5 Essential Factors To Consider When Expanding Your Business Internationally
There are many reasons for businesses to want to expand internationally with their brand and operate activities abroad, whether it is importing, exporting, investing or even outsourcing their services. Strictly from a business point of view, it can indeed be an extremely beneficial action to take; from increasing sales and revenue to growing brand awareness on the international market and acquiring new customers.
Nevertheless, trying to internationalise your business can be either a great success or a costly mistake, depending on how you plan and implement your strategy. There are many aspects to consider when taking your business abroad and these challenges should be faced carefully.
Here are the 5 major factors to consider when taking your business globally.
– Cultural patterns
– Language barriers
– Local legislation, regulations, laws
– Economic environment
– Potential market share, competitors
Culture refers to the learned norms that members of a specific population or society are confronted with from an early age, characterised by common values, attitudes, beliefs and behaviours. It is the main factor that differentiates groups of people coming from different geographical regions or social backgrounds and links these groups within national or regional borders. Nonetheless, subcultures also exist between countries and these similarities link groups from different countries as well.
Cultural differences are the reason why each specific population has different needs, interests, preferences, motivations and purchasing habits. Indeed, consuming habits vary a lot from one country to another, and products/services are not necessarily perceived and used in the same way. For example, French people consume milk mostly for breakfast and TV ads for milk often take place in the morning. On the contrary, milk is more of a product consumed at night time before going to bed in the US, which is why commercials won’t stage people drinking milk for breakfast, since it does not match the consuming habits of Americans.
Numerous cultural factors come into play when it comes to people’s behaviours and purchasing habits and a business approaching a foreign market must be aware of those.
Religious values can also play a significant role in the success of a product, and some countries religion shapes market and consumer behaviour. It wouldn’t be profitable for a company to commercialise the pork-based product in a Muslim country where people do not eat it, for example. Religion creates strong values which should be considered when doing business as it affects people a lot in their way of living and consuming.
Even colours are a cultural aspect, which should be taken into consideration; the colour red is much appreciated in China, and the colour white represents peace and purity in some countries, while it refers to death in certain Asian cultures and should be avoided in marketing materials.
When expanding your business internationally, your communication strategy should therefore be specifically tailored to your target market and to the population you are addressing. You should choose the means of communication you are going to use, according to the targeted audience’s habits. This will allow you to determine which means are more appropriate (paper advertising, online advertising or TV and radio). Newspapers, for example, are very widespread in India and not everyone has access to the internet, while in most western countries online advertising is much more suitable. You should also consider the rate of illiteracy to make sure your audience can read, encode and understand your message since it can make advertising more difficult and can directly influence how you should present your messages to your chosen market.
You should also respect the country’s values, beliefs and customs to avoid making mistakes and getting in trouble. Puma, for example, created football shoes with the colours of the UAE flag. It seemed like a flattering reference in their eyes, but the United Arab Emirates did not see it that way and got offended as they thought it was a disrespectful move from the brand, who then had to issue an official apology to the country. This is no good for the brand image.
A localised approach is therefore key to be successful in each market you penetrate. After years of failure in the Chinese market, Oreo had to reinvent and tailor their cookies to the consumers’ preferences, as they did not like the original version. This resulted in “Oreo thins” which had a thinner design and were reviewed by the brand in terms of taste, texture and size to be suitable for the Chinese market.
As another example, Walmart failed in Germany because the brand was trying to impose its values internationally, but it didn’t fit the German market, which caused them to lose millions of dollars and harm their company image. However, it served as a lesson for companies trying to expand internationally. It made a good example of why accommodating to the local market is often essential.
Adapting your strategy to your segmented group, its lifestyle, consuming habits and its preferences and going through a localised approach can be extremely important. Whether it is about adapting the packaging, the product itself or the promotion/marketing strategy, most businesses have a lot of cultural factors to consider before going for a “one-for-all” strategy, which is often not enough to be successful anymore. Consequently, often, translation services must be taken a step further and transcreation agency must be onvolved in order to accurately and reliably adopt marketing content specifically for the audience you wish to target.
Language and communication
Each language has its own way of functioning and its own specific structure, which makes it hard for cross border communication to be translated as intended. Languages are linked to the cultures and regions where they are spoken and are very important to consider to make sure your strategy is transmitted the right way to the culture you are targeting.
When transcribing a marketing strategy to another country or market, language plays a major role: marketing materials must be understandable and adapted to the target market’s culture. Each country has its own way of communicating. Therefore, packaging, flyers, TV and radio ads all have to be translated accurately and accordingly.
Translating your website is also essential. Most online shoppers spend the majority of their time on websites in their native language and feel more inclined to commit to a purchase if the information about a product or services is provided in their mother tongue. You should therefore make your website available in the local language to create a trustworthy image and to make sure you have a good visibility to your target customers. Since your website, in most cases, is going to be the first point of contact between your company and the consumer, localising it and adapting it to their language, culture and preferences is a good initiative to take. As you can see, building a website which is available in multiple languages according to the populations you are targeting is key to build customer loyalty and trust and is essential for the positive image of company image, which can be especially important within a new, foreign market.
