5 Factors Businesses Must Consider When Going Global

As globalization gradually transforms the modern economy, an increasing number of firms are looking for ways to expand internationally into new markets and achieve economies of scale. While cross-border trade enhances productivity and access to resources, it also brings new forms of market risk, exchange rate risk, and regulatory complexity.

The following are five major economic and strategic matters that every firm should consider before beginning to expand its business internationally.

1. Plan a Comprehensive Pricing Strategy

Regardless of whether one desires to export the same product, they will need to modify pricing to address differences in purchasing power, tax structures and import costs in foreign markets. A standard pricing policy generally falters at the country border as income levels vary and consumer behavior is different in each country.

Pricing too high will dampen demand for the product and pricing too low will reduce gross margins. Companies should consider engaging in some form of market research around pricing points in the market while recognizing differences in currency and foreign exchange risk in that market.

One alternative is to utilize multi-currency business accounts to maintain cash flow and reduce foreign exchange transaction costs. Specialised platforms such as OFX provide multi-currency accounts and foreign-exchange services that can help businesses manage volatility more effectively.

2. Understand Local Laws and Business Registration

Each country has its own regulations that dictate matters related to the establishment of a business, foreign investment, and taxation. If you are not compliant with local law, your entry into the market will be slower, and costlier.

Investigate whether the country you are targeting is accepting Foreign Direct Investment (FDI) and what types of barriers to entry there may be for new firms. Local lawyers, consultants, or the trade office of the government may assist with adhering to the corporate governance that may be necessary to comply with operational laws in that jurisdiction.

3. Navigate Cultural and Consumer Differences

Achieving effective performance in a new locality of operation requires both an appreciation of the local economic context, and understanding of the local culture. The way consumers behave, how social norms are defined, and how people communicate will vary from country to country, and influence how products are valued.

An example of culture informing perceived value between Western and Asian nations is noticeable when comparing negotiation approach, advertising tone, and the meaning of a branded symbol. To maximize remote working potential, organizations ought to engage in cross cultural management as well as local market research to mitigate costly mistakes and align better align with consumer demand.

4. Strengthen Supply Chain Operations

A commodities supply chain management system is integral to the global production or distribution of products, as each country has its own set of logistics complexities, including the level of customs, fees, and the conditions of the infrastructure in the specific country.

Finding suitable suppliers and logistics partners as early as possible will help identify disruptions easier and find efficiencies. Companies can also evaluate what produces a comparative advantage and where to produce or source at more competitive prices.

5. Localise Your Marketing Strategy

An effective market entry strategy is one that puts temporary style changes into play with your marketing to align with and target local culture. What motivates consumers in one economy, might not work in another. Tailor campaigns with relevant market segmentation details, and insights from behavioural economics, to target all campaigns locally with response to, at a minimum, the local tastes of the culture and any local holidays, and social trends to support your entry strategy to the most local audience possible.

Digital marketing methods such as regionalised search campaigns or regionally specific social media content can help firms attract audiences in the quest to appear authentic and elevate brand equity abroad.

Summary

Going global can be competitive and grow over the long term, if firms understand the economics, the law, and the culture of the new market. A properly researched plan based on the principles of international economics can turn international expansion from a risky leap into a strategic advantage.