered units across the world, but there are formal training programs to create a ubiquitous company culture.

Choosing Your International Strategy

Which of these top-level strategies you choose should depend on your own business and the conditions in the market(s) you’re looking to penetrate. How much does your firm need to adapt its offering in order to survive?

Companies that sell food will likely have to adapt to local conditions or they’ll struggle to appeal to local tastes, which vary widely across the world. Look at McDonalds, although they standardise a significant amount of their production, they alter their menu to suit tastes in each country. Conversely, a company that makes cardboard boxes will probably be safe to sell the same product worldwide.

Perhaps the culture in your target country is very similar to your home nation? In that case, great, a global strategy may be the most appropriate and could save you a lot of money! As a company in the UK that intends to penetrate the Chinese market, the huge cultural differences between these nations will force you to adapt both your product and marketing.

 

Global Marketing

Your global marketing efforts will need to be tailored to individual countries (unless you’re adopting a purely global international strategy, that is). After all, marketing is all about understanding the wants, needs, and minds of your prospects. These will inevitably be different across the world.

Planning an effective global marketing strategy involves setting objectives, thinking about the challenges you might face when marketing abroad, and considering how your strengths and weaknesses match up against the conditions in the target country.

It’s great if you’ve got your segmentation, targeting, and positioning firmly established in your home country. When attempting to penetrate a foreign market, however, these strategic elements will probably need a bit of modification. Do similar consumer segments exist in your target market? How will they respond to your brand positioning?

Think about your marketing tactics, too. Remember the 4Ps from our guide on how to grow your business? Well your product, price, promotion, and place may need adapting to your target market.

Product

Maybe you won’t need a new product altogether (although this can be the case). Even so, slight modifications to your product could help you to win favour in your target country. Think about McDonald’s offering wine in its French stores. This move shows that the brand has assimilated the local culture and adapted to the French penchant for vino. 

Price

As for pricing, you may be able to offer your product or service at a higher price if consumers in your target market tend to have more disposable income. Alternatively, it could be that you’re looking to penetrate a less economically developed region. In this case, you may need to develop a slightly cheaper, affordable alternative to your home market offering

Promotion

The advertising culture – and potentially even law – may be radically different in the target country. What kind of ideals will your promotion appeal to? In the US, positioning your product as bold and adventurous may be effective; Japanese consumers, on the other hand, could find such appeals less attractive and may prefer promises of security.

Place

Where/how are you going to sell your products in the target country? It might be the case that it’s a lot more expensive to set up an inner-city physical store abroad. Equally, there might be a pronounced culture of e-commerce where you’re looking to expand, as is the case in China. You could use this to your advantage by doing most of your business online.

 

Common Issues When Going Global

Expanding internationally can be a real minefield! Don’t get tripped up by unexpected differences in your target country by neglecting to do your research. Not fully understanding the country you’re moving to is a sure-fire route to business failure. With that in mind, here are some common issues that businesses face when attempting to penetrate foreign markets:

  • Not understanding local laws can be the fatal flaw in your plans for expansion. Make sure you get to grips with how tax and trade work in the country. Employment laws are probably pretty different there, too. One example is Wal-Mart, who famously failed their expansion into Germany after their strict rules on employee relationships gained a whirlwind of bad press.
  • Currency rate fluctuations can be a nightmare for businesses expanding internationally. It’s advisable to establish deals with producers and suppliers in the same currency as the country your moving to (if possible). Establishing contracts and payment plans far in advance can help to mitigate the effects of sudden changes in the value of the currency.
  • Communication can be an issue. Making sure you speak the language is particularly important when you’re engaging with foreign partners and customers.
  • Communication and culture are two sides of the same coin when it comes to international expansion. When employing local people, remember that their approach to work may be very different from your own. Likewise, keep the cultural difference in mind when interacting with your local customers. We saw Wal-Mart also failed here after bringing their overly friendly US customer service style to German stores, a culture which German customers did not appreciate.
  • Companies often face issues related to their choice of international business structure. Following a multidomestic strategy, for example, there’s a chance that your local business units will become alienated from the corporate culture and cause conflicts of brand identity.
  • Finally, underestimating local competition could be your downfall. Some companies enter a country believing that the local market is untapped – in reality, however, they may just have failed to do their research. 

 

Hopefully this guide has given you a sense of direction when it comes to strategies for going global. If your business is looking to expand, choose BizSpace for your workspace rental needs to benefit from flexible renting options and great prices.

 

Author

Hannah Lloyd-Jones