For many small businesses, expanding internationally is a simple choice of accepting PayPal and a shipping courier. However, for some companies the decision to sell internationally comes with risk, considerable investment, careful analysis and considerable planning. This article provides a summary of some of the more complicated decisions that some businesses must make.
Succeeding in internationalization sometimes requires a company to review how well internationalization aligns with the company’s strategic planning, its products, the requirements of the international market that it seeks to enter and the company’s ability to monitor and maintain the expansion. The information gathered will help a company formulate its strategy, which often includes one of the following choices:
A multi-domestic strategy establishes branches with significant autonomy. The strength of this strategy is that it allows branches to respond quickly to the local needs. The downside is that it does not allow for economies of scale. Further, because these branches operate independently, they may find themselves at odds with corporate-level decision making. For instance, a large French retailer with stores in China advertises low pricing on non-existent products. When corporate learned about the practice, it immediately ended it, even though this practice is commonly used by Chinese retailers to increase store traffic.
Under a global strategy, a business treats the world as one big marketplace. There is little or no product or service customization and pricing is fairly uniform. Further, little or no decision-making is done at the local market level. This type of strategy allows for economies of scale to be recognized.
When a business follows a trans-national strategy, it attempts to find synergies where many costs can be shared and decisions can be made at the corporate level, while allowing some specific decisions to be made at the local market level. For example, a restaurant chain might keep purchasing and accounting at the corporate level, while at the same time making certain marketing, advertising and personnel decisions at the local level.
Deciding on the type of international strategy to follow is one of the more obvious choices a company must make. Before going international, companies need to develop plans and policies for marketing and communications, human resources, accounting, information technology and more. Companies also need to partner with a reliable translation services company. Other critical areas of concern are described below.
When it comes to internationalization, there are two primary questions that need to be answered. Which products should be offered, and should they be customized for certain market level conditions? Customization can add costs, but sometimes it is necessary to meet the needs of the local market. Some manufacturers customize products for developing countries by removing features that add costs, thus offering lower pricing that is more compatible with the incomes of the local market. In some markets, product packaging must be customized to meet specific regulations of the local market.
By their very nature, some products require customer assistance, installation assistance or warranty repair. When a company’s products require after-sales assistance, a business needs to plan how to provide these services. In some cases, a company might manage this on their own, and in other instances they might decide to outsource the work to other companies that can provide bilingual or multilingual translation and customer support services.
Public relations, advertising and sales promotion can be challenging to internationally operating companies. Usually a company needs to translate and localize its marketing materials, not always easy to do from the corporate level. In each specific culture, colors, expressions and words can convey unintended meaning.
Doing business in a foreign country comes with the additional costs of tariffs, shipping, handling and other costs. A thorough cost analysis must be conducted to ensure that products can be priced competitively.
When a company embarks on an international strategy, it usually sends domestic managers to direct the new operations. In recent years, training and promoting local talent to manage the operation has become a trend. This is particularly true in China, where Americans have shown a high propensity to return home before their mission is completed, often stemming from loneliness and spousal complaints. Additionally, the cost to hire and retain local talent is generally much lower.