Expansion is a very important decision that a business makes. It is not as prompt as launching a new face of an existing product or introducing a new package for the product and involves a lot more strategic planning, calculations, cash flow forecasts, budgeting, the demand for human resources etc. The businesses that have newly established and managed to sustain their presence with all the competition around should not rush into growth and expansion because a decision that quick may result in larger consequences afterwards.
However if the business is leading the industry with high sales and profits and has reached the growth stage or maturity stage in the country of origin, it might be time to think for expansion into the foreign market. As the owner or a named partner in the company, you must be mentally and financially prepared with the increasing number of hours you have to give to your business in its initial stage. As an entrepreneur, you must have the ability to take on risks because expanding into a new and unknown market that has different cultures, behaviors, tastesand perceptions can contribute to manyproblems in operating a business.
There are three established steps to start an international business or expand into the international market.
- What is the Motive?
Have you been contacted from a foreign importer who is interested in selling your products in that country? Has your marketing department researched in the foreign market and found a hole that can be filled with your products and services? Your decision to dive into just any venture should involve a lot of planning and foreseeing.
- Can you manage with the resource availabilities?
It all depends on what is your decision. Is it to export your products and services or open a sister factory in another country? If you have explored possibilities of potential success in the foreign market, you need to carry out a comparison between the cost of exports and the costs of production relevant to that country. You also need to face other challenges like duties, taxes etc.
- Getting your Payments in Order
The third most important factor you need to consider is how you will carry out your transactions. If you are operating in the international market, then you need to carry out payments in their currency but if your exporting, you need to decide on the currency you will be dealing in, so that your financial statements do not pose any material uncertainties.
To keep your batches of production different for different countries, you need to change the packaging that has a high impact on the sales. Each customer’s perception of a product lets him or her view the product differently and so packaging plays an important role.
Other imperative factors that should be considered before expanding into the international market if you are establishing your operations there include:
- Political Issues
- Government Role in Private Sector Industries and Businesses
- Availability of Labor (Skilled, Semi-Skilled)
- Availability of Resources (Machinery, Tools, Raw Materials & Semi-Finishes Products)
- Costs of Outsourcing Operations
- Costs of Labor
- Costs of Alternative Resources
- Availability of Land
- Property Taxes
- Environmental Liabilities
SK Financial employs extremely talented business consultants that can help you with your business expansion and provide advice on profitable opportunities.