Consider The Profit Potential Of International Expansion

For example, although companies are dazzled by China’s large market size, deeper analysis shows that 70 percent of the population lives in rural areas. In addition, consumers in different regions speak different dialects and have different tastes in food. Finally, the purchasing power of consumers varies in the different cities. City dwellers in Shanghai and Tianjin can afford higher prices than villagers in a western province. For example, US chemical firm DuPont, Brazilian aerospace conglomerate Embraer, and Finnish mobile-phone maker Nokia are all investing in China to gain new customers. Schneider Logistics, in contrast, initially entered a new market, Germany, not to get new customers but to retain existing customers who needed a third-party logistics firm in Germany.

  • GDP per capita is widely regarded as the best measurement of a country’s standard of living.
  • By analyzing the two types of investments, Hymer distinguished financial investment from direct investment.
  • This potentially can lead to compromised quality and lower staff morale, resulting in higher staff turnover, which in turn can damage your customer relationships.
  • To support this bold international growth strategy, YUM has aligned its capital allocation process by increasing international capital expenditures by over 50 percent, while decelerating capital expenditures in the US.
  • But for similar reasons, recruitment also becomes easier because flexible working has broken down the physical and geographical barriers to talent.

Likewise, when Walmart enters a new market, it seeks to source produce for its food sections from local farms that are near its warehouses. This practice is also a win-win for locals, who have the opportunity to sell to Walmart, which can increase their profits and let them grow and hire more people and pay better wages. Introducing new services or products in a dense market requires a great amount of resources with little yield. International expansion brings about new sources of revenue for the organization to capitalize on. Diversifying your portfolio and adapting a new business model to your new market creates access to new revenue streams. You will be able to assert your presence in the new location with existing products and develop a larger international status.

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CAGE analysis can help you identify institutional voids, which might otherwise frustrate internationalization efforts. Institutional differences are important to the extent that the absence of specialized intermediaries can raise transaction costs just as their presence can reduce them. For example, Mexico accounts for 40 percent of the goods exported from Texas.

Consider The Profit Potential Of International Expansion

Thanks to advances in technology and the rise of e-commerce, it has become more feasible to expand operations in new markets. Even smaller or niche businesses can reach new customers in foreign countries and achieve new successes.

Real Benefits from International Expansion

Take a major non-traditional crop or agricultural product which your country produces with sales potential overseas. Devise a market entry strategy for the product, clearly showing which you would use and justify your choice indicating why the method chosen would give benefits to your country and the intended importing country. Organisations are faced with a number of strategy alternatives when deciding to enter foreign markets.

How do you evaluate international expansion?

Research should identify things such as exchange rates, government stability, ease of doing business, treaties, and trade regulations. Reputable resources such as the CIA World Factbook, the World Bank, and are a good starting point for research.

Understanding the culture and what will resonate will play a huge role in the success of your global expansion efforts. In most countries of the world, international trade represents an important share of the gross domestic product. In considering alternatives to grow your company, it will be worth investigating this accelerating trend which is the outcome of increasing industrialization, transportation and communication tools. You can follow the footsteps of large corporations that are already looking more beyond their country borders for growth.

Importance of studying international business

Nali group, has, since the early 1970s, been engaged in the growing and exporting of spices. Spices are also used in the production of a variety of sauces for both the local and export market. Its major success has been the growing and exporting of Birdseye chilies. In the early days knowledge of the market was scanty and thus the company was obtaining ridiculously low prices. A high Consider The Profit Potential Of International Expansion market-share company can attempt to convince Congress to pass legislation giving it special treatment under the law. For example, labor unions, professional athletic leagues, banks, and newspapers have all received special treatment under the antitrust laws. Special legal treatment has also been offered to many companies in the form of subsidies, tax loopholes, and tariff reductions.

  • Managers in international business must understand social science disciplines and how they affect different functional business fields.
  • Often processors enter into contracted outgrower arrangements or supply raw inputs.
  • Expand that budget to account for at least three years of continual expansion support, with budget-based KPIs tracked every month.
  • Organisations are faced with a number of strategy alternatives when deciding to enter foreign markets.
  • The company already serves bottom-of-the-pyramid consumers in one area, but it could tailor its core offering and business model to meet the needs of similar consumers in a different area.

The more similar markets in different regions are, the greater the pressure for an industry to globalize. Coca-Cola and PepsiCo, for example, are fairly uniform around the world because the demand for soft drinks is largely the same in every country.

