A company that finds success in its domestic market is soon faced with the decision of whether it wants to expand internationally. The international market offers incredible opportunities for growth, particularly when it comes to small and medium-sized enterprises (SMEs). Once the decision to expand has been made, it is necessary to develop appropriate strategies that ensure that the international expansion process goes off without a hitch.
In this post, we provide you with food for thought and guidance on what to keep in mind when expanding internationally. In this way you can ensure that your first steps towards international expansion are met with success.
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Setting your sights on new countries and new markets: while there is great potential for growth, certain pitfalls can also be spied in the distance.
Why do companies expand into international markets?
There are many different reasons why SMEs decide to expand their businesses internationally. One of the key reasons is the additional potential for profit, of course, but there are others:
- Access to new markets that are often larger
- A strategic decision in favor of additional growth (due to saturation of the domestic market)
- Access to new expertise as well as state-of-the-art technologies
- Reducing production costs
- Increasing manufacturing capacities
But no matter what reasons you have for expanding your business internationally, there are many different aspects to keep in mind when preparing for your next big step.
No matter what reasons you have for wanting to expand, there is a great deal of opportunity you can take advantage of if you think of everything.
You want to expand into foreign territory – but where would that be exactly?
In Germany, every second company that is classified as an SME is now exporting its products abroad. Goods that are “Made in Germany” enjoy great popularity worldwide, as these three words stand for outstanding quality. Nevertheless, entering international markets is not something that happens all by itself. Companies first need to identify the countries or regions in which their products are in high demand.
German companies, which are mostly SMEs, often expand into the European Union first. This is because the customs union makes it much easier to export within the trade block, where there is less bureaucracy to deal with and costs are lower. You can also see this reflected in certain key figures that show that nearly every second (41%) SME sales market has been in Northern and Western Europe in recent years.
Nearly every second (41%) SME sales market has been in Northern and Western Europe in recent years.
Looking beyond the borders of the European Union, the strongest sales markets for German companies are China and the United States. However, countries in Latin America, particularly Mexico, Brazil, and Argentina, are also increasingly consuming more – so it is important to keep these regions in mind. Other promising sales markets include South Africa, Rwanda, and India:
- South Africa: one of the largest economies on the continent and one that offers good infrastructure for industry.
- Rwanda: particularly attractive for automotive suppliers, as Volkswagen has had a plant there since 2018.
- India: the country’s economy is growing in size – along with an affluent middle class.
As a company, you need to individually consider which target markets you want to serve in the future and the form each market will take. In addition to the classic export business, licensing, franchising, joint ventures, branch offices, and subsidiaries are all within the realm of possibilities. What you need to do depends on the products or services offered, the bureaucratic requirements, and the geopolitical situation in the respective country.
Positioning your company on the international target market
It’s not easy to expand into international territory, so the strategy you use to expand should be carefully worked out in advance. It is best to proceed in a step-by-step fashion in order to avoid overlooking any important areas that need attention.
Deal with questions about the market, law, invoicing, customer service and language in your target country step by step.
1. Analysis: target market, risks, and competitors
To find out which target markets offer potential that is great enough, you need to analyze the markets in detail. Current trends, market research, and online search behavior can provide valuable hints in this regard. Useful tools for conducting the analysis include the Google products Market Finder, Keyword Planner, and Analytics.
Just because your product is successful in your own home market doesn’t mean that demand would be as strong in other countries. For this reason, you should carefully study purchasing behavior, gather as much information as possible, and adjust your product range if necessary. You also need to monitor competitors as well as risks that are specific to the local market, which can be regulatory, economic, or environmental in nature.
2. International legal regulations: Caution is advised
From customs regulations and costs to trademark rights, patent protection, and trade regulations and authorizations, expanding internationally is also no walk in the park when it comes to the law. To be on the safe side from a legal standpoint, a company definitely needs to seek comprehensive legal advice in order to avoid nasty surprises later on.
