4 Key Things To Consider Before Expanding Your Business Abroad


Expanding your business abroad is a big commitment, but it can be an attractive as new markets offer new opportunities for growth, greater stability and an opportunity to learn and grow on a business (and personal) level. But careful consideration is needed before you take this big step. Here are 4 key things to consider before expanding your business abroad.

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However, new markets also require a lot of preparation, and careful consideration of all the issues that might arise. Without fail, the most successful business expansions are those that consider every eventuality, and prepare for every possible scenario, be it good or bad. Here then are five things to consider before expanding your business abroad, and some tips on how to address them.

1. How well will my products travel?

New markets can be an ideal opportunity to export a product idea from a saturated market to a fresh one, but you have to consider how it will travel - in other words, how the conditions in that country might affect how the product is received. And while success in one country or area is usually a good barometer of global appeal, some products just won’t interest or be suited to a particular country. 

One example is Microsoft’s Kinect product, a camera that could interpret movements within a 3D space and transfer these into games. Hoping to benefit from the success of the Nintendo Wii, Microsoft’s camera used impressive technology, but it was designed with spacious American living rooms in mind. It turned out that the camera didn’t function properly in smaller living spaces such as in Japan, and this impacted its global sales.

This isn’t just an issue with expanding from Western countries. Consider the example of launching a new kettle in the United States; lower voltages and a preference for coffee makers mean that very few Americans see the need to own one. Similarly, you might struggle to sell a new saloon car or off-roader in a densely populated country with strong public transport links, as it simply isn’t practical or desirable.

There can also be cultural barriers, particularly if you’re expanding to a different continent. From preferences in food to differences in routine, you may have to pitch your product in a unique way to overcome uncertainties or stigmas. Problems could range from launching a new alternative form of payment in a very traditional country, to a name that translates into something unfortunate, to even a colour that carries a certain connotation locally. 

While studious research is a good way to avoid these issues, the simplest way to resolve any cultural problems is to run your plans past local people beforehand, either in person or through targeted online surveys. This relatively minor expenditure could either reinforce your existing plans, or save you time, money and energy on a difficult or fruitless expansion.

Recommended reading: 4 Things That Can Help SMEs Plan Their International Expansion

2. Is now the best time to expand?

When you have a killer product idea - or indeed, a product that’s killing it in your local market - the temptation can be to expand early and widely to steal a march on your competitors. While there are examples of where this has worked, it’s also been the death of many an overambitious business, as they decided to run before they could walk.

Take the example of Uber. While they are obviously a hugely successful company, the philosophy behind their rapid expansion came back to bite them. Reasoning that they could set up somewhere first and figure out the local environment later, Uber ran into all sorts of issues further down the line, from licensing laws to local competition who knew the areas better, and could offer a superior service. Uber were forced to sell their Chinese business at a massive loss for these reasons, scale down operations in Germany, and leave Hungary completely.

Expansion should only be undertaken when you’ve considered all of the risks, particularly if you don’t have Uber money to resolve any problems. But it can also be a matter of geopolitical conditions, and the climate for businesses in your home and destination countries. Brexit is perhaps the prime example, and many UK businesses consider this a good time to divest their interests, and gain a foothold elsewhere in Europe. But the U.S. trade tariffs are also an example which could affect your sales in a particular nation.

Timing is a tricky business, as it’s hard to predict the future, and you’re always going to be wary of being gazumped by another firm. Fundamentally though, if your product is strong enough, it should be able to stand by itself almost regardless of when you release it. Waiting a month or two to do your research and weigh up your decision to expand shouldn’t do any harm, and can allow you to take advantage of new developments in the business world.

3. How will local laws affect the business?

Unless you’re selling cannabis products, you might not think there would be any legal issues with selling your products or services abroad. Unfortunately, each nation tends to have a wildly different legislative environment, with entirely different considerations about product safety, testing, licensing and more besides. You may need to think not just about how long it will take to gain approval, but also whether you are likely to gain approval at all.

If you’re expanding from Ireland, selling elsewhere in the EU is probably the easiest decision. Most standards are shared, so most products should not be an issue, but individual EU nations do have some different food standards which may require unique licences. However, things like product liability law, advertising law and IP law will differ, and are worth looking into beforehand.

Another more obvious consideration is tax laws, and how they might impact on your bottom line. Different countries will have different approaches to sales tax, value added tax and import tax, as well as different forms of income tax for employees; take Germany for instance, where you’re required to withhold various social insurance contributions from employees depending on your industry, and contribute 50% of the tax yourself. 

These are areas where a formation specialist or tax advisor would be best placed to run you through things, and potentially assist with tax planning and contacting the requisite authorities. Taxes are perhaps the most important thing to get right when expanding your business to a new country, as the records need to be extremely thorough right from the outset, and the consequences of not complying with the law are the most severe.

Recommended reading: How to Use Localisation to Help Your Business Go Global

4. What’s the best way to reach local customers?

Becoming successful in another country isn’t just a case of plonking your brilliant product in front of people - it’s about finding ways to relate that product to people’s lives. However good you think your offering is, you’ll always have the inherent barrier of not being a local business. This means you’ll have to work harder to sell people on the premise, and make your product or service indispensable.

Anywhere there is competition, most people will err on the side of supporting local interests. Unless your product is significantly cheaper or obviously better, people will be more inclined to buy the existing option. Your competitors will likely understand their audience better, allowing them to tweak the product and marketing to suit them, and may also be able to price it lower due to existing relationships and deals.

The best way to make inroads is to actively involve yourself in the communities you move into, and evidence the fact that you care about and are investing in them, both monetarily and culturally. Like a footballer moving to a foreign club, the quality of your offering takes precedence, but making an effort to integrate will give you much more leeway. This means hiring plenty of local talent, sourcing local goods where possible, and supporting local communities through schemes and charities.

Marketing is also an extremely important facet, and one which you shouldn’t take for granted. The marketing channels you’ve used in the past may not be relevant in the country you’ve expanded to; newspapers and magazines may be more popular, while social media platforms like Facebook and Twitter may be less popular than local alternatives. Again, hiring locally, doing your research and polling local people will help to unearth these differences, and give you the ammunition to win ground from your newfound rivals.

Final thoughts

Expanding your business abroad will always be difficult, and is only recommended for people who are ready to embrace the challenge. The rewards can be equally great, though, and the experience of expanding to one country will help to inform all of your business decisions. By doing your research and being considerate of the country you’re moving to, you’ll set yourself on the path to success, and improve your own acumen along with it.

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