The global marketplace has quickly become more accessible, providing small businesses the ability to exploit international trade opportunities. However, most small businesses do not know how to determine if international expansion is right for them.
Are you ready to go global? If you have all of the following then you might be:
- Management commitment
- Adequate cash flow
- Capacity and capability to produce international products or services
- Experienced success in the U.S. Market
BusinessDictionary.com defines management commitment as, “Direct participation by the highest level executives in a specific and critically important aspect or program of an organization.” According to James Foley, author of The Global Entrepreneur, management commitment translates to strong resource commitments: budgets, personnel, and time commitments. It also means that the entire organization is there to support the activities associated with the international expansion strategy. Management commitment allows a company to establish risk and payback expectations.
Adequate cash flow
An international strategy will require cash. Cash flow is a very important consideration when evaluating foreign market expansion. The foreign market selected and the aggressiveness of the company’s international expansion plan influence the need for cash. Successful international expansion requires appropriate financial investment consideration to avoid mistakes, missed opportunities and failure.
Capacity and capability to produce international products or services
Your company must consider its capacity and capability to produce international products or deliver a service internationally. International expansion without these components lead to channel frustration, a situation where foreign distributors, buyers or end-users are not able to buy or service the product because of regulatory requirements, logistics, or simply lack of supply.
Experienced success in the U.S. Market
If you think a lack of success in your home market is a reason to expand internationally, think again. Knowledge of the company’s competitive advantage in the domestic market is leveraged to international markets and necessary for global success.
Once you know you have all four of those areas covered, you are ready to develop your international strategy. Four questions a company needs to answer before developing an international strategy are:
- Who are the end-users and why do they need your product or service? This knowledge helps identify foreign markets.
- What components of the company create the competitive advantage? Does the company successfully compete on price, features, quality, after sales service, branding, etc.? This helps determine the marketing approach into the foreign market.
- What is the profitability structure of the company’s product or service? (also consider what external forces influence profitability) This helps determine how you enter the foreign market, landed costs, and end-user pricing, and competitive threats
- When and how will the company determine if the international expansion is successful, must be scaled back or even stopped?
Exporting may seem complex, but it really is not. We are available to assist new-to-exporting companies evaluate their export readiness and our international trade specialists can work with you to develop your international strategy. Our assistance will reduce the likelihood of unexpected challenges once you cross the border.
John Privette is the regional director for Laramie and Goshen counties. John holds a master’s degree in Business from Colorado State University. He has extensive experience in business start-ups, business development & marketing, and international trade. John is also a NASBITE Certified Global Business Professional.
When he’s not in the office:
John enjoys DIY projects, hiking, and exploring Wyoming geology.