Global Expansion: I’ve seen too many companies go at it the hard way. They decide they’re going to expand globally and then try to go it alone. They don’t start by trying to find out what they don’t know. They don’t look at how other companies succeeded and failed. You can save yourself a lot of agony if you learn from the experience of others.
IKEA is an excellent example of a rocky start to expansion. When IKEA first entered the United States in 1986, people loved the design of the furniture but felt it was too tiny for American living spaces. IKEA’s (literally) one-size-fits-all approach, which works well throughout Europe, needed to be adapted in the US market, which wasn’t as easy as it might sound.
IKEA redesigned the furniture, but then it also had to reimagine the warehouses where the furniture would be stored and the retail spaces where it would be sold. Everything had to get bigger.
IKEA made a mistake many companies make: It thought that what worked in one country or culture would translate to another one easily.
Executives must start by asking and answering two vital questions as they form their expansion plans:
- What kinds of markets make sense for us?
What are the characteristics of markets where we’re more likely to be successful? Further in, I’ll give you a list of things to consider, but the fundamental question will stay the same. Analyze your company, with your strengths and weaknesses and experience. Consider your strategy. Then look for markets where you’re more likely to succeed.
- What’s a reasonable level of risk and reward for us?
Companies have different tolerances for risk. They have different expectations of reasonable Return On Investment (ROI). And remember that for most global expansions you should expect ROI to increase as you do businesses successfully in a new country.
Here are a few of the hottest markets to consider in 2018:
Singapore is still a booming market, but its less well-known neighbor, Malaysia, has been named the number one place to invest by US News Report. Real estate opportunities abound, and there is well-educated, multi-lingual, workforce. Additionally, the government is foreign investment-friendly creating incentives and eliminating barriers to doing business there.
The Czech Republic
$125 billion has been invested in the Czech Republic over the last 20 years. The government offers training and job-creation grants, and the workforce is young, dynamic, and multilingual. Many tech companies are expanding there, too.
If you’re looking for moon-shot growth potential — and have a huge appetite for risk — then an attractive area might be the countries in sub-Saharan Africa. Sub-Saharan Africa is abundantly rich in commodities such as oil, natural gas, copper, iron ore, and gold. Governments are becoming more stable. And, the area has the youngest workforce in the world.
More Traditional Markets
Many companies are still expanding to cities in what we consider traditional markets: Ireland, Denmark, and Canada. These are markets are “easy” in that they hold more available and modern infrastructure, and there are large, hungry talent pools.
And, of course, there is the United States, which is still the world’s largest economy. In my book, Market Entry in the US: Why European Companies Fail and How You Can Succeed, my co-author, Ralf Drews, and I connect the buying psychology driven by American beliefs and values with a company’s go-to-market strategy. Remember: The cultural values of a particular country and region have a profound impact on the business environment.
As you consider global expansion for your organization, bear in mind: The “hot” market of today won’t stay that way forever. You have to decide if the market is right for you. You should analyze several critical issues for every market you consider.
Take these actions first before expanding globally:
Do your due diligence and market research.
Use all the sources and all the tools at your disposal to learn as much as you can about yourself, your company, and the market you’re considering.
Travel to the location to which you’re expanding.
Reading is not enough. Video helps but isn’t sufficient. You won’t get a real feel for the place you’re considering unless you go and spend some time. And, when you do go, don’t just talk to other businesspeople who are staying at your hotel. Get out and spend time with local people and listen to how they describe their country and its business climate.
Do something different.
I don’t know what that will be for you, but you will. Make it something beyond what we’ve talked about here. Come up with a way that is uniquely yours to learn more about the country where your company may expand. Only you can come up with something that fits your style, your organization’s corporate culture, and helps you understand this new country and its culture.
A version of this post was first published on Inc.
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