For small and medium sized enterprises in the business or professional services industry, expanding to a foreign market can be a daunting proposition. Many such companies limit their growth by not taking the chance, while others proceed with insufficient preparation and then wonder why they didn’t succeed. The following is a brief outline of the key steps that should be undertaken prior to launching into an international venture, and some of the issues to consider.
Step 1: Market Overview
Determine which country or countries have a viable market of sufficient size for your services. If more than one location is being considered, determine which location to target first. A wise service exporter will move on to other markets only after success has been achieved in the first location. Even if only one country is being considered as a potential market, it may be necessary to target a particular region to narrow down the focus of the market research. Instead of simply following the easiest and/or most popular export route, consideration should be given to less likely regions, as untapped opportunities may exist there.
Avoid becoming an exporter by default. Many international expansion decisions are based on a contract “landing in your lap”. Just because one client from a particular country approached your company and has a need for your services, it does not mean that the entire market should necessarily be targeted without having undertaken any additional research and analysis. The client in question may not be representative of the target market, therefore due diligence is still warranted.
Step 2: Market Analysis
Ensure all aspects of the market are covered. These should include: the market’s response to your service, competitive intelligence, the impact of foreign currency exchange rates on fees charged and costs incurred, and consultation with local professionals on local laws and regulations.
Be prepared to adapt your services for the needs of the targeted market, as well as meet the increased demand that the new market will create. Prepare for cultural differences, both from the perspective of customer service and also employee and/or partner relations. Do not assume there are no cultural differences simply because English is spoken. Also keep in mind there may be regional sensitivities within the target market.
It is important to visit the potential market and build relationships through face-to-face meetings, as well as to talk to other companies that have succeeded at exporting their business services to the area. Most importantly, be prepared for the financial and time commitment of the venture to be greater than anticipated.
Step 3: Market Entry
There are various options available when entering a new market as a business services provider, these include: opening a full branch office, opening a sales or representative office only, operating through an agent, entering a partnering agreement with a complementary business, forming a joint venture, or acquiring a competitor.
The advantages and disadvantages of each path should be analyzed. This would entail considering the need for positioning the business name or brand versus the cost efficiency of entry into the market through a partner or agent, market share versus profit goals, and the viability of entering the market in stages by working through an agent or sales office to test the market prior to opening a full branch office.
Step 4: Marketing/Business Plans
Form a market entry strategy based on the information obtained in the previous steps. A Business Plan or Strategic Intent should be prepared at the beginning of the new venture even if there is no necessity for financing. Prepare a detailed monthly marketing plan, especially if there is no local partner involved whose marketing strategy can encompass both parties. As a business services provider, which usually entails marketing intangibles, this will be vital to the success of the operation, and should focus on image building, and establishing credibility and relationships.
Consider diversifying your services or service delivery to better meet the needs of the target market. Also take into account any cross-cultural issues, and translate and localize all marketing material including websites. To avoid making mistakes in this area, engage the services of a local PR firm, advertising agency or other required expertise.
Step 5: Start-up of Operation
If the Business Plan includes opening a branch office, ensure that all local laws and regulations are understood prior to setting up systems or hiring employees. Accountants and lawyers familiar with the local requirements should have been consulted during the market study stage, and should now be engaged to assist with start-up.
Adapt any systems already in place to work cross-culturally. The challenge lies in succeeding with this adaptation without losing sight of your company’s core values and culture.
Analyze the advantages and disadvantages of transferring staff versus hiring local people for key positions. This can be crucial to the success of the venture and should be closely monitored.
Ensure there is smooth communication between offices and with partners. To avoid the risk of miscommunication, translate all pertinent information into the local language even if English is understood by all parties.
It is essential to make a long-term commitment to the new market. Always keep in mind that this new venture may require more perseverance than originally anticipated. But ultimately, the most important point to remember may be the old adage: