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International growth

How can a Company Gain Competitive Advantage through Internationalisation?

Victanis Advisory Services GmbH
2018-11-03
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For many businesses, international expansion has been elevated to more than just another challenge and has instead evolved into a true business priority. Many of these businesses are trapped in an environment with an unstable economic outlook and unpredictable, omnipresent and threatening competitors. Nevertheless, many international development strategies are either delayed or abandoned altogether and, although increased globalisation is no longer the preserve of major corporations, there is still a fear factor for SMEs and medium-sized companies. Consequently, they may ask themselves all kinds of questions: can they really compete effectively in other territories? How can they claim a better understanding of the market than local companies?

How should businesses position themselves strategically to continue to grow beyond national borders? It is important to appreciate that international expansion can represent a genuine opportunity to derive a substantial and sustainable competitive edge, irrespective of your industry. A number of different scenarios can be envisaged, enabling businesses to get ahead of their competition and succeed. Here are three key examples:

Competitive advantage derived from an economic strategy: concrete financial results

Sometimes your business and operating models require renewal to secure a return to growth and profitability. International business development represents a genuine opportunity for businesses to win new customers and, more broadly, to unleash a profound change in their sales strategy. At a time when new technology is making borders more porous and making it easier to trade, the time may be right to take advantage of this increased globalisation to become a global operator in your own right. This is yet another reason why this approach can overcome financial and business blockers.

assess company's ability to capture growth opportunities abroad

An international presence can act as a strategic boost for businesses, allowing them to overcome dependency on domestic markets while effectively addressing their overall market position. Remaining competitive in highly restrictive or stagnant markets is far from straightforward, and by building new, parallel sales networks in territories experiencing booming markets, businesses can respond to their competitors with flexibility and develop close relationships with influential local partners. However, it would be wrong to assert that there are no risks inherent in this approach.

Nevertheless, by choosing to expand into territories and markets with a different economic cycle and different seasonal peaks and troughs, businesses can balance their risk and generate additional revenue over the year. As such, international expansion leads to benefits in terms of risk and capital management. In addition, the business benefits from a different risk profile and companies can also draw on the advantages offered by a new location. By making effective use of market trends or the ability to bring new products to market more quickly, they can diversify their supply chain and enjoy greater diversification in their sources of revenue.

To read - Competitive benchmarking: how to identify and monitor your competition

Competitive advantage derived from the product or service on offer: a flair for differentiation

When you choose to take your business international you need to think matters through in great depth, and make a number of strategic choices in relation to your value proposition. You cannot build a lasting presence in a new territory simply by expanding your current operations or by replicating what already exists; differentiation is essential. Despite the scale of the task, if you succeed, you will achieve a sustainable competitive advantage.

There are several ways for businesses to achieve this success, one of which is to launch products or services ahead of their main competitors, targeting areas where competition is less intense. Entering new markets is an effective way to focus your development activities and position yourself as a market leader. Consequently, reduced production costs and improved margins can be achieved thanks to economies of scale that can be rolled out quickly during the expansion phase.

It may also be worth establishing a niche for yourself with a unique product or skillset, or a distinctive and effective brand that derives its value from a bespoke marketing and communications strategy for your new sales region. For example, a cutting-edge position in the local market, achieved by offering a major technological breakthrough or a high-end service, enables businesses to create powerful differentiating factors in the new territory or company that can feed through into the domestic market. SMEs or medium-sized businesses that successfully create a link between their original brand image and their local positioning has every chance of acquiring a global market position with an even more extensive reach.

One consequence of globalisation is to enhance and enrich businesses’ value proposition. The ability to offer products and services that exactly reflect local requirements and cultural expectations leads to a distinctive, tightly-controlled brand that can continue to adapt, innovate, and improve.

To read - Growing your business internationally: the main mistakes to avoid

Competitive advantage derived from the business’s positioning: multi-faceted innovation

When a business starts to operate internationally, the change is frequently a factor in driving innovation. Businesses that expand internationally spend twice as much on R&D on average, compared to businesses that only have a domestic presence. Against a backdrop where there is an urgent need to demonstrate an ability to innovate, and where failure to innovate can mean the outright failure of the business, it seems essential to devote all necessary resources to research and development activities. International expansion provides businesses with a new dynamism, a new appetite for entrepreneurship, and a desire to push the limits of what can be achieved. It helps to develop new competitive strengths, both domestically and in new, international target markets.

Enhanced creativity

Watching what happens elsewhere, developing your ability to adapt, assimilating a new culture and dealing with new, strategic challenges are some of the strengths that can be acquired as a direct consequence of improving a business’s ability to innovate, both in terms of the solutions that it offers and its internal processes. This change also provides an opportunity to create highly-motivated, close-knit teams that are ready to meet new challenges. Globalisation can create a genuine culture of entrepreneurship, defined by open-mindedness and an inventive approach, all of which are essential for long-term success.

The emergence of new approaches

International expansion will transform the way in which businesses interact with their local environment. Competition is not necessarily synonymous with opposition: it is possible to compete with other bodies (in every sense) leading to partnerships that encourage innovation and business processes that provide the flexibility needed for greater performance. An international approach can help to create a new partner network, encompassing talent sourced from local universities and research centres as well as influential local organisations.

Enhanced profile

International business development enhances businesses’ reach and their profile with their target audience. Their ability to deal with international stakeholders raises awareness of their products and services and can provide the ability to improve their image with a more innovative, attractive and updated approach.

International expansion can be a powerful driver of margin growth, differentiation and innovation for businesses that want to enhance their productivity. It allows a range of competitive advantages to be derived from the business’s growth strategy, helps to evolve the business’s market position, and changes the perception of its existing customers. To ensure that these benefits are retained, detailed, well-thought-out and context-specific, preparation is essential.

Establishing a location outside your additional market nevertheless entails a number of challenges that should not be underestimated, and the services of a partner (such as an international business development consultancy) with the subject matter expertise can be a wise choice to ensure that you embark on a journey to exploit new markets with as many cards in your favour as possible.

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