3. Issuing invoices in foreign countries
It is usually financial reasons that spur companies to expand internationally. In the planning stages, you need to consider currency conversions as well as exchange rate fluctuations outside the EU. Invoices being sent to international customers require that you consider additional mandatory information, taxation, and the reverse charge procedure.
You also need to evaluate the payment options in the target market. While people in Germany like to pay by bank transfer in response to an invoice, customers in other countries prefer PayPal, Alipay, iDeal, or other local providers.
4. Customer service: Keep local preferences in mind
When it comes to international customers, customer service is make-or-break for your business – especially in the early stages of expansion. The target market may not yet be familiar with your company, leading to reduced trust in your brand. Offering in-country customer service can help build confidence by providing customers with key information about payment processing and options, shipping, returns handling, and more. Keep in mind that your customers expect to receive all relevant information in the local language and that telephone contact with the company will also be free of charge for them.
5. Local partnerships are vital
Expanding your business into international markets will go a lot more smoothly if you have partners at your side who already know what the local conditions are. Seek out advice from experts regarding financing, legal regulations, consumer behavior, and any other relevant issues. One possibility is having internationally experienced colleagues within the company who also speak the language of the target market. During the transitional period, you can also hire external consultants – preferably from the target country.
You should also work out the issues above with your local partners, who can provide you with valuable insights into the conditions and preferences of the country.
6. Speak the language of your new customers
To achieve success internationally, you can’t get around translating and/or localizing your website and other relevant information: a survey conducted by Common Sense Advisory revealed that 60 percent of online customers will not purchase a product or service if the website is not available in their native language.
In a nutshell, you need to translate both the product itself (its software, product data, and so on) as well as all content that is available online and offline. This includes:
- Websites, landing pages, news, and product announcements
- Product descriptions, manuals, and item/category texts
- Advertising, videos, and images for shops and marketplaces
- How-to content, e-books, blog posts, customer magazines, newsletters with links
- Customer feedback and ratings as the basis for improvement and recommendation marketing
Be sure to take into account the cultural conditions in the target market – not everything that works in Germany will also be successful internationally. You can find specific information on how to successfully expand your online shop in our post “Getting off to the Right Start with E-Commerce Localization.”
Even if it sounds easy to you, you shouldn’t underestimate how much localization matters and the amount of effort it takes. You should therefore plan to include this aspect at an early stage of your expansion strategy. Establish appropriate processes from the very beginning and use available translation technologies that simplify and speed up the endeavor.
7. Localization with people and technology
The obvious option for you might seem to be machine translation, as DeepL, Google Translate, and Systran have made good progress in recent years. However, it may not be as simple as it first appears. We described in detail what pitfalls there are and how you can avoid them in our “Machine Translation for Companies” post.
Machine translation has not yet reached the quality of translations prepared by human translators. Particularly with regard to terminology, that is, consistent usage of certain designations, machine translation does not yet meet all requirements. That means you need to rely on a translation supply chain that includes human translators and reviewers at the end. It is also the case here that you by no means need to do without the support of technology, with one of the key technologies at your disposal being a translation management system (TMS), a type of software that allows you to automate and significantly accelerate your translation processes.
The TMS represents the link between you as the customer and the translation service providers, freelance translators, terminology specialists, reviewers, and proofreaders.
Best of all, a TMS can be seamlessly integrated into virtually any content system, allowing you to automate your translation processes to the greatest extent possible. We summarized a large amount of information in this regard in the “All about Translation Management Systems” post.
The bottom line
There are many reasons for SMEs to expand internationally, but the road to success can be bumpy, from making a fundamental decision regarding which target markets to serve to analyzing the markets you choose and their local legislation, financing, and customer service through to translation of your product and all associated marketing information.
However, the right technologies can help make expansion into international markets easier. An example of what you should do is the use of a translation management system for all your translations. This approach allows you to handle the key part of localizing your content both efficiently and automatically to the greatest extent possible.
How to be Successful in E-Commerce – with the Right Translation
In the free white paper, you can find out in detail what you should watch out for when engaging in international e-commerce. On this basis, your international venture will be a success.