Is the idea of turning your brand into a global business always on your mind? To pique your interests, most American companies are keen on going global. Companies engage in various activities like exporting, manufacturing, and outsourcing.
Though global business growth is promising, proper timing is crucial. Continue reading below for the best signs to consider expanding outside the country.
Three Straight Years of Profitability
Consider doing a global business if you record three straight years of profitability. It doesn’t exactly mean having three consecutive years of profit growth. It also doesn’t equate to three years of consistent revenue increase.
These business milestones are good. Though sometimes, profit stagnation can also be a sign to expand to other countries.
Assess your profit and see if it’s hovering right above the break-even point. If so, then it’s not yet the time to expand overseas.
Wait until your profits reach a comfortable level for three consecutive years. You should have enough earnings to make different aspects of your business self-sustaining. If you have that extra money, use it to fund your expansion.
There’s a Demand Overseas
Examine the market status and determine if there’s a demand for your business overseas. Check for any emerging interests in those countries and conduct a feasibility study.
Some industries with high demand include healthcare, information and technology, and digital marketing. You’ll have more options for expansion if your business falls in any of those categories.
It doesn’t mean the customers need exactly what you’re offering. It can be a need for anything related to your products.
Develop market surveys to define and identify the target audience you want to reach. Study the business cycle of the current market in those countries.
Determine if you have any direct or indirect competition. If there’s any, ensure that your products offer something they cannot match or copy.
The Need to Boost Revenue and Savings
Increasing revenue is one of the primary goals of expansion. If your revenue is on a plateau and your efforts seem to get you nowhere, expanding can help turn things around.
Going global increases your reach. It very much adds to the number of potential clients you can tap. You will need increasing revenue to boost your savings.
Globalization means having more opportunities of lowering your expenses. Expanding to Asian countries like China or Vietnam can reduce your production costs. You can also save money by paying lower salaries for your local team.
When You Need to Boost Your Reputation
Global expansion is significant for boosting your reputation. Opening a branch in a different country gives a certain level of prestige.
Doing this expansion makes your company more attractive to customers. It may also attract potential investors.
The expansion reflects on your brand’s trustworthiness. It shows that people can rely on your products to deliver on their promises.
When the Market Is Shrinking
Expanding globally can help reduce the impact of a shrinking market. Though this may seem counterintuitive, exploring foreign markets can open new growth opportunities.
A new country means having a new customer base. You get to enjoy a different market climate that may be opposite to a contracting market.
Adjust your products by aligning them to what the locals want.
McDonald’s is a great example of tweaking products to suit the specific needs of their customers. The fast-food giant introduced products unique to the countries they cater to. They offer local products that other McDonald’s branches from other countries don’t have.
You’ll also have to hire locals for your new market. Hire a company that offers employer of record (EOR) services to have more time in testing a new market. Click on the link for information on EOR and how it can help your business.
Key Points to Consider for Global Business Expansion
The first thing to consider is the gross domestic product (GDP). GDP is the value of all the goods and services an economy produces. It’s also an indicator if the country you’re eyeing is viable for your expansion.
Review the GDP of the countries you’re considering. Check if the GDP is growing and on pace with the countries’ population growth. A GDP per capita that’s stagnant could mean that the standard of living and purchasing power is unmoving.
Another consideration is the inflation rate, which is the rise of the general price level. A country with a high GDP rate means paying more for your production costs. It also means the value of your cash savings that you lend to others will go down.
It’s a good thing that there are ways to manage inflation. If you wish to expand in a country with a high inflation rate, borrow your expansion money at a fixed interest rate.
Consider the unemployment rate of the countries. It pertains to the number of jobless people over the number of working or searching for work. If the unemployment rate is high, the economy may be struggling.
On the flip side, a zero unemployment rate is also a bad sign for expansion. It means companies need to spend more to get the best employees to work for them. In turn, they pass the cost to consumers through their products’ high price tags.
Mistakes to Avoid When Going Global
The first mistake to avoid is not having a solid global expansion plan. There’s no one-size-fits-all plan for expansion. Instead, align it to the needs and economic climate of the country.
Another is having an opportunistic mindset. You might fail if you expand your business without a proper strategic diagnosis. There might be opportunities everywhere, but without planning, you might risk losing everything.
Finally, avoid underestimating the costs of your expansion. Seek the help of professional financial experts before parting with your money. Be fair with your decisions and manage your emotions well.
Learn More Valuable Tips
Now that you know when to do a global business, you can make careful plans for your expansion. You can manage your risks and maximize your spending.
Discover more business tips for your business growth. Check out our other articles for more helpful topics.