International/Global Expansion

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International/Global Expansion

International or global expansion refers to the strategic initiative undertaken by a company to enter and establish its presence in international markets beyond its domestic or current operations. This often involves setting up subsidiaries, partnerships/alliances, or distribution networks in foreign countries to tap into new customer bases, increase revenue streams, and enhance brand recognition on a global scale. It should mainly be considered a form of market development strategy (Ansoff), as basically existing products are being sold in new (geographical) markets. Even if the product(s) are being tailored somewhat towards the tastes of local consumers (see below). Be careful not to confuse this expansion strategy with the phenomenon of globalization.

Preparing for International Expansion

• Thorough MARKET RESEARCH and STRATEGIC PLANNING are vital for international expansion and global market entry. They will enable informed decision-making and planning by having insights into:
  
  • Local market conditions (culture, languages)
  • Consumer behaviour (customs, spending habits, desires)
  • Political and Economic situation (stability)
  • Legal (local law, regulations, employment practices, government support/funding, entry requirements, export/import regulations)
  • Tax (tax law, tax schemes, customs procedures, foreign trade)
  This knowledge helps to tailor effective strategies, identify challenges, and capitalize on opportunities. A lack of research or poor strategic planning can lead to very costly mistakes and hinder growth in the new market.
• PRODUCT/SERVICE ADAPTATION (LOCALIZATION), tailoring products/services to match cultural, social, and economic preferences is vital for global success. Diverse regional needs may require adjustments in features, packaging, pricing, or redesigning. Doing so fosters trust and familiarity, showing dedication to local demands. Neglecting necessary adaptations risks customer disinterest or alienation, hampering expansion and market potential.

Advantages of International Expansion

1. ADDITIONAL REVENUE Global expansion and market penetration can lead to increased revenue and revenue diversity by tapping into multiple markets. This reduces reliance on a single market and its economic fluctuations, thereby spreading business risks. A diverse revenue stream can provide stability and cushion against downturns in specific regions.
2. ECONOMIES OF SCALE Expanding globally and entering new markets can lead to economies of scale. With increased production and sales, a company can potentially reduce per-unit costs through bulk purchasing, streamlined processes, and efficient resource utilisation. This can contribute to higher profitability and competitiveness.

Disadvantages of International Market Penetration

1. CULTURAL AND REGULATORY CHALLENGES. Adapting to cultures demands care, and navigating varied legal frameworks can be intricate, affecting business operations and growth strategies.
2. INCREASED COMPETITION AND RISK. Entering new markets often expose a company to intensified competition. Local competitors may have established customer loyalty and market knowledge. Moreover, market-specific risks, such as economic instability, political uncertainties, or currency fluctuations, can impact profitability. The increased risk profile in unfamiliar territories needs to be managed effectively.

Application Areas of Global/International Expansion

1. Market Saturation Mitigation
2. Capitalising on Emerging Markets

Example of an International Expansion Strategy

A US tech firm expands in Asia via local partnerships, leveraging reputation and technologies. Localization adjusts products, content, and UX for language, culture, and preferences, boosting acceptance.

Source: Common Sense Advisory, "Can't Read, Won't Buy: B2C Survey", CSA Research, 2014.

		Comments by date▼ Comments by rating Rating
		2 Jaap de Jonge Editor, Netherlands
	International Expansion Factors Excellent summary. Countries or nations can vary in countless aspects/factors and it is important to consider each and every one of them. A tool you can use use for this purpose is PEST Analysis or a more advanced and complete form of it.

		1 Paramathmuni srinivas Kumar India
	Understanding on What's Changing and What's not Helps in International Expansion To many it is fascinating to expand and having a global footprint... In expansion there is a need to walk in other country people's shoes in order to understand the local culture, understand the contextual setting in the form of laws, regulations, way of working, etc. For example, working between 8 am to 5 pm is the common practice in the West, however most companies in India work even late in the evening. But that norm is changing fast in India... Understanding what's changing, what is yet to change, and what is not, is helpful to make the expansion easier I suppose.

		2 Sarkis Yaralian Director, Saudi Arabia
	International Expansion: Pros and Cons Two more important advantages (PROs) of international expansion can be summarized as follows: 3. DIVERSIFYING THE BUSINESS AND THE RISKS by going to other markets. A food service operator in Kuwait expanded into UK market. During 2006-2010, recession and soft business in UK did not affect the company much as Kuwait economy was booming. Vice versa, slow growth and saturated QSR market in Kuwait was mitigated by health growth in UK post 2010 period. 4. The LEARNINGS a company acquires by operating in more than 1 market are an advantage over companies operating in one market. Management experience, new practices acquired from new markets and diverse resources will be a plus to an expanding organization. Another major disadvantage (CON) of expanding internationally is: C. LOSING FOCUS by having to oversee and manage more than 1 market with few or same resources. Priorities will end up pushing one market agenda over the other and hence, one market or business will be at disadvantage if not given enough attention and management time.

		1 Saleh Al Harthi United Arab Emirates
	Standardization in Expanding Internationally Part of the motives for firms to expand internationally lies in the opportunity to apply their specific know how to new locations. Standardization of activities and maintaining a strict quality policy...

		1 Tendekai Dzinamarira Manager, Zimbabwe
	The Uppsala Model The Uppsala Model by Johansson and Vahlne (1977) distinguishes four steps or phases involved for a company to enter an international market namely: Sporadic Export (no regular export activities) ...