Determining an Optimal Market Share

The bank will finance the export of all types of goods or services except for most military-related products. The moment you’ve been waiting for has finally arrived, and you’re ready to export your product. Your first order of business is to heed the hard lessons learned by those who have gone before you. Below are some of the most common exporting mistakes, according to John E. Cleek, program director at the Bloch School of Business Administration at the University of Missouri in Kansas City.

  • Not to mention Brexit and the Sino-US trade war, the global political landscape is facing one of its toughest times.
  • Here’s how a business development manager can help your company enter new markets and countries.
  • It is increasingly easier to see how foreign markets respond to products, even ones that are not yet available to them, thanks to the internet.
  • Likewise, a foreign firm is not allowed to own more than 25 percent of a US airline.
  • Dunning was widely known for his research in economics of international direct investment and the multinational enterprise.

It’ll take even more time to begin implementing in stages along set dates, benchmarks, and checkpoints. Your internal business audit should be detail-oriented and comprehensive, including stakeholders from across your entire organization, from operations to sales to finance to IT. Each of these domains will need to scale up and align to help overseas branches thrive. Each department’s insights and infrastructure must be reviewed, feasibility tested, and then tweaked to work in the new market. Copying and pasting domestic processes onto international ones and expecting identical results almost never works. A market analysis, researching the health and landscape of the new target market.

Google’s CEO Is Asking Employees 3 Simple Questions to Boost Productivity

Energy companies are adopting and perfecting policies that cater for remote work. This gives them access to international talent and international employees with region specific skill sets. For an expansion strategy to work successfully, dispatching a team dedicated to the strategy should be a priority. Realistic goals, budgets, and timelines should be identified and agreed upon across the board. According to Hubspot,global B2C eCommerce salesare projected to reach $4.5 trillion by 2021. Companies that sell in different countries and multiple languages can reach more customers, grow faster and have higher profit margins.

What are expansion strategies?

What is an Expansion Strategy? An expansion strategy is synonymous with a growth strategy. A firm seeks to achieve faster growth, compete, achieve higher profits, grow a brand, capitalize on economies of scale, have greater impact, or occupy a larger market share.

During the past decade, many multinationals have come up short trying to make a profit by solving the pressing needs of low-income communities. Preoccupied with their social missions, companies have optimistically taken on challenging projects, only to be surprised when weak consumer demand and obstacles such as bad roads keep revenues low and costs high. Overstretched and disillusioned, many switch gears and reconstitute their ventures as break-even social investments that are destined to remain small. Here’s how a business development manager can help your company enter new markets and countries. Interested in expanding your international business through hiring in France?

2 PESTEL, Globalization, and Importing

Unexpected events also create unique opportunities for global expansion. A prime example is how businesses and consumers across the world increasingly went digital when the pandemic hit. However, many companies still have second thoughts about going global. After all, the path to international expansion requires facing new challenges to start over in a new country and new market. The U.S. Government Export Portal provides online trade resources and one-on-one assistance for your international business. Counselors can help you design a training program to match your specific needs. International trade is increasingly important to many growing businesses.

Consider The Profit Potential Of International Expansion

By improving strict hygiene standards a marketing chain can be broken, however strong the link, by say, Government. This, however, should not occur, if the link involves the close monitoring and action by the various players in the system, who are aware, through market intelligence, of any possible changes. Whilst many of the details vary, most contracts contain the supply of credit/production inputs, specifications regarding quantity, quality and timing of producer deliveries and a formula or price mechanism. Such arrangements have improved the flow of money, information and technologies, and very importantly, shared the risk between producers and exporters. Whilst not strictly speaking an entry-strategy, EPZs serve as an “entry” into a market.

That’s the contention of the authors, who say that a steady flow of profits from manageable ventures will pave the way for later investments in more-ambitious socially beneficial projects. Outside experts can help you determine the costs of your expansion and how to pay for it. Larger businesses mean delegating more management duties or dividing workloads between different locations. This potentially can lead to compromised quality and lower staff morale, resulting in higher staff turnover, which in turn can damage your customer relationships.

These questions are examples of the types of issues that can arise in a PESTEL analysis. The degree to which the company’s existing practices, resources, and capabilties fit the new market. Bert Markgraf is a freelance writer with a strong science and engineering background. He started writing technical papers while working as an engineer in the 1980s. More recently, after starting his own business in IT, he helped organize an online community for which he wrote and edited articles as managing editor, business and economics. Browse our legal documents and services and choose the right plan for you.

Learning Objectives

Similarly, many companies view international expansion as an easy way to diversify their assets and protect their bottom line from market shocks. Having multiple locations provides a counterbalance; should one market struggle, another may act as a buoy. Learn more about how Citcon’s global payment processing solutions can help you expand your business internationally and gain a competitive advantage.