Languages therefore represent a risk, as messages can get lost in translation when transmitted to foreign markets, but are important to deal with to create long-term relationships with and within these foreign markets. Also, be careful not to generate ambiguity or lose the original meaning of your material, as most of the time translating literally doesn’t do justice to the core message.
What you can do to dodge these risks and guarantee an accurate and efficient translation of your legal documents, marketing materials and website is reach out to a business translation agency. This way, professional native translators with sector expertise in the right field can do the work for you and adapt your materials to your target market’s language, its culture and its ways of communicating. Our Translation services are a good way to manage this process reliably.
Local legislation, regulations, laws
When growing your business globally, you have to consider the political system of each country you are expanding to. The way of functioning of a society will not be the same in a democracy as in a totalitarian system, which affects business activities. In some countries, you will have to face censorship for example. In Saudi Arabia, commercials for alcohol are banned since alcohol is illegal in this country. Then, expanding to such countries if you run an alcohol company isn’t necessary a smart move to make. The reason for alcohol being forbidden in Saudi Arabia is because its legal system is built on theocratic law. In theocratic legal systems, religious principles have to be respected on a legal level. The type of legal system of a country says a lot about its values and there are often specific principles behind laws. However, you should be careful when you are trying to respect a country’s customs as well. Ikea for example removed women in Saudi versions of advertisements as women are required to cover their hair and don’t appear frequently in advertising, which caused them trouble, controversy and money loses in other markets. Of course, such incidents are bad for company image, so you don’t want that to happen to your brand.
You should also consider the degree of government intervention in the target country, especially concerning international trade. Certain laws directly affect international business: embargoes, extraterritoriality, import tariffs, quotas, import and export tariffs… They all have a direct impact on international trade. Certain countries will even require you to involve a certain percentage of local people working on a project within its borders. To do business in Canada for example, at least 25% of the people working on the project should be Canadian.
One thing that can also affect your business is the notion of intellectual property. If there are no rights and protection of intellectual property in the country you are expanding your brand to, it can get difficult for you to get the recognition you want. China didn’t sign up for intellectual property rights agreement which is why forgery exists and makes it tough for brands to be acknowledged the way they should.
Since each country is different and has different laws and policies, you will be faced with all types of regulations: from environmental requirements and regulations to labour laws. You will have to deal with each nation’s legislation and respect its principles to effectively do business with them. As a result, it’s essential that the person translating your legal material and documents will fully understand each country’s legal systems and culture and that they will be able to provide certified translation in your target market’s native language.
The type of economic environment of a nation, its currency and its living standard are essential aspects to determine how favourable it is going to be for your business to succeed in a country.
According to whether it is a command, market or mixed economy and the degree of economic freedom, you can determine where it is most convenient for you to expand your business. For example, doing business in North Korea, if you were lucky enough to get a permission to trade, will not guarantee you a smooth business activity because of the number of regulations imposed by the government in this command economy (the state makes most economic decisions).
You should have a look at the country’s GNI, GNP and GDP to give you an idea of its level of development and the quality of life of its population. Can people afford your product? Is the segmented target large enough to make profit? These are questions you should ask yourself, however make sure to refer to the right indicators. For example, if you are selling luxury products, check how many millionaires there are within the country rather than checking the average revenue of the population.
The purchasing power and income of the inhabitants is important to take into account when commercializing a product in a country to determine the number of potential customers, and is often linked to its level of development (developing, emerging or developed).
Inflation rates, debt, unemployment, poverty, interest rates, tax rates and exchange rates all come into play when analysing and studying a market to see if there are opportunities to invest or expand your business in a particular country.
Once you have analysed all of these elements, you should also set a pricing strategy accordingly. Consumers don’t always react the same way to price. The sensitivity of a population to prices varies from one culture to another. For example, in some countries prices are not indicated and are only set after a bargain between the seller and the buyer. The elasticity of the demand to the price should therefore be analysed as well. Of course, don’t forget to consider currencies and exchange rates.
Potential market share, competitors
As an expanding business, you should go through a rigorous market research to analyse your chances of prospering in a local market. It is about survival, hence the importance of your potential market share. Are you expanding to an empty market or a saturated one? Markets with lots of competitors are difficult to penetrate especially when your brand is still unknown in the country as opposed to brands that have been there for a longer time. It takes a lot of effort to earn customers’ trust, not to mention the costs that it might imply. You would have to bring something new to the market to differentiate yourself or build a strong competitive advantage and provide a superior value, a lower price, or introduce something new to the local market to stand out from your competitors.
To succeed internationally, it is vital to make a thorough market study and analysis for each country you want to expand to. The economic environment, the culture, the legal system, the competitors and the language of each target market should be analysed carefully to determine if it is favourable for you to do business in specific countries, to set an adapted strategy and to stand out from competitors as much as possible.
You should tailor your strategy to your target market and customers to engage and create a long-term relationship with them to keep your business successful on the market for as long as possible.