There comes a time in every company’s life when the question arises: should I export and internationalize? The process of opening up to new markets is long and complex, but it can become a method of growth that can even save some companies from suffering declines in their countries of origin. If this is your case, our article will tell you how to internationalize a company, the strategy, and the steps you should follow in this article. Read on!
What is internationalizing a company, and what does it consist of?
First of all, let’s see what the internationalization process consists of. Internationalizing a company is how the organization creates the necessary conditions to operate in the international market. More and more companies are moving towards offshoring and directing their strategy abroad.
Internationalization is more than expanding the business from home to foreign markets. Taking products abroad is not something to be taken lightly or underestimated. Internationalization is a process that requires conviction, commitment, and willpower.
The economic crisis has reinforced the commitment to international trade in recent years, which has pushed companies, especially SMEs, to look outside a collapsed domestic market.
The decision to internationalize is one strategy that significantly impacts any brand and all internal and external operations and their management.
Entrepreneurs have seen that this is a path of growth in the growing export trend, opening doors for them. In this aspect, it is interesting to analyze why exporting is a good option.
Advantages of internationalizing a company
The benefits of exporting, apart from the obvious ones, are varied. Still, most of them have to do with companies forcing themselves to make a significant change that allows them to improve in many areas by competing harder in a fiercer global market. Let’s look at the most critical advantages of internationalization:
Increase customers and revenues.
One of the most critical advantages of internationalizing a company is that the number of potential new customers can increase considerably. With each new market we enter, we can pave the way for business growth and increased revenue.
On the other hand, companies can also use international markets to introduce unique products and services, which can help maintain a positive revenue stream.
Improved risk management
Market diversification is one of the most important benefits of international trade. Being less dependent on a single market will help us avoid risks in our primary market.
Organizations may have the opportunity to increase brand awareness in a market that competitors have not yet entered.
Companies expanding into new markets are forced to innovate and improve their offerings to compete with local companies. In addition, entering new markets can provide access to top talent, advanced market trends, and industry innovations.
Cost savings and access to new technologies
When you start operating in a new market, your company is exposed to opportunities to benefit from foreign investments that may not exist in your home country. For example, many governments offer incentives to companies that want to invest in the region.
In this sense, foreign investment can be valuable for our business, as it could accelerate growth, tax relief, cheaper logistics, cheaper commodities, etc.
Moreover, on the other hand, it can also help companies gain access to new technologies and ecosystems in the industry and the international workforce. These connections and networks can significantly improve business operations. The company is accelerated in the innovation process, something seen in its management dynamics and its products, through the clearer and broader vision of what is being done in other markets.
- It streamlines industrial capacity and speed.
- It allows you to improve the management of resources since you are forced to do so.
- It generates new opportunities
- It increases sales
But for all this to happen, the company must enter into a process of awareness and prepare a good long-term business strategy.
What does a company need to internationalize?
We have told you about the benefits of a company expanding its business and venturing into other markets, but none of this is helpful if you do not know the requirements needed to do so. In this section, we name some of the most critical requirements to internationalize a company:
1. Ability to identify barriers
If a company does not know what is preventing it from growing, it will not be able to continue. It is vital to take note of this because the mistake that many companies make is to look ahead without taking into account the risks. To take this step, it is essential to perform an internal analysis, which it is analyzed if the company is prepared to meet the demands of the market it wants to cover.
2. Recognizing the product to be offered
To internationalize a company, it is also necessary to evaluate the opportunities offered by the product or service at an international level. In which countries will it be successful? Will it be attractive to my potential customers? If a company wants to expand its business to global markets, it will not be enough for its product to be popular in the country where it has already established itself; it will also have to be popular in the other target countries.
3. Be better than the competition
A company that wants to internationalize will have to offer a better product or service than its competitors if it has one. For this reason, expanding into other markets means being very aware of what other companies in the same sector are doing. Examining the consumption of what your competitors are offering can help you know the level of opportunity you have in that market.
4. Develop a roadmap
A company cannot internationalize without a plan that determines the steps to do so, where all the actions, failures, successes, and strategies are written down. None of this can work without a method and a guide.
5. Every activity is an investment
When embarking on the internationalization of a company, it is crucial to keep in mind that each activity is an investment to be made. It means keeping in mind that the benefits can be long-term and that it is always necessary to work with a margin to act in case of failures that may arise in each activity.
The capacity of the organization influences export performance. For this reason, examining the company’s situation in the market will help to know if it can internationalize without the help of external agents. Suppose the company’s capacity is not sufficient. In that case, it will be necessary to look at other options, such as partnering with other companies or hiring the services of foreign trade consultants or advisors.
Legal aspects of internationalizing a company
Legal aspects are essential from the moment a company decides to internationalize. These may vary according to the company’s activities abroad since not all of them have the same objectives. Along these lines, we leave you some of the most important legal requirements to internationalize a company:
Rules that regulate international trade. The WTO (World Trade Organization) is the global organization in charge of these rules. Investigate the legal aspects that could affect you according to your sector.
The means of collection in international transactions will be determined by the agreements made between the importer and exporter.
Be aware of the Tariff Law and the rules governing international trade operations in VAT, with exemptions in intra-Community deliveries of goods and exports.
To know the country’s taxation where you want to expand your business. It is essential to know the regulations governing both the country of departure and destination. Contacting professionals in the country where you wish to operate is vital to be aware of these rules.
Attend events and meetings with people in the sector to network and learn about opportunities in other countries. ICEX is an excellent opportunity to be aware of the meetings.
