What are some of the risks of expanding a small business across multiple countries?
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For any business, large or small, expanding across multiple countries can bring large rewards and real risks. While large businesses have significant managerial, IT and financial resources, the critical question is whether management understands the consumer, the marketplace and the competition.
In looking to expand your business overseas, what is your core value proposition? Why should someone use your service? What do you do better than everyone else? What is unique about your offering? Most importantly, does your offering truly fill a need? Make sure you have fully explored these questions as part of your decision.
Enter an international market with your domestic offering without localizing it and you are taking a risky leap. You must clearly understand the culture of the country you are entering and how your offering is supported by that culture.
Successful international expansion depends on both bringing a clear and valued offering to the market and successfully delivering it. As a rule, successful businesses find others in the new overseas market to work with as strategic partners, joint-ventures or possibly licensees. Once you are comfortable in the market, you could consider creating a foreign subsidiary by acquiring a local business.
The rate at which you enter a new market should be governed by your ability to invest, manage and bear the risks of your expansion.
Your business may lend itself to a virtual market entry via the Internet. In addition to the real issues of foreign exchange, tax and business regulation that must be addressed, you are interacting with a consumer who may see things very, very differently than you do. Again, assume they will love it — everyone does — at your peril.
Finally, look to international growth as an avenue to learn more about your industry and customers and the true strengths and weaknesses of your core value proposition.
About the author
Jonathan Seltzer is a professor of marketing at the University of St. Thomas Opus College of Business.