Going global is one major step to expand your business. However, this step requires a careful strategic process to reach its objective.
About five years ago I helped one of my clients, a manufacturing company, to expand its business to the Middle East and Africa. Later in my article I will share with you the reasons why these countries were chosen as target market for my client’s initial global expansion.
About a week ago, his son George, who recently took over the family business, approached me with the idea of turning the online shop of their products into a global business. He came to me and said: Marwan I know the strategy that you and my father applied few years ago, when expanding overseas, was a success. He proceeded: I care to learn from it and turn this new online platform into a global giant.
I told George: In principal there are three main criteria that should be taken into consideration when expanding your business. Exited with what I was going to say, George took a paper and a pen and start taking notes. So I proceeded.
As a first criteria, and before going global, you will have to start local.
Starting local means understanding well your business and its history. You need to know what you are selling, the positive and negative points that your line of business holds. In addition, you need to know your customers, what they think of your product and what drives them to purchase what you develop. Moreover, you have to take into consideration the market strategies that you are applying. You also need to know why these strategies are helping you generate revenue. After understanding well yourself, your market and competitors as well as your customers’ behavior, you can start thinking global. Note that, as long as this criteria is not well developed, your expansion will have a negative impact.
The second criteria would be to identify the initial area, region or country to start your expansion process.
Now this matter needs a bit of reflection as many elements must be taken into account. These elements include the location of the market, its rules and regulation along with its need.
I told George: if we take for example your fathers’ business, as a fragrance producer, sending products from China to North America will require not only a higher transportation fees, but also special equipment to protect your product during the shipment. As you know, the change of weather and temperature could affect your product, and you surely do not want customers to receive damage goods. This matter will add additional cost to your goods affecting your sales strategy. Beside, when your father wanted to sell his goods to the United States, he had to apply for the FDI approval, that matter took time and money. Looking at the European market, it was also a challenge for your father, especially that top multinational players were dominating the European market. Because of the competition and the strict safety regulation, Middle East and Africa were presented as our initial target.
Other elements must also be taken into account when identifying your primary overseas target market. These elements includes, the countries culture, business behavior and language. If we take your online business, translating your business platform into users’ language is a key issue to take into account. In addition, you have to know where to put your data and your server, an essential point for storage capacity and speed issues. Most importantly, to think of security and payment process. I told George, that a lot of research and benchmarking must be done, learning from success and failed stories of existing e-commerce platform like Alibaba, JD, Ebay and Amazon.
The third and final criteria that must be taken into account when expanding overseas is to identify the proper channel to penetrate the targeted market.
George looked at me and said: okay but what do you mean by channel?
I replied: George, knowing well yourself, as well as the market you aim to penetrate is only the beginning. To build a proper bridge between your country and another countries, whether by selling a product or a service, online or offline, you need someone to help you and support you on the other side of that bridge.
Like an agent, George mentioned.
I continued: yes exactly like an agent, a distributer, or a partner. Someone who knows well the regulation and legal terms of that country and someone who has many years of experience dealing with that market. Now, here is the most important part, you need to find someone either a person or a company, who will become part of your team, someone you can trust who can run the business in the country where you care to integrate.
George asked: but where to find that person and how to start dealing with him?
I responded: there are many ways to answer your question. Identifying the right person could be by personal introduction, where your friend could introduce you to someone in that particular country. We remember partnering with our agent in Egypt though a nonprofit organization I was member in. this could also happen by attending conferences, events and shows in these particular countries. Of course not to forget the social media an important channel that can help you link with people all over the world. Speaking of social media, creating an online campaign could help you generate a lot of followers and potential overseas partners. Like for example, the campaign that Airbnb did in January 2015. The company referred to the campaign as a “global, social experiment,” in which Airbnb asked the community to perform random acts of hospitality for strangers, and then take a video or photo with the person and share it using the hashtag. Just three weeks after the launch of the campaign, over 3,000,000 people worldwide engaged, created content, or were talking about the campaign.
When it comes to dealing with them, trust and capability are the two main issues you need to look for. Trust, is to know that the person you will be working with is actually a person you can work with and understand, someone who will not stab you in the back and who will keep his word. And capability, is to know if that person can deliver and help you penetrate that particular market.
Therefore, before partnering with that entity or person, it would be nice to test him. Starting as a nonexclusive agent would usually be a good way to proceed. If that person prove himself and helps you acquire a proper market share, you can put him exclusive agent. If the market will require, you can after that open a factory or an office in that country, this by partnering with your agent. I personally wouldn’t penetrate the market on my own, simply because a local powerful person can, besides helping you get business, protect you from unexpected situations.
I finished my speech, George directly, put the pen down, took the phone, called his father and said: Dad, we need to talk.