Posted on 24 Jul 2017 by Niels Maas
There are many reasons to remain a local business. For one, it is probably more easy to keep your organisation focussed and to realize economies of scale. But if you want to build a truly great company, it is a must to go international! Here are 10 reasons why.
When you have a successful business in your home country, you better make your organisation ready to keep-up in a field of global competition. Your product offering will improve more rapidly by serving customers in other countries and by meeting stronger competitors. The sooner you meet your opponents, the better. Don’t wait until they knock at your door!
Great talent and culture build great organisations. Talented people want to live and work as global citizens. They want to work with international colleagues and meet international customers. Not only because it will make them learn faster, but also because it’s fun. They will choose to work for your company when it will have the culture and ability to make them grow. So, if you want to attract great talent, give them access to international experiences.
Investors are looking for return and scalability. Scalability most of the time equals the ability to expand internationally. When you have a proven record of successful new market openings, it is a great multiplier of the valuation of your company. So make sure your product is scalable internationally and prove you have the team and the ambition to realize its potential by actually entering new markets.
Creating horizontal synergy between country business units may be harder than you think
Going international means having exposure to different customers, competitors, employees and service providers. They all have expectations and demands and will provide you with a lot of feedback. So you better create systems to manage feedback and make new insights available to your team. Your people and stakeholders will learn from it. For shirt, your ability to learn will grow.
When you scale up internationally your customer base will increase. Sales and profits will undoubtedly go up if you manage them properly. However, bigger is not always better! Select the right kind of growth. Reasons 1 to 4 are in the long run important to go international. An increase in sales and profits is merely the result.
You will probably select the markets that are easy to access and that offer the best potential first. These markets will often have better cost-to-profit ratios than your home market. Once you have reached scale in your new markets, you will be able to operate with better margins than in your home country.
Products need continuous improvement. There is always someone ready to copy your product. Seize the moment: if you have a great product, you better introduce it to as many markets as your organisation and capital can absorb. If you do not seize territory, somebody else will. Markets do not ‘wait’ until you are ready.
If a competitor with a similar product enters a new market, you may have to follow. Better fight for a market instead of having your competitor build a stronghold you cannot access afterwards anymore.
When entering new market you do not have to reinvent everything. Your brand and most processes can remain the same. You will find that sourcing contracts may be extended. As volumes grow, you will be able to negotiate better discounts from suppliers and start realizing economies of scale. Most of the times, this is not a key driver to go international. Creating horizontal synergy between country business units may be harder than you think.
International business creates jobs, drives innovation and increases corporate tax income. For a country like the Netherlands: 40% of all business is done by foreign owned business, creating 20% of all jobs! Not surprisingly, cities are eager to land your business. They will offer support and sometimes even cash incentives. Look into this resource and use it whenever you can.
Niels Maas is founder and CEO of Forglobal. Niels worked in international retail in Europe and Asia and studied Industrial Engineering at the Eindhoven University of Technology. He is a strong advocate for open economies and global citizenship. Niels lives in Amsterdam, The Netherlands, close to the beautiful Amsterdam Zoo.