Forgetting Everything: The Trick to Successful International Expansion

Having worked in the retail industry for over 30 years and the franchise industry for 10, one of the hardest challenges I have faced has been learning to forget. There can be no doubt that international expansion is exciting and a real testament to the strength of the brand and operating model. However, it is also one of the most difficult business development activities the organisation can undertake. After expanding our business internationally several times, it has become apparent that the reality is that most of the experience and knowledge gained by the organisation and key staff while growing the business domestically is not only often redundant but also dangerous.

Making assumptions can be catastrophic to the new foreign entity and the business at large. To this end, doing the homework and sharing the information with stakeholders and decision-makers throughout the organisation is essential. The business's first forays into international markets should be researched properly; finding a market similar to your own will make things easier and put less stress on the business’s resources and people.

Market selection should initially be driven by factors such as disposable income levels, population density and cultural affinity for the products or services. Of course, it is not only the market and market forces that will be different in a new territory but also the following key areas.

The Law

The business must comply with any local laws and legislation which will differ from the ones it currently operates under. Therefore, it is essential to take professional advice on trademark requirements, labour and employment law, duties and treaties, customs and import rules, restrictions and fees, taxation, consumer rights, and liability provisions.

It should not be assumed that just because a market is demographically similar, there will be the same demand. The adage of trying to sell ice to Eskimos is never more dangerous than at this point; research into competition may be very exciting, should there be none, but you must check that there is no reason for this. From country to country, many cultural and religious differences could affect your business. These include how deals are done, and common courtesies, and understanding these can make the difference when trying to get a deal through. In some countries, certain designs, animals, text combinations, colours, etc., can be considered unlucky, funny, offensive or simply counter to your brand image and messaging. As such, the importance of research and necessary localisation with brand messaging, design, and even product composition cannot be understated. In many countries, the local population can be protectionist and or religiously sensitive. As such, it is essential to understand, respect, and reflect the local values, as failure to do so can be disastrous.

The Costs

It would be easy to think that as the market is similar, the business should make similar returns on investment. However, Rent, Sales Profit taxation, employment contributions, and consumable costs will all differ from the market the business is currently operating in. In addition, any equipment, point-of-sale materials, or goods required will need to be sourced locally, and their costs may differ; if the decision is made to import these, then any import duties and logistics and storage costs will need to be factored in. Labour costs and contributions will likely also differ, and unless you are located within the Eurozone and expanding within a different currency will be used, factoring in any exchange rates will be necessary.

In addition to these local cost differences, looking at the short- and long-term support costs is necessary, as running a business remotely is rarely a good idea. Hiring good local people is essential, but this is not quick or cheap, and there are no guarantees that someone will be found. As such, there should be a properly costed plan for a person or persons from within the organisation to head up or support the development of the business. This means that a detailed and well-researched profit and loss projection should be conducted before entering the market to ensure that sufficient cash flow is available to support the venture and that the potential financial returns measure up to expectations.

Everything Else

Of course, many other internal and external factors will determine if international expansion is successful. Avoiding assumptions and forgetting everything you know will ensure that you check what the situation is on the ground, and that really is the key to it all.