The complete guide to growing your business internationally: part 1
Our series on how to grow your business internationally
Welcome to part one of our guide to growing your business internationally. In this edition, we’ll give you an overview of the steps and decisions you’ll need to consider when thinking of expanding overseas. In the next edition, we’ll dive deeper into finding ways to distribute your offering across borders.
Why expand your business overseas?
Britain, like many of the developed nations, is losing economic dominance on the world stage. By 2020 The Economist predicts that the emerging markets – specifically BRIC (Brazil, Russia, India, China) – will be the new global leaders(i).
There has never been a better time, or need, to think about where your business growth might come from outside of the UK.
But many growing businesses are concerned about the level of difficulty in setting up overseas. There’s a lot of advice available out there but what steps do you really need to take to make trading abroad a reality? Here’s our step-by-step guide how.
Step One: Get Real
“We moved into exports when a UK client asked us to take on a major contract in the States. At the same time we started working with a firm in Taiwan to make circuitry, who said in return, ‘We have a contract in Ireland, could you take it on?” – Harry Everington, Chairman of signage manufacturer and installer Pearce Signs (iii).
Growing your business overseas is not a Plan B if you’ve failed to grow your business in the UK first. Ideally, you’ll know you’re ready to expand abroad because:
- You’ve dominated the local market and growth has flat lined and/or…
- You’re already selling to, or getting order requests from, other countries
You also need to consider whether your business relies on your physical presence i.e. if you’re a florist famed for your floral arrangements your business probably needs you around to deliver the work. This barrier is a very real consideration to those who deliver services.
Step Two: Think Strategically
“Business is done between people, not companies, so you need to ask yourself if people get your strategy and whether they will adopt it.” – Richard North, chief executive of toy manufacturer Wow! Stuff (iv)
Even if the demand for your product is there, does it make sense strategically for you to grow overseas?
Only you know what the overarching mission is for the company and only you have access to all the insight, knowledge, and figures to determine if expanding overseas will drive growth or send costs spiralling out of control.
You may have found success to date felt ‘spontaneous’ or that you rely on ‘gut instinct’ to make decisions. That’s OK but the logistics of operating in another market involve a huge amount of effort and jumping through official hoops which may not excite you in the way running your existing business does today. You’ll need a sound, strategic plan, to see you through the tough times and convince key stakeholders along the way that you’re headed for success.
In particular you’re going to need to plan your finances. You’ll need a plan for working capital, bonds and credit insurance to reduce financial risk. You’ll also probably want to take out a foreign-exchange contract to protect the business from unpredictable and fluctuating currency rates – even a shift of one percentage point can make a significant impact on your margin. All of this should be considered while developing your strategy.
Step Three: Find a Mentor/s and or Local Advisor to guide you through the process
“I needed to attract new business on a tight deadline. Thanks in part to UKTI’s assistance, we were able to secure a new contract in just six months, exceeding even their expectations.” – Tom Elvidge, Principle Consultant of Consultancy Moorhouse. (v)
There’s no way you and some late night Googling are going to do this on your own. You need expert, local knowledge and maybe even the support of someone who’s been there. (And we don’t mean just been there on a holiday.)
In the UK there are some organisations dedicated to helping businesses like yourselves do this very thing.
UK Trade & Investment: UKTI s going to be your first stop. They are the official Government body set-up to work with UK businesses expanding internationally. Working with them will get you access to loads of practical advice, market research, and potentially even funding. They also operate offices in key markets so should be able to connect you with someone in your market of choice http://www.ukti.gov.uk
The Department for Business, Innovation & Skills: Another government resource, the Department for Business, Innovation & Skills, advises on specific areas such as trade agreements, market assessments and intellectual property law www.bis.gov.uk
The Institute of Directors: If you’re already a member of the IOD you may or may not be aware that they offer advisory services on trading abroad. Even for non-members there is some handy information available on their website www.iod.com
Business Councils: Some economic relationships between Britain and other countries are already very strong and joint initiatives have been established to encourage trade. For example there’s the China-Britain Business Council, the British-American Business Council, and others you can look up for market specific support
Professional Associations: Is your business supported by a professional association? Many of these are global and can connect you with local market contacts and advice relevant to your profession or industry. Wikipedia has this list of UK Professional Associations to find yours – if you work in manufacturing The Manufacturers Association is a great place to go. There may even be dedicated international organisations such as the British Chinese Law Association.
