Expanding your business globally
The benefits to expanding your business into foreign markets includes increased sales, more profits and improved competitiveness. Going global may also reduce your dependency on domestic markets.
The potential downsides to foreign market expansion include financial risk, legal risk, cultural risk (not fully understanding the people or processes in a particular market) and possible increased costs before you start making a profit.
There are many risks to consider – here are some of the most important.
Increase your chances of success by focusing on one market before you diversify into multiple markets. The pressures of entering export markets can include:
- Cost – having to finance your integration into export markets with debt while your business begins to generate profits overseas.
- Time – the demands on your time will intensify as it’s unlikely everything will run smoothly from day one.
- Workload – by expanding your business into foreign markets you’re increasing your total workload.
By focusing on only one market, you’ll be able to keep your local market strong. This will allow you to support and possibly even pay for your export drive.
Keep your local business strong
Consider the risk to your current focus, which likely involves serving customers closer to home – the very customers who have made your company a success. Will this expansion prove to be a distraction? Do you have the bandwidth to pull it off? Is your team ready for the challenge? Do you have enough money?
It’s a matter of assessing your business’s ability to continue to serve its current customer base while taking on additional customers in other markets.
In theory, diversification is a sound management strategy because it lowers the dependence of your business on a single source of revenue. Some examples of diversification are:
- Running multiple product lines.
- Serving several customer segments.
- Expanding to numerous geographic markets.
Have a look at our range of exporting services that can help add value to your business in foreign markets.
Protecting your intellectual property
It may be a costly mistake to assume your trademark, patent or industrial design protection in Canada also protects you in foreign markets. Intellectual property (IP) rights are often territorial rights and don’t necessarily carry from country to country.
Copyrights do get some broader protection in a larger number of countries. The unique IP you bring to a particular foreign market may be open game there – which could put you right out of business when someone copies it.
For example, you may save yourself considerable grief by checking to ensure no other company operating in your targeted foreign market is using a trademark similar to yours.
Speak to an expert
Always consult a qualified IP expert – such as an intellectual property lawyer – to access information and obtain advice regarding protection of your IP in other countries.
You can learn more about IP issues by visiting the World Intellectual Property Organization website.
Applying due diligence
It’s important to weigh up the damage that could be done to your brand, and core business, if the research into your targeted export markets isn’t thorough enough. By not completing due diligence on overseas markets, you could:
- Assume the brand communicates the same meaning as in Canada.
- Use ineffective communications channels leading to a lack of sales.
- Underestimate the time and money required to get a foothold – where your foreign market can become aware of your brand, try it and adopt it.
- Underinvest in your regional employees – they need to understand your business’s values along with the benefits of your products or services, and be able to communicate them.
Does your business have the right processes, organization and culture to develop an export market?
The success that your business achieved in Canada may not necessarily apply to a foreign market. You’re potentially dealing with a very different culture with different rules.
In China for example, relationships come first and as a businessperson you’re expected to spend time to establish trust in advance of economic activity. It will take time, effort and money to realize returns in a foreign market because of the learning curve your small business may need to travel.
Serving foreign markets can be a positive strategy for business growth. Like any strategy, you owe it to your business to do the necessary research and consultations to decide if it’s the right path for your business to pursue.
Make use of the services and expertise of Export Development Canada.