Overcoming 5 top challenges of international expansion

As you make your first steps into international trading there are a lot of variables to consider. You’ll need to know what sort of company are you, who are your customers, how quickly are you planning to expand, how much time and money are you willing to invest, and – perhaps most importantly – which country or countries do you hope to expand into?

As we at QuickBooks Commerce have outlined in a previous article, there are a lot of hurdles to overcome if you want to expand your business internationally. Fortunately, there are some key stepping stones you can put in place to make the process easier.

Challenge #1: Language and cultural barriers

It should go without saying that if you don’t speak the same language as your customers, communication is going to be a challenge. It’s certainly possible to run your product descriptions through Google Translate – which is a great tool in certain circumstances, but we would not recommend solely relying upon it to represent any company in a new country.

We recommend you need at least one person on your team who speaks the local language. Obviously, this makes expanding into Anglophone countries like the US, UK, and Canada more appealing for Australian and New Zealand companies.

Of course, one should also bear in mind local differences in language. An Australian company trying to export thongs to the UK will quickly find that they’re better off referring to them as flip flops, since ‘thong’ means something entirely different in British English.

If that sort of confusion exists between two countries that share a common language, imagine the challenges you might face expanding into a country with a radically different language and culture!

You’ll also need to understand that different countries work at difference paces. Your company needs to be aware of the infrastructure you have to work with, and to compete with, in your target country. In some countries, customers expect next day delivery and customer service that’s available 24/7. If your business can’t provide this, you run the risk of alienating your customers.

Solution: Adapt to the environment and establish a go-to market strategy

Your company will need to evolve to face the realities of your new market. Perhaps you’ll need to overhaul business practices, in order to meet compliance regulations, or perhaps you’ll find a new niche market for one of your products. Whatever the specifics, you’ll need to ensure you really are adapting to fit into your new environment.

Expanding into your second country should be easier than the first time around. Why? Because you can apply the lessons you learned on the first attempt, without needing to make the same mistakes.

As you expand, you’ll come to understand what works best for your company, and your customers. You can use this knowledge to build a market strategy that you can apply in a number of situations. Just remember that you’ll sometimes need to be flexible. If you do that, a solid go-to strategy can make sure you succeed.

Challenge #2: Local competition

If you’re making a killing selling handmade knives in Australia, you might think you can just export that business model to the UK. But what if there’s another company selling handmade knives? One that’s based in the UK?

Well, obviously that might put you at a disadvantage right from the start. You’ll have to deal with import fees and tariffs, potentially slower turnaround times, and the problem of dealing with two currencies while your British counterpart can just work in pounds sterling.

You’ll need to be cautious, and be very aware of what your competitors are doing in order to counteract the advantages they have over you.

Solution: Find the right partner and build relationships with local businesses

Yes, if you expand into new territories, you’ll inevitably come into conflict with some new businesses. However, if you’re smart, you can build working relationships with overseas companies – shipping, storage, and logistics firms for example – and use these to help your business grow.

With local knowledge and expertise, these companies can bring many benefits. By working closely with them, you can deliver your products to their customers, or have them help you find your own customers, making the transition into trading in your target country that much easier.

Challenge #3: Tax codes and compliance issues

Dealing with tax can be a headache even when you’re only operating in a single nation. Dealing with taxes, fees, and tariffs for international trade can be a major obstacle for a lot of companies – especially smaller businesses.

You also need to be aware of trading standards and regulations. Failing to meet compliance regulations in a country you’re attempting to expand into can not only put a halt to your expansion plans, but also create additional costs in your home country.

Solution: Do due diligence and sort out legals, tax, and finance

As we’ve said, dealing with the taxes, laws, and tariffs of your new market will be a challenge. However, so long as you take a sensible, unrushed approach by making sure you or someone working for you knows exactly what they’re doing, it doesn’t need to be a problem.

Study the details before you get started, and make sure you understand what you need to do. Most tax and legal requirements ultimately amount to ticking the right box, so all you need to do is make sure you know which box you need to tick before you start expanding.

Challenge #4: Supply chain risks

Imports, exports, shipping, and logistics are all things that large enterprises have departments dedicated to. That’s because managing a supply chain that crosses national boundaries can be a real challenge.

If you’re shipping goods from the APAC region to Europe or America, you’ll have to contend with geographical distance. However, the cost and time involved in shipping aren’t the only problem.

What if a container ship full of your goods is delayed a week, or doesn’t show up at all? What if your goods are impounded by customs?

These are all risks you face when trading internationally, and you’ll need to understand how things work in order to avoid them.

Solution: Develop a strategy, a business plan, and a budget

The absolute worst thing you can do is rush into international expansion without proper planning. If you don’t find yourself competing with an unexpected competitor, you could potentially overstock or understock on key products, and maybe even end up spending more than you expected.

Conducting due diligence and having a solid plan in place makes it that much easier to avoid unexpected surprises. You wouldn’t wander into a foreign city without a map, and at least a vague idea of where you’re going, so why would you try to trade in a new nation without a firm, well-thought-out plan of campaign?

Challenge #5: Operational risks with hiring staff

You will need more staff to handle the increased pressure on your business of working in another country. You may even need to hire staff on the ground in the new country. The specifics vary from business to business, and from country to country.

However, regardless of your specific situation, hiring more staff is always a risk. You’ll not only have increased overheads, but you’ll have to put your trust in new people – potentially even new people you never meet face to face.

Solution: Making sure your product and and organisation are ready, and establish a great team

As Shopify points out, “but if done well, the increased revenues and profits can easily pay for some extra time and/or staff to help manage your newly-invigorated micro-multinational”.

• Have you hired the new team members you need to meet the increased time demands of your expansion?
• Do you have the necessary infrastructure in place to handle exports?
• Are all of your financial and logistical documents in place, ready to be used as necessary?

You need to ensure that your organization is 100% prepared for the challenge of international trade in order to succeed and grow effectively.

You should also ensure that your product is ready. If there are any changes to be made, you need to make them ASAP. If you roll out the right product in the right place and at the right time, success can be almost guaranteed.

Similarly, if you take care with who you hire, and how you manage them, you can leverage their expertise, skills and strengths to achieve your company’s goals and objectives.

One final note: Consider the impact of new ideas both locally and in your new market

Business is constantly changing. New products and new technologies are innovating all the time. Market trends change quicker than most can keep up with, so, if your business can keep up, you have a great opportunity on your hands.

By remaining open to new ideas and new points of view, Your business will be able to connect with partners and customers in your target nation.

If you take a careful considered approach to new ideas, implementing those that fit with your business goals and discarding those that don’t, you can help your business expansion plans run smoothly. You could also improve your business in your original market too.