International growth is rightly considered to be one of the key drivers behind the growth of a business. As ever, this process needs to be led with ambition, pragmatism and intelligence, learning from those who have already embarked on a venture of this kind. Here is some of the feedback from Victanis’ extensive experience, highlighting five mistakes to avoid when expanding internationally.
Which companies in France export the most?
In 2015, two-thirds of French exporting companies had been in business for over a decade. According to INSEE, 95% of French exporters in 2017 had fewer than 250 employees, and these SMEs and micro-businesses accounted for 13% of total exports. Whereas only 8% of French micro-businesses sold internationally, this percentage increased to 65% for businesses with over 250 staff (mid-sized businesses or MSBs). Ellisphere reports that MSBs accounted for 41% of total French exports, even though their share of revenue within the country is just 30%. These findings make a powerful argument, for any business that has sufficient resources and that is looking to grow, in favour of examining whether international expansion is feasible.
Why do 70% of exporters give up after one year?
This is not an encouraging statistic! French businesses that start to expand internationally experience a high failure rate of 70% after just one year. Failures this frequent, often are the result of a blatant failure to prepare, naively entering a market and feeling the full force of tough international competition in a market that the exporter has failed to understand. From a sluggish or even non-existent growth strategy or an unsuitable product or service through incorrect cost estimates caused by the lack of a strategic diagnosis, there are many issues that can explain such a high rate of failure.
Growing your business internationally: the main mistakes to avoid
Among the mistakes that are often made during international expansion, Victanis has identified the five below as being the most important mistakes to avoid at all costs:
Mistake 1- An opportunistic approach is no substitute for a strategic diagnosis
Unexpected opportunities that are grasped at on the fly and that result in instant success are very much the exception to the rule. Instead, a growth strategy built on mature reflection is much more likely to succeed. Thinking things over, by diagnosing your internal and external strengths and weaknesses, carrying out market research, analysing the costs, return on investment (RoI), countries to target, and identifying preferred distribution channels, results in a set of objectively-analysed criteria to sketch the actual prospects for growth, ultimately resulting in a precisely-defined plan of action.
Mistake 2- Underestimating the costs of investment
International expansion results in a higher cost-base, and underestimating the length of time and the budget required before your first commercial successes is, unfortunately, a very common mistake. Indeed, over the long term, opening up the business to international sales is undoubtedly a driver of growth. However, while it is very difficult to budget with absolute certainty without understanding a market, it is possible to get help via consultancy, advice, or financial support, all of which can take numerous and varied forms.
Mistake 3- Failing to establish a local presence
Some businesses also attempt to grow internationally from their home country, with no presence in their target countries. To minimise their costs and risks, some choose to rely exclusively on young ex-pats who enthusiastically volunteer for international experience, for their presence in the field. With no local network and no experience international expansion will quickly run into an insurmountable wall.
Mistake 4- Offering an unsuitable product
One of the most common mistakes that absolutely must be avoided is failing to adapt your product or service to meet the expectations of local customers. Quite aside from any regulatory aspects that may apply, it is essential to respond to local needs for the product or service and to be familiar with local competition. Thinking that product will be successful anywhere, just because it has flourished in its home territory, can lead to far-reaching delusions. Refining your product or your value proposition, or even launching an entirely new brand, is an essential step in winning new markets.
Mistake 5- Failing to account for cultural differences
This error of judgement is, unfortunately, very common. Cultural differences may be slight or obvious, but there are always cultural differences between the home country and the target market. Overlooking them often leads to a harsh failure for the overseas operation, even for well-known brands (Walmart in South Korea is a well-known example). A strategic diagnosis that is worthy of the name enables these differences to be highlighted, and you can even obtain training on how to identify and address these cultural differences.
When all is said and done, it is true that a great deal of analysis is required to prepare for international expansion, and that this analysis requires skills in terms of strategic diagnosis that businesses may not necessarily have internally, whatever the extent of their national operations. In this context, businesses are well advised to obtain the support of a specialist advisor to help define their growth strategy. Ultimately, this is an investment that is easy to justify.