Top 10 considerations for global expansion
Launching in a new country requires significant due diligence. There are many factors to consider when assessing whether a market is the right fit.
We’ve worked with several clients looking to expand overseas. Our advice has helped them identify risks and opportunities. Below are some of our top tips.
- Check your business health
If your business is struggling in its home market it might not be a great idea to turn your attention to expansion. Moving into a new market requires significant resources. They might be better used sorting out your existing problems.
2. Assess market health and stability
There are several ways to look at this but we typically look at economic, social and political health. Economic data can suggest how robust and healthy a market is for investment. If unemployment is high and growth non-existent or dropping it might be worth crossing that market off your list. Market stability is also evident in politics. A country undergoing turbulent change or revolution could make market entry difficult. Both Brexit and Trump have recently led to business leaders thinking cautiously about their next moves.
3. Assess regulatory environment
If you’re an Uber of the world this is particularly important. Regulation and its burden can go up or down. in some new sectors regulation is either non-existent or only starting to emerge. Be mindful that regulation can undergo significant and rapid change due to unforeseen events. A disaster, litigation or change in political leadership could see new regulations emerge.
At Strategy Activist we typically look at two factors. The first being the regulatory environment and whether it’s low, medium or high. The second angle we take is to assess the regulatory direction of travel. This will differ depending on your venture but it’s an easy way to assess if you might run into trouble. It also helps you identify where you might want to focus your lobbying efforts.
4. Assess ease of doing business
Not all markets are easy to launch in. Protectionist markets will put up barriers to entry. They’ll put in place new laws, taxes or subsidise local competitors and imitators. China and India are two markets that are highly prized but also low on the ease of business index. Check the Global Opportunity Index — they assess markets and give ranked scores for each.
5. Check rule of law
Again some markets operate a cowboy mentality when it comes to abiding by international and even local laws. For some businesses the risk may seem worth it but for many, a poor market score should make you think twice. It’s easy to identify whether a market is risky for investment. You’ll want to avoid markets where IP is easily infringed or where assets could be seized.
Similar to rule of law check how acceptable the market is to foreign investment and ownership. This can leave many businesses trying inventive ways to enter a market. India until the recent past has proved difficult for foreign investors.
6. Launch & running costs
Some markets are relatively easy to conquer whilst others could see you burn an almighty hole in your wallet. Uber in trying to conquer China spent over $1bn trying to outdo local competition. You need to be confident that in launching you have the operating budget to make it a success.
7. Late to the party
Assess what the competitive landscape looks like. It might even open opportunities in that you buy into a market through a merger or acquisition. We often help clients look at the local playing field to assess whether it’s empty (no incumbent or emerging threats) or busy. Identifying existing competitors isn’t a reason to avoid a market. But it is a way of identifying how best to enter and once having done so how to outmanoeuvre any threats.
8. Size of the prize
Think about rewards. Yes, there might be risks, but is the prize worth it? Launching a taxi app in China, a country with dozens of mega cities could be lucrative. You should identify your target audience and assess how big or small it is.
9. Audience suitability
Assess how likely your business is to succeed. This is basic planning and business 101. If you’re launching an app there’s no point doing so if smart phone ownership is on the low side. If might be that the trajectory is going your way, in which case you can simply postpone your planned launch.
10. Right A-team
Launching into China from say San Francisco isn’t going to work out well. Distance aside, the cultural, societal and political differences are immense. Assess whether you have the right localisation experts in place to make success a reality. Local experts can help you navigate a closed, confusing and difficult market. Anybody launching in China should do just that and set up shop in Beijing or Shanghai.
Expanding businesses globally is exciting and we love helping clients do just that. Just make sure due diligence is done first!
To learn more about how Strategy Activist can help your business visit us at www.strategyactivist.com
