Seeking to Expand Overseas? First determine if your firm’s ready.
Nearly every week we see another headline about a previously unknown startup that has catapulted to international stardom. Where it once took years — sometimes decades — to go from relative obscurity to market leader, the infinite connectedness of our planet has compressed that timeline into months, if not weeks. Thanks to the virality of the social web, word of new apps, services and gadgets travels fast, and consumers demand instant gratification, creating organic demand for rapid market expansion.
Considering the skyrocketing growth rates in virtually all industries in emerging markets around the world, it’s no surprise the temptation to go international is so strong. In the mobile-app space, for example, Japan is by far the fastest-growing market, generating 560 percent revenue growth in the Apple App Store alone last year. The next three top markets — Russia, China and Taiwan — are all above the 100 percent mark, with additional strong growth in Brazil, Mexico and Turkey. And, in the cloud-technology space (another booming industry), Gartner predicts double-digit growth rates in Indonesia, India, Argentina Mexico and Brazil.
Why expand? For any type of company, international expansion obviously provides tremendous growth opportunities to penetrate and dominate new markets. Considering how resource consuming and challenging this is, however, startups must be very clear about why they would even attempt international expansion and partnerships. The primary reason for international expansion and partnerships is to enable or accelerate market domination.
Most hardware companies, like consumer devices and “wearables,” will need manufacturing partners early on to support going to market in a new geography. Mobile-app companies need device distribution partners to accelerate user adoption and growth. Without these strategic partnerships in place, domination of any market will remain unattainable.
When to jump. The question of when to take the leap is perhaps the most perplexing. Concern over emerging competitors and agony over the possibility of lost opportunities can turn an eager entrepreneur into a racehorse chomping at the bit. Expanding internationally can be very difficult and it’s wise to not let blind ambition ruin a golden opportunity.
The first step is to ensure that the resources and bandwidth are in place to properly plan and execute the expansion strategy. Next, be sure you’ve build enough reputation equity in your home market to give you credibility. As an unknown in a new market, you can try to have powerful references lined up to improve your chances of landing that important first customer.
How to succeed. While the exact strategy will vary depending on the industry, a few standard principles should guide an international expansion effort:
Find the path of least resistance. Look first to markets with similar characteristics that require minimal adjustment to your home-market strategy. For U.S. companies, other English-speaking countries will present lower barriers to entry than non-English-speaking countries.
Balance ease of penetration with market opportunity. While China may be the largest market in terms of sheer population, it can be extremely difficult for non-Chinese companies to penetrate.
Use internal resources to gain access. Many startups have foreign-born employees who are already quite knowledgeable about their home market and may have existing networks that can help to make an early connection.
Leverage international resources on your home soil. Most leading foreign technology companies have local representation in Silicon Valley for the purposes of technology scouting, venture investments and other U.S. business dealings. It’s a good place to start when testing the waters.
With success coming so quickly these days for many U.S. startups, it’s only natural that ambitious entrepreneurs have begun eyeing international expansion earlier in their corporate life cycle. Many focus their investor pitch on the international potential from the very beginning.
Simply copying and pasting strategy from one country to another is a recipe for disaster, however. Each market comes with its own nuances, mores and customs, and economic, regulatory and political issues that can vary widely even within a region. A successful international go-to-market strategy starts with a strong foundation of home-market success, backed by ample research, shrewd analysis, a strong network — and loads of courage.
Mar 31, 2014