How to select the right international expansion opportunity

Business leaders must invest time and resource into exploring the viability of global markets before they expand internationally. Size of market, trade tariffs, barriers to entry, market fit, and potential launch strategies must all be carefully considered.

Whilst it makes sense to carefully map out your global expansion strategy, some businesses will naturally begin to get enquiries from abroad via their websites and you may begin trading or exporting in a small way. However, don’t be tempted to launch into a foreign market or accept or target new customers wherever they may be found. You need to be choosy, do your homework and seek advice.

Whilst you may feel diversification will reduce risk, it can also diffuse your focus and may mean you end up trading in markets that are less profitable. If you do begin to get a lot of enquiries from a particular country, then it’s worthwhile beginning to think about whether you want to invest more heavily in that market. For example, by widening your distribution network, looking for local distributors or local premises.

How to plan an effective international expansion

Often business owners can identify territories where their business may have potential but struggle in knowing where to start when it comes to trading there.

Identifying the right market will entail detailed market research to understand which countries may offer the best opportunity for your business.

One of the biggest risks is not having sufficient market intelligence to know the size of the potential market, competitors market share or if your product or service is likely to succeed. You need a good understanding of the local market. This can be done by using local contacts to prepare a detailed market analysis or use online resources.

Overseas trade shows can also be a great way to gain market knowledge and build contacts. The Department for Business and Trade offers help to British SMEs that want to attend or exhibit at overseas trade shows.

Areas to examine as part of
your research are:

the industry structure;
the predicted demand for your product or service;
tax implications and currency risk;
the competition and how you plan to fit into the marketplace and;
any modifications required to make your product or service saleable.

International market research

After completing your market research, you can begin to create a more detailed export plan defining how you intend to enter the new market. You will need this if you are seeking funding for your international venture. This plan should include:

Create an export plan

a marketing strategy that incorporates international trade development;
an understanding of the route to market, for example, your preferred distribution channel;
your chosen business model / structure (see next page);
the financial resources required;
the right people to develop the new markets;
adequate knowledge of requirements i.e. local regulations and standards, laws, restrictions, cultural differences etc;
an understanding of export payment mechanisms and export finance.

Planning is crucial when expanding abroad. You should begin by determining what the structure or business model of your international trading is going to be. This could be any of the following to the left.

The set-up options can be vast, and each has its own advantages and disadvantages. These advantages and disadvantages also vary hugely from country to country and from one industry to another.

There isn’t one rule for international trade, there are different rules and regulations for each country.

Decide your structure/business model

Assessing your product/service

To assess whether your product/service is suitable for another country/market, consider:

Legal responsibilities

There will be legal responsibilities associated with doing business overseas – all of which you should seek advice on and understand before you launch into another country.

For example, you will need to seek advice on VAT rules from HMRC, export controls which may relate to your product or service, local tax and accounting regulations. You should have support from accountants and lawyers both here in the UK and in the country you are looking to expand. Barnes Roffe have international networks and associations that will ensure the best advice in your chosen country.

Get you paperwork in order

It’s vitally important when expanding globally, that your documentation and paperwork are in order. Having people in the country you are expanding into will enable you to get a detailed insight into customs regulations, export documentation, local accounting and tax regulations and the legal paperwork required to set up a company abroad.

Seek professional advice

As well as help from Government bodies, Chambers of Commerce etc., it’s critical to your success to seek professional advice. At the minimum you should utilise your accountant, lawyer and bank to advise you from the early stages of planning your expansion.