Taking business international is a key milestone from any business, be a start-up or an established, mature business. It opens up a lot of new avenues and market, and gives the business a lot more credibility. The promoters need to have a clear vision and a strategy while approaching new geographies, be it domestic or international. Internationalization could be tricky as it would involve a lot of efforts, manpower and capital, hence doing a thorough research and having a clear go to market strategy is the key to success.
There are several successful cases of businesses growing international in the recent times from India, take for example Zomato, the restaurant rating and recommendation, and delivery app which was started by two college students who struggled to keep menus in one place when they were living in a hostel during their undergraduate life and which now operates in over 24 countries. The company has acquired local companies in various regions such as UrbanSpoon in the US, to enter the market with a bang.
Other way could be to form a joint venture like Suzuki did when they entered the India market and collaborated with Maruti to form what we know today as Maruti Suzuki. At times, there are regulatory hurdles that hinder a company from entering the market. In the recent times, Walmart has been through something similar. Because India does not allow 100% FDI in the online / offline marketplace inventory based model, Walmart invested in the home-grown online marketplace Flipkart to acquire a significant share of the market.
How to go international?
- The first step is to identify the target market and come up with a winning strategy. The companies need to do a thorough due diligence about new markets and choose to go to the market with the most potential. To select a target market, a market sizing would be helpful for the company, hiring a market research firm could prove to a very helpful investment in the long run. Performing a SWOT (Strength, Weakness, Opportunity, and Threat) analysis would also be helpful for the company at this stage. This would help the company understand where they stand in the market, and accordingly tweak their existing offerings and business model.
- A stellar business plan is the next step to ensure success in the new market. Do your research about the market and make a business plan suitable to the market dynamics. This would heavily base on the kind of funding the company has been able to secure in the past. Some companies prefer to enter the market with a slow start to test the waters, while others enter with a big budget to conquer the market quick. Consider the marketing of the offerings, whether the market prefers online or offline marketing.
- Team and Infrastructure: The core resource of any company is the team, most investors bid on the founding team while investing in a new company, especially at the angel and VC stage. A company, when entering a new market, is kind of like a start-up there and having the right team can make or break the business. A team that shares the passion for the business and has the right skill set, along with knowing the market well, would ensure that the business plan, as decided, would be executed properly. Moreover, if a company is offering products, it is important to decide whether to import the product in the market or set up a local manufacturing. In such cases, a lot of governments promote local manufacturing, as that creates jobs and a whole eco-system around it.
- Product Readiness: Toyota offers the same cars in India as they would in other developed nations, but knowing that the customer is price sensitive and there are other companies offering similar cars at a more competitive pricing, they would trim down the features of the cars, and would offer them at competitive market rates, this is called product readiness. The company customizes the products according to the needs of the market to stay ahead of the competition.
- Making sure that the organization is ready for venturing into a new market, the employees should understand that the company is growing, in case of a start-up, and should be able to understand the culture, especially the employees who would be responsible for the new market. Small aspects like language readiness could prove to be crucial while entering new markets. Therefore, selecting the right people who are agile and fluid and training them would be very important.
- Regulatory Environment: Understanding the legal framework of the country the company is entering is vital. The regulations about the products, the taxation system could save a lot of time for the company in the long run.
- Lastly, budgeting the market entry could prove critical. Managing the company finances, arranging funds to enter the new markets, and looking out for grants from the local government should be on the company’s priority list while venturing out of their home markets. Getting the existing investors on board, seeking suggestions from the company advisors and mentors could prove to be very helpful.
International Expansion amid COVID-19:
The spread of novel coronavirus has spelt disaster for the world which has caught the entire world ill-prepared to deal with such high magnitude pandemic. It has compelled the governments to put lockdown and confined people to their homes. It has not only affected our personal lives but also impacted the business operations and deterred the plans for growth & expansion. However, each crisis is an opportunity and it is time for entrepreneurs to evaluate which way the economy is moving and to adapt their businesses. There may have been a dip in traditional consumption but we can see a large expansion in the industries such as data analytics, healthcare, food value chain and telecommunications sectors. We can see increase in demand for ‘Made in India’ products in overseas market as well especially in essential goods sector. Therefore, good entrepreneurs should seize these cross-border opportunities now as international markets are starting to open up.
India has been under strict lockdown for more than 2 months and now though there are some relaxations the markets are still under pressure as the COVID cases have been increasing rapidly and experts believe coming months could be the peak of the pandemic in India. While India is still struggling, it seems most of the foreign countries have passed the worst and are now in recovery mode. For example, New Zealand has recorded zero new cases in past 10 days. Accordingly, businesses have started their operations aggressively and foreign markets are now gaining strength. Therefore, this could be an opportunity for India companies to target overseas market and develop a strategic growth plan keeping in mind the current scenario.
Foreign governments have also been actively introducing various economic relief packages to revive the economy and support their people & businesses. In March 2020, US announced $2 trillion stimulus package which planned to help people, families, large corporations & small businesses, and the economy to cope with the disastrous effects of the COVID-19 pandemic. Similarly, the European Union unveiled a €750 billion ($826 billion) coronavirus recovery package as the region attempts to claw its way back from the worst crisis in decades. Japan also introduced a major stimulus plan worth $1.1 trillion to support individuals as well as businesses. The governments are trying to push existing businesses and also encouraging new entrepreneurs. Indian corporates can benefit from these support schemes in order to establish their business in foreign countries.
Further, though the travel restrictions are being lifted there will still be some sluggishness in coming times. Therefore, instead of setting up a new business operation in foreign country and getting stuck with legal hurdles, it could be advantageous for Indian companies to follow the footsteps of Zomato and expand their business overseas by acquiring suitable local companies which will give them a ready base and also an entry point into the market.
Coronavirus may have halted your plans for growth and expansion for some time but as mentioned this crisis has also opened various opportunities for businesses. It is upto the entrepreneurs to navigate through these critical times, plan for the future and be ready to exploit the opportunities available.
