I've seen too many companies go at expansion the hard way. They decide they're going to expand globally--and then try to go it alone. They don't try to find out what they don't know. They don't look at how other companies succeeded and failed. You can save yourself a lot of agony if you learn from the experience of others.
IKEA is a good example of a rocky start to expansion. When they first entered the United States in 1986, people loved the design of the furniture, but they felt it was too tiny for American living spaces. IKEA's (literally) one-size-fits-all approach, which works well throughout Europe, needed to be adapted to the US market, which wasn't as easy as it sounds.
IKEA redesigned the furniture, but then they had to redesign the warehouses where the furniture would be stored and the retail spaces where it would be sold. Everything had to get bigger.
IKEA made the mistake many companies make: They thought that what worked in one country or culture would translate to another one easily.
These are the two questions executives must ask to form an expansion plan:
1. What kinds of markets make sense for us?
What are the characteristics of markets where we're more likely to be successful? Further in, I'll give you a list of things to consider, but the basic question will stay the same. Analyze your company, with your strengths and weaknesses and experience. Consider your strategy. Then look for markets where you're more likely to succeed.
2. What's a reasonable level of risk and reward for us?
Companies have different tolerances for risk. They have different expectations of reasonable Return On Investment (ROI). And remember that for most expansions you should expect ROI to increase as you do businesses successfully in a new country.
Here are a few of the hottest markets to consider in 2018:
Singapore is still a booming market, but its less well-known neighbor, Malaysia, has been named the number one place to invest by US News Report. Real estate opportunities abound and there is well-educated, multi-lingual, workforce. Additionally, the government is foreign investment-friendly creating incentives and eliminating barriers to doing business there.
The Czech Republic
$125 billion has been invested in the Czech Republic over the last 20 years. The government offers training and job-creation grants, too. The workforce is young, dynamic and multilingual. Many tech companies are expanding there, too.
If you're looking for moon-shot growth potential -- and have a huge appetite for risk -- then an attractive area might be the countries in sub-Saharan Africa. Sub-Saharan Africa is abundantly rich in commodities such as oil, natural gas, copper, iron ore, and gold. Governments are becoming more stable. The area has the youngest workforce in the world.
More Traditional Markets
Many companies are still expanding to cities in what I would call traditional markets: Ireland, Denmark, and Canada. These are markets are "easy" in that they hold more convenient and modern infrastructure, and there are large, hungry talent pools.
And, of course, there is the United States, which is still the world's largest economy. See my book for more information on expanding to the US: Market Entry in the US: Why European Companies Fail and How You Can Succeed.
When you think about global expansion, remember that the "hot" market of today won't stay that way forever. You have to decide if the market is right for you. You should analyze threel key issues for every market you consider.
Actions you need to take first when expanding globally:
1. Do your due diligence and market research.
Use all the sources and all the tools we've talked about in this webinar to learn as much as you can about yourself, your company, and the market you're considering.
2. Travel to the location you're expanding to.
Reading is not enough. You won't get a real feel for the place you're considering unless you go and spend some time. When you go, don't just talk to other businesspeople who are staying at your hotel. Get out and spend time with some local people.
3. Do something different.
I don't know what that will be for you, but make it something beyond what we've talked about here. Come up with a way that is uniquely you to learn more about the country where your company may expand. Only you can come up with something that fits your personal style and helps you understand that other country and culture.
Are you looking for more information? This short video includes some strategies for global expansion and how to work and lead successfully across cultures.