For small to medium-sized businesses, going from a local or regional market to an international one can be highly lucrative. Overseas expansion allows you to boost profitability and diversify your customer base, but many businesses rush into it and underestimate the complexity of working in the new environment.
This article will cover mistakes businesses make when scaling globally due to insufficient preparation and adaptation.
1. Skipping Thorough Market Research
Going global necessitates an understanding of local industry trends and forecasts. Businesses that fail to research their competitors’ strengths and weaknesses, distribution, and commonly used market channels are taking a blindfolded leap into the unknown.
Market research provides crucial insights into the dynamics of new markets. It identifies market saturation and potential opportunities while allowing businesses to mitigate risks by tailoring products and marketing strategies to suit specific needs and expectations.
2. Underestimating Cultural and Language Differences
Failing to adapt to local cultures can be as simple as choosing a social channel that isn’t as widespread in your new territory or, more fundamentally, misunderstanding how potential customers like to do business.
While English is often used internationally as the default business language, businesses shouldn’t neglect localisation. English proficiency is low in many countries, so you shouldn’t assume that locals can use your website and products if they haven’t been accurately translated. This can create a barrier to adoption that kills your product or service launch before it’s properly underway.
Basic translation without contextual meaning will put off potential customers. Translating your English slogan directly into Japanese, for example, won’t account for nuances and phrases, making it painfully apparent that you haven’t adequately invested in localisation.
3. Overlooking Legal, Tax, and Compliance Issues
Countries can have very different legal and tax frameworks. You need to account for different corporate governance, intellectual property rights, taxation, and industry-specific regulations. Neglecting to adhere to rules can lead to reputational damage, fines, and even termination of your business licence in the foreign market.
Due to its non-compliance with local regulations, Uber has faced severe pushback from taxi unions and regional authorities in many countries. In 2018, it shut down operations in the Philippines after lengthy legal disputes with the country’s regulatory bodies.
Consider working with assurance, tax, and consulting experts to avoid worst-case scenarios. They can share their audit, tax, IFRS, and legal knowledge to help you comply with all the necessary regulations in your new territories.
4. Poor Supply Chain and Logistics Planning
Managing supply chains, transportation logistics, and distribution networks across international borders can be complicated. Your business must carefully navigate customs regulations and tariffs to ensure timely delivery of products and services.
Businesses also often underestimate the financial resources needed to expand overseas. Beyond the initial setup costs and market entry expenses, ongoing operational investments can quickly spiral out of control. Your team must manage foreign exchange risks and currency fluctuations to avoid becoming unprofitable.
5. Lack of a Strong Local Team and Partnerships
Building partnerships with local influencers and marketing agencies can promote your product in an organic way that resonates with locals. Failing to utilise the most commonly used social media platforms will harm your marketing efforts.
Finding and retaining qualified local talent that fits your company can be challenging. Your human resource management must employ strategies to recruit and train staff across different geographies and time zones.