Expanding globally has long been a goal among businesspeople, and as the world emerges from the pandemic, the question naturally arises: When is it a good time to commit to a global expansion. When considering such a move, it’s good to ask some questions, consider the timing and what conditions might be expected, and finally whether you’ve done all the research required before committing to such a major endeavor.
Question Your Goals
First of all, it’s important for those who might be considering global expansion to ask a series of questions pertaining to any potential advantages of making such a move. Honest answers may illuminate benefits, or even drawbacks, which are not obvious on the surface.
The foremost question, of course, couldn’t be more obvious: Does your business want to increase revenue? Entering a new market means exposure to more potential customers, which allows for that potential result. So that first question might lead anyone to believe, yes, global expansion is a no-brainer. But wait, it’s not that simple.
Another pertinent question is how one views the competition. Does your business feel pressure from competition, and would expanding into a new market give you an advantage over the competition? If the competition is not yet in the new market, in a “blue ocean” scenario, new clients or new customers can be secured. And having your business operating in a new market can serve to make competition less likely. Rivals may be disinclined to enter a market which is already being dominated.
Does your business need a jolt of inspiration? This may seem like an odd question, yet it’s worth considering. Learning what a new audience in a new market desires can spark new ideas and could even lead to new products or services which are not obvious now.
Is there a need to diversify to reduce risk? Downturns in the home market can be offset by an increase in business in new markets. That has always been true, of course, but varying conditions in different regions during the pandemic emphasized the case for prudent diversification.
Does your pool of talent need to be expanded? Planting the flag in new places will naturally bring in new recruits, which can have an invigorating effect. And given the realities of global labor markets, it’s often possible that lower labor costs will be secured.
Finally, a question that should always have a clear answer: Do you want your company’s reputation to receive a positive boost? Do you believe having the reputation of a global brand, a company that is recognizable around the world (and can leverage economies of scale) is a worthy and attainable goal? If so, it may be a good time to think seriously about global expansion.
Making the decision to expand globally can bring enormous benefits. But there are always risks. An article in the Harvard Business Review in 2015 based on older data made the point that “most companies should not treat international expansion as a default growth option.” The article, which contended that most global expansion efforts did not live up to their early promise, cited specific challenges. For example, companies had encountered problems with local regulations, and in some regions cultural differences created unforeseen management problems.
A set of problems in the current era are the disruptions with global supply chains. Newsworthy incidents, such as GM having to shut down production because of microchip shortages, have highlighted the crisis triggered by the global pandemic. Issues with transporting goods would seem to be an obvious impediment to conducting business across the globe.
The good news is that disrupted supply chains are not expected to remain a permanent problem. Yet it is a reminder that businesses depending on smooth operations around the globe can be made vulnerable by unforeseen circumstances.
Watch the Timing
The timing of a move may have a great impact on its success. And that can be the case in making the decision to expand globally.
One general indication of whether it’s a good time to expand would be the global growth forecast. In May 2021, the Organization for Economic Cooperation and Development released its annual report, which projected an optimistic outlook for a global recovery from the coronavirus pandemic.
The OECD report projected the global economy to expand by 5.8 percent, which was higher than estimates made six months earlier. The optimistic projections were based on governments around the world being able to administer vaccination projects that would suppress the spread of the virus.
Do Your Research
If signs point to making a move toward global expansion, it’s prudent to make sure you’ve done all the due diligence you can. You’ll be moving into new regions, contending with unfamiliar laws and regulations, and perhaps dealing with cultural differences. It goes without saying that the more you know, the better you’ll be able to navigate into new territory.