Image source: Flickr UKTI
Mentoring might seem a bit ‘new-age’ but even Warren Buffet believes in the value of a mentoring. The whole point of a mentor is to connect you with someone who has already trodden the same or similar path you intend to take and offer you their knowledge, expertise, and experience so you can replicate their successes and avoid their failures. At the very least they’ll be someone who understands your highs and lows and can help support you through the process.
How to find one? As part of connecting with any of the organisations above ask if someone can make introductions to a possible mentor – this tends to be done via word of mouth.
Step Four: Research, research, research
“We did lots of research. You can’t assume that what works in the UK will work abroad. For instance, we found that the UK had a large range of PC and internet-based magazines, and we got lots of press coverage. In the US, PC Magazine had a circulation of over one million and dominated the landscape. It was horrendously difficult to get PC Magazine’s attention.” – Chris Barling, CEO of IT provider Actinic (vi)
Knowledge is power. For example never underestimate the cultural differences which may exist even in going in to a country which speaks even the same language – these brands all found out that hard way:
- The Pepsi campaign that translated “Come Alive With The Pepsi Generation” into Chinese as “Pepsi Brings Your Ancestors Back From The Grave”
- The GM Nova car that was launched to the Spanish speaking market where “no va” means “It Doesn’t Go”
- Vacuum cleaner manufacturer Electrolux marketed in America with the slogan “Nothing sucks like an Electrolux”
While these examples are all giggle worthy it’s staggering how these expensive mistakes could’ve been avoided with some simple upfront research. Even a large multi-national with 100s of people on the ground in the local market can miss business critical information.
Things you’ll want to be confident about before launching in another market are:
- Is there are a market need for your product and service? You’ll want to use your own insight i.e. existing demand from another country, as well as research local buying needs and behaviours. You’ll also need to find out who local competitors are and what you’re up against in launching alongside them.
- Can you provide your product or service in another country to the same standard as in the UK? This is going to include everything from knowing there’s local suppliers and pre-scoping the cost of local production, to legal and regulatory knowledge and knowing there’s local human resource available. We’ve also called out the importance of maintaining standards; you need to protect your brand equity and consider that local suppliers may not provide resource that’s either up to scratch or as affordable as it is here.
The organisations you identify in Step 3 will be able to help you with this.
Step Five: Choose a model
“You have to set it up as a separate business model rather than simply take a punt at getting some business from a different part of the world.” – Ray Jones, head of business consulting at RTC North (vii)
There are several ways you can enter a new market; open a subsidiary, acquire or merge with an existing local business, or develop a strategic partnership – this could be through franchising, a joint venture, or licensing, or sourcing a local distributor or provider.
These all have various pros and cons which are unique to both your business and the local market you wish to enter. The research you’ve undertaken should be able to indicate which the best option is – you should not have decided this in advance, in absence of any research.
Once you’ve selected a route to market you can then seek out specific advice on how to execute that model in your local market from the organisations you’ll have sourced in Step 3 and organisations set-up specifically support those activities – for example there is the British Franchise Association for those needing advice on franchising. The International Chamber of Commerce can also assist and provide model contracts you can buy for signing partnership and distributor agreements.
Typically, and this may not be right for you, the first step to doing business overseas is through a distribution deal. You can locate and negotiate with a local distributor yourself or many businesses attend trade fairs where they can showcase their product or service and then are approached by businesses who wish to become their local distributor.
So, you see, once you have selected your preferred model for trading overseas the next steps become a little clearer.
Gift manufacturer Wild and Wolf from Bath is exhibiting at key trade shows across Europe.
The economic situation today means that growing your business overseas might not just be great opportunity but could be a necessity in the very near future. And the markets with the most potential could be the ones you least expect – the developing nations.
If your UK growth is plateauing and/or you are experience high demand from overseas, now is the time to explore your options. Make sure you avoid making mistakes and benefit from the help available out there by teaming up with specialists – UKTI will most likely be your first stop.
Good luck out there!
- UK Trade and Investment
- Department for Business, Innovation and Skills
- The IOD
- The International Chamber of Commerce
- UK Export Finance
- The Institute of Export
- The Confederation of British Industry
- The Manufacturers Association
(v) UKTI Trade Services Guide 2013
Access to funding is often a barrier to small business growth, if you are looking for capital or growth finance, Funding Circle could help.
- See more at: https://www.fundingcircle.com/about-us/our-blog/the-complete-guide-to-growing-your-business-internationally-part-1#sthash.YNe7eZlm.dpuf