Below is another great guest blog from Jane Hatton Finette of Elektronauten. I have also included her background at the end of the blogpost.
Expanding an Internet business further into Europe can reap huge rewards – 680 million potential customers, a secure and stable business infrastructure and some of the richest nations of the world are all arguments, which make the ‘International’ step a very rewarding one. But expanding a business geographically also poses some significant risks and can be a daunting undertaking.
Spending time on these 5 essential topics before expanding your business can significantly reduce the risk and costs; as well as increase the success rate of your internationalization plans:
1. Define the exact reason for expanding your business into Europe
As obvious as it seems often businesses do not fully define and articulate the reason for expanding abroad. This can prove to be a fatal mistake: it is a fundamentally different undertaking if your reason for expansion is to serve your already existing international customer base better; or stagnating growth in your home market. Be very specific not only where and how you want to expand, but also be clear about the underlying reasoning. This will help you to develop a tailored market entry strategy and helps to set the right expectations to company stake-holders.
2. Define a realistic budget – costs, resources and time needed
Defining a realistic budget can be one of the most complicated tasks – as you often need to navigate through literally hundreds of unknown variables. Usually companies grossly under-estimate the necessary resources (and therefore the drain on the core operations) and time needed. To get a better grip on this topic ask yourself what it would mean for your expansion plans if you would overrun your assigned budget by 50% and also 100%. If you find yourself in a position where these scenarios put too much stress on your operations try to redefine your goals and plans to shed costs and resources. Don’t forget to account for fluctuating exchange rates and different business taxes country by country.
3. Research the target market thoroughly
Reduce the risk of any nasty surprises coming up once you entered a new geography by conducting thorough market research. Often expanding companies are surprised by competitors who suddenly evolve from areas not foreseen, or local requirements that could have easily been known beforehand. Consider not only researching the companies you see as direct competition, but also the companies which those competitors would also see as rivals. Understand the needs and requirements of your customers before you expand into their market. Make sure you fundamentally understand the legal and business framework in your target market to minimize the risk of costly surprises.
4. Understand the local culture and it’s implications on your business
We might be a global economy these days, but people do ‘local’ business. People prefer to interact in their own language, conduct transactions through their local payment services, receive support during their normal business hours and work with products, which serve local business requirements. Look at your business from all of these angels and understand what it means for you and your expansion plans. Do you have all the pieces in place to fulfill local needs? Speak to your potential customers and try to understand their culture – how do they like to do business, what makes them buy your product, what they love and hate about the existing local solutions.
5. One step at a time
Internationalizing companies generally fail out of two reasons: 1) Poor preparation and/or 2) weak execution. Time and time again companies try to do everything at once – often inspired by the pressure from the marketplace to be fast. As important as it is to be quick to market, it proves to be even more important to do things right and in the right order. You will not win any sustainable business if your international operations grow through excellent marketing & sales, while your new customers don’t receive adequate support in their own language and time zone. Take one step at a time, allow your organization to grow at a pace, which it can absorb and you too will soon be one of the many international companies who enjoy success on multiple continents.
Some other great resources to check out are www.ukinvest.gov.uk, businesslink.gov.uk, www.invest-in-germany.de/en/
Jane’s past has been firmly based in building and expanding companies; mainly focused in the online/IT/Software arena. She has held many interesting senior positions such as German Country Manager for Marketworks, Business Unit Manager at eBay UK and International Director Marketing, PR for the Multi-channel ecommerce provider – ChannelAdvisor. Jane has worked as a consultant for many years advising businesses on how to expand their presence internationally.