At some point, all successful start-ups pass a milestone when they think, “hold on, why aren’t we all over the world yet?”.
The majority of entrepreneurs understand (perhaps you’re one of them) the advantages of international business and can’t wait to sink their claws into the global market. But how does one find the right moment for doing this? There is no single recipe to make start-ups global overnight. Yet, there are distinctive signs which indicate that your business is ready.
Timing is subjective
All product businesses go through a product life cycle. At the introductory stage, your offering is struggling to grab market shares. The growth stage will find you picking the fruits from the local market. Finally, the mature stage is characterized by a sales slowdown, higher competition and tighter margins. Once you’re reaching maturity—that’s when it’s time to consider overseas options. Yet, pay attention:
- If you go global too early, you risk having to dig into your buffer if things go sour—or you might not have the development resources free to address urgent, new market challenges yet.
- If you go global too late, you have a tougher battlefield to fight through, and you may lose your product’s marketing momentum.
There is an exception to the rule—if you’re operating in the digital field, internationalization might be your prerogative from the very beginning. Digital companies have fewer obstacles in their globalization endeavour. Many of successful, international start-ups emerge from smaller countries, like Sweden, Israel or Estonia, basing their growth on strong, local digitalization.
Good reasons for going overseas
Before starting your foreign business escapade, make sure that you can explain its benefits to yourself. If you can’t logically build a business strategy, including a thought-through SWOT analysis, then why would you even try to convince anyone else? Merely thinking that foreign markets are bigger, consequently, better, is not a good enough reason for internationalization. Neither are “everyone’s doing that” or “why not”. Don’t disillusion yourself with phantomesque advantages of a foreign market. You might spring a trap that costs money to escape from and bring nothing but vague benefits.
Think of grounded, thoroughly researched and justified reasons, why this step is necessary.
Ko Kou Ko Le – world leading brand
High local demand for a product or service doesn’t guarantee high international demand. There is always an innate advantage in your home market which you lose when hitting the road. It’s a simple truth. Cultural, judicial, logistic, social or language differences can all pose a serious threat to expansion. If you’re in the gambling business, for example, some countries make it impossible to create a functioning business entity. If you’re in the delivery business, some countries’ roads will send your fleet of vans to the junkyard quicker than you can spell “pothole”. Whilst internationalizing your business, keep in mind that you’re not becoming a world citizen, but in reality adjusting to the environment of each new market.
There is always an innate advantage in your home market which you lose when going global.
When Coca-Cola was first entering into China, its marketing team spent countless days and nights tweaking their brand name for a better customer perception. In the end, they launched “Ko Kou Ko Le”, which sounds similar to the original name and translates, literally, as “happiness in your mouth”.
Not all start-ups realize how vast cultural and language differences sometimes are. However, they are also very manageable if addressed in time.
Find a good local tour-guide
Do you remember the first time you moved to a new city? After a few days, you were still breathing the air of opportunity and discovery. After a month, you started to understand how the streets were interconnected. After a year, you knew where to go for the best party. After five years, you also knew where not to go.
Don’t overestimate how well you know a market. There is always someone out there who knows it better—and if you don’t play your cards wisely, your competitors will. Even if you know there are volumes of potential customers in a new market, beware of concealed obstacles. Legislative issues, taxation, complicated distribution channels—these are the factors to look out for.
Don’t overestimate how well you know the market, someone always knows it better.
It can be complicated to understand all the peculiarities of a foreign market, even after research. You don’t want to end up like Colgate did when naming its French toothpaste “Cue”, which is also a name of a French 18+ magazine.
This is why you need expert advice. Business and legal consultation isn’t for free. We get it. But being without it is probably going to be even more expensive.
Above all, be prepared that your decision to go global will change your home address for a while, because your physical presence in the new market may prove essential in the beginning.
Which market—it matters
If you’re making first steps in internationalizing your start-up, it might be a better option to start working on a market that is very similar to your home market. If you’re a EU-based entrepreneur, don’t rush into Asian markets. First, try your neighbor EU countries.The experience will prove valuable down the line.
There are no bad sources of information in market research. If you have an opportunity to take tips from your competitors or fellow entrepreneurs entering the same market—don’t hesitate.
Foreign markets can cost you an arm and leg to enter into, especially if the competition is tough. Yet, going global can prove both lucrative and essential for maintaining business momentum.To help you cope with the pressure of foreign market entry, nearshoring could be an alternative. We’re not saying it is, but don’t forget that it’s an option.