The challenges of exports for companies
The main thought that leads entrepreneurs to decide to export is the most basic and rational reasoning that anyone makes in times of crisis: if things don’t work out here, we will have to try other places where people’s purchasing power is higher, sales are not being affected, etc. The idea that it will be easier to maintain the business if it is sold in countries with better economic conditions is not unreasonable. However, the key to success in the export process lies in the company’s strategy and not so much in the country in which it wants to sell.
The will to sell or continue selling is a good principle, but this will must be accompanied by the choice to grow. An SME, in particular, has to think that leaving the incubator of its country, which until now has limited it to certain magnitudes, means having to grow irremediably, and it must accept this challenge with enthusiasm and without fear or limitations.
For a small company to grow and enter the international market implies a series of changes to be adopted and challenges to be overcome:
First, you will have to optimize your processes to be more competitive. The competition will be more significant and will have more years of experience. The fact that the competition is growing tells us that the market is also increasing and, consequently, the number of products and deliveries to be carried out will succeed. Is the company ready to invest in a competitive production and distribution model?
Compensating for seasonality
On the other hand, the company must also be able to compensate for product seasonality within the overall market. Suppose a farmer decides to export his fruits and vegetables to the world. What will he do when it is winter in his place of origin, and certain fruits do not grow but are in demand on the other side of the world, where it is summer? The farmer will have to find a way to compensate for the lack of produce or have the option of being able to sell to several countries and synchronize the demand for the product throughout the year.
Steps to internationalize a company
Now that we have all the information in hand let’s look at the different steps to internationalize a company. Take note!
1. Creation of an export department
It is the most intuitive and natural step. Without a department to manage the new phase of the company, it will be challenging to face the challenges that lie ahead.
2. Conduct an internal analysis
We must ask ourselves whether the company can initiate this change in this step. The first step is to assess how the company is ready to acquire the production capacity needed to meet the new demands.
The most important factor is money. We have already given you a (basic) average of what you need to invest in starting the process. Based on this, you have to consider whether you will have the financial capacity to assume the expenses. If this point is clear and you can go ahead, the next concern is the product or service: Is it suitable for all markets? Does it have enough potential to stand out? If the company offers more than one product, the ideal and advisable thing is to go for the one with the best chances of success.
A curious thing to consider is each country’s social, political, and economic characteristics. Perhaps the product or service that works in one does not work in another. Therefore, in this step of the strategy, it would be necessary to study the markets and tastes of the places we are interested in reaching.
3. Bet on innovation
Most internationalized companies are characterized by being innovative and carrying out projects committed to innovation. Exports to the world seem to be accompanied by a more open and futuristic vision, which is necessary to go abroad.
Innovation can manifest itself in various ways, whether in company policy, human resources, payment methods, or the final product, offering more eye-catching, practical, or original packaging.
4. Choosing markets
Earlier, we mentioned the importance of considering the social, cultural, political, economic, and legal factors of the countries you plan to export to. There are all kinds of particularities in each region that can become barriers to selling products. For example, customs laws, currency type, and exchange rate must be considered: Does it benefit the company?
On the other hand, product or service considerations also come into play. Depending on what you want to sell, you will draw complex lines to overcome in internationalization. For example, you cannot sell a computer program or an application and leave it in only one language or export products that require refrigeration, and there is a stretch of the journey where the cold chain would be cut off.
As a tip, the best thing to do is to draw up a statistical table in which the factors to be taken into account and the probabilities of success in each country are listed. In this way, a more detailed list of the best places to start will emerge.
Depending on the budget, one or more offices may be set up in one or more countries you plan to export to. However, it is most likely that small companies will not have this capacity, and their new market will be reduced to the areas closest to their country of origin.
5. Find a marketing channel
When internationalizing a business, the sales channel will vary depending on whether you sell a product or a service. You may or may not need a physical presence for sales. If needing it, the best way is to do it directly through a local partner.
On the one hand, being present has the clear advantage of gaining extra knowledge about new market demand and better identifying consumer trends and preferences. However, the logistics become more complicated with this option, and problems may arise related to collection, lack of communication, etc.
On the other hand, if you choose to use an external commercial distributor, you gain functionality and risk control despite losing control over the market since you can make more significant and orderly shipments.
6. Start with promotion.
The communication and marketing of a company have changed a lot. In this blog, we have told you about the thousands of new ways we have to sell a product more effectively, from inbound marketing or neuromarketing to growth hacking and SEO. The recent trends exploit the free channels and the subtlety to emphasize the brand more than the products themselves, giving rise to the company’s already famous branding or image.
We recommend you make a small ‘study’ of all the mentioned options for the promotion. To begin with, several things should not be missing: a website or eCommerce, where products are sold, and information about them is provided, profiles on social networks to promote, and investing time in finding the best international events and fairs where it is of interest to showcase the company and its services.
7. Strengthening the internationalization of the company
After a while, the small company that started dreaming big will have become a large international company. At this point, the same flow of events will have already led it to create the figure of an export manager, and it is likely to think of investing more and more to be able to take on the fronts that have been opening up.
The last phase of the process, which completely consolidates the change from a national to an international company, is the physical establishment in other countries, either with subsidiaries or franchises. One of the most outstanding examples, rather trite at this point but valuable nonetheless, that allows us to visualize better the evolution and change that a small company can undergo is Starbucks. Starbucks went from being a small coffee shop with its origins in Seattle, Washington, to becoming the most significant international coffee chain globally.
What did you think of this article on how to internationalize a company? Leave your comments and share!
Finally, one of the things we encourage companies to think about is that, in the context of digitalization in which we live, the barriers to internationalizing any business are getting lower and lower. You could say that it is an excellent time to take advantage of the opportunities offered by the new connections, as long as you keep in mind the other factors that influence the success or failure of the adventure.