For many businesspeople, thinking about going international might be the last thing on their minds right now. However, trading abroad makes companies more resilient, and for some businesses tough times are exactly when you should explore this.
There are essentially two approaches to tough economic times: tighten belts and ride things out, or actively seek opportunities.
The most enduring businesses have consistently shown that what marks them out as winners is their response to adversity – and this is as true for SMEs as it is for large corporates.
Microsoft and Fortune Magazine started in the middle of recessions, and IBM has repeatedly resurrected itself to new heights after darker chapters in economic history.
If a business can no longer grow in an economy of only 60 million people, why not at least consider new markets – especially ones more than ten times larger – that are still growing through the global downturn while other economies are in a recession?
For all the well-documented challenges of doing business in emerging markets such as India and China, such economies meet the increasingly rare criteria of having large, growing numbers of consumers and businesses with money to spend.
Technology firms have specific advantages when expanding internationally. For example, their products are often virtual or services-oriented, so there is less cost involved in production and distribution.
Also, their industry is already global, so dealing with foreign suppliers is a familiar concept to customers abroad.
However, care is needed. Some businesses don’t do well abroad because they fail to look at themselves critically through the eyes of new prospective markets.
Ask if your offering can meet a true customer need in another part of the world. The trick is to avoid starting with competing products already selling in that market.
Instead, look for your kind of customer and factors that trigger needs that you could satisfy.
Local characteristics and culture may favour your product, but may also change the way customers perceive value from it.
For example, technology that reduces the power consumption costs of UK mobile phone networks may be better applied in India to improve power reliability for operators spending vast sums to increase their share of this fast-growing sector.
The other common oversight is a failure to understand what it means to operate in the local market – how to promote, sell, distribute and make money from your offering.
Competitive pricing may require innovative approaches to reducing costs by considering new ways of distributing, selling or servicing.
Differentiation strategies that work at home may not be right for the new market, and local labour laws or regulatory constraints may also require a fresh approach.
Overall, there should be clarity on what makes your business special, and what may need to change to translate that into success abroad. This helps you identify which aspects of your offering should be localised for new markets.
The key to success abroad is knowing enough of the right things about the new market to make informed decisions on the way forward.
What may not be obvious is how much can, and arguably should, be done before actually arriving there.
Preparation in the UK should focus on: market data insights; understanding how to find customers, partners, staff and suppliers; understanding the regulatory and legal environment; and generally understanding the reality of the country for your business.
This isn’t something many can do well by themselves, but there are many sources of help – some free or heavily subsidised.
UK Trade & Investment (UKTI) – the Government body helping UK companies expand abroad - is a rich source of data and advice, and of course there are many business advisors, who provide such services for a fee.
If you don’t have the necessary basic information by the time you land, it is usually too late to get it, and certainly an expensive way to find it.
Focus on meeting people already identified as potentially helpful, and kicking the tyres of the business environment. Trade shows, business delegations and managed introductions can be good ways of doing this.
If what you do could meet customer needs in other markets – especially if you face difficulties selling in the UK – going global may be right for you. But you should also be open to perhaps having to alter your business to make it work in new markets.
You could at least consider the possibility of international expansion and what that might entail.
The reality isn’t necessarily as difficult as people may fear – if approached properly with the right support. The challenges are definitely surmountable, and there is probably more help available than many realise.
Was Rahman is chief executive of Dolphin Advisory and ICT adviser at UK Trade & Investment (UKTI)
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