Your business, like everything else, will change with time. As your market share rises steadily, you'll realize your current target market limits your further growth. Expanding into new markets may make your business more substantial, profitable, and successful.
However, expanding into a foreign market means paying for more space, inventory, and people. As a result, you may still be on the fence, wondering if getting into a new market is the right idea.
Keep reading as this article discusses five excellent benefits of expanding into new markets.
Why Expand to New Markets?
Expanding into a foreign market allows you to grow your business by looking into niche product areas or related industries where you can succeed. Therefore, one of the primary motivations for trying new markets is to improve your business in one way or another. Below are three examples of why you may decide to enter a foreign market:
- To respond to rising competition. If some competing businesses have already expanded into new markets, you may not compete favorably with them and risk being left behind. Getting into a new market is a significant step in leveling the competition.
- To satisfy the growing needs of existing customers. If your customers’ needs have changed, you may expand to new markets to address those needs and maintain your existing customer base.
- To grow your customer base. Expanding into a new market allows you to connect with new target audiences who may also be interested in your products or services. With more customers comes more sales and, ultimately, more profits.
A review of some of the iconic global brands shows that most of them are not satisfied with just operating in their home countries. Instead, they keep expanding into new markets, which gives them an international appeal. For example, while McDonald’s began as a burger and milkshake restaurant in San Bernardino, California, in 1948, it has expanded into many new markets. Today, there are about 38,000 McDonald's restaurants in over 120 countries. Coca-Cola, which started in Atlanta, Georgia, in 1886, has expanded into many markets and is now sold in all countries except North Korea, Cuba, and Russia.
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Benefits of Expanding Into New Markets
While the main benefit of entering new markets is increasing profits, other benefits exist. These include:
Expanding internationally allows you to diversify your company markets, which can safeguard your bottom line against unexpected events. Suppose a natural disaster or other unfortunate circumstance causes a dramatic shift in one market. In that case, your company can still offset negative growth by performing successfully in the global market.
At the same time, you can diversify your revenue stream to avoid exclusively relying on one product or service. For example, if you operate a bakery, you can expand into a new market by opening a restaurant that offers other types of food. If there is a drop in the demand for baked goods, the restaurant will ensure the survival of your business.
Access to Global Talent
Your employees are undoubtedly your most important business asset. When you expand into international markets, you can benefit from global workers with unique skill sets, languages, and educational backgrounds. This will, in turn, foster creativity and innovation in your business, giving you an edge over your local competition.
For example, if you are a tech company that is expanding into the Indian market, you may benefit from Indian tech talent that’s both highly skilled and inexpensive. This is due to the Indian government’s significant investment in the information and communication technology (ICT) sector in recent years.
With the U.S. and most developed nations struggling with digital talent gaps, expanding into foreign markets provides a broader talent pool. You can get enough workers with the right skill sets for your business.
If your market has overwhelming competition, expanding into new markets becomes more of a necessity than an option. For example, if you enter a foreign market where your competitors do not operate, you automatically get a first-mover advantage and can establish strong brand awareness with customers before your competitors.
In addition, international expansion gives you access to new technologies, industry ecosystems, and growth opportunities that may not be present in your home country. Your business will have a strong competitive advantage over the brands still stuck in the local market.
Foreign Investment Opportunities
Expanding into new markets also avails additional investment opportunities for your business in foreign markets. You can create meaningful connections with other global players and develop new resources that support future growth.
Your company can benefit from international financial incentives not in your home country. Many developing markets are looking to attract foreign businesses, offering financial incentives to global companies. Malaysia uses corporate tax deductions to attract foreign businesses. While local companies pay about 19%, multinational organizations pay 17%.
Unfortunately, you may need to know the countries that offer these financial incentives. And even if you do, the regulatory obligations in corporate taxes can be confusing and difficult to understand. This is why you should consider working with a reputable employer of record (EOR), as there will be experts to help you navigate these kinds of things.
Greater Brand Recognition
Another benefit of international expansion is that it improves the credibility of your business amongst a global audience, hence better brand recognition. Generally, branding is all about ensuring your target audience associates specific desirable qualities or ideas with your product or service.
Establishing great brand recognition requires several efforts. First, you need to deeply understand the target market and what the audience in that market needs. Secondly, you need a proper marketing strategy to communicate your brand to that new audience.
Big brands often have an advantage when it comes to branding, as they have vast resources to use in their advertising and marketing efforts. However, this doesn't mean your business needs to be a huge corporation to get proper brand recognition in your new market. Using the available resources to drive marketing efforts can still put you ahead of other players and provide immense branding opportunities.
Tips for Expanding Into New Markets
International expansion can grow your business and improve sustainability in a highly competitive world. However, it requires a well-thought-out strategy; otherwise, you risk making hasty decisions that lead to failure and disappointment. Below are five critical tips to keep in mind when expanding into new markets.
Conduct Thorough Market Research
Before anything else, take your time to conduct thorough research on the market you plan to enter. Simply replicating the techniques that have worked in your home market may not produce the desired results with new markets. Some of the things you can research include population demographics, target customers, local sales data, and market potential.
Develop a Strategy
Once you’ve finished studying the market, the next step is to develop a strategy that will allow you to reach your target customers and remain competitive. Generally, each market has a unique culture, government, and economy, influencing the strategy. Therefore, understanding the new market will be vital in developing an effective strategy.
Financial sustainability is essential for the success of your international expansion. Ensure you understand your numbers and how they will be applied in your expansion. Do you have enough finances to invest in the equipment needed in your new location? Can your business sustain your new hires on the payroll? And if you decide to outsource payroll to a global provider, do you have the funds for that? Also, ensure you have some emergency funds for any disruptions or unplanned situations that may arise.
Hire the Right People
You can have the best strategies for international expansion, but your business' growth and success will only be hampered if you have the right people to support implementation.
Successful brands like Microsoft and Google understand the value of having the right hires, so they consistently hire skillful, talented, and highly knowledgeable workers. This should also be the case for you to allow a smooth expansion.
Plan a Marketing Strategy
While introducing high-quality products or services to your new market will go a long way toward helping you outperform your competitors, more is needed. You still need a well-laid-out marketing strategy to promote these products or services and connect with your target audience.
Finding a Partner for Global Expansion – Skuad
Expanding into new markets has numerous benefits for your company. But it carries risks, especially for companies that have yet to plan their expansion. Working with a global employer of record like Skuad is a reliable way to avoid these risks. We will handle all hiring, onboarding, payroll, and HR compliance and save you money and time.
Book a free demo today to learn more about how we can help.