Expanding your business abroad: what you should consider before internationalizing your company
Internationalization represents a key stage in the strategic growth of any company that aspires to increase its sales and position itself in new markets.
However, this is a complex process that, if not managed properly, can have negative impacts on the daily operations of your organization.
Therefore, throughout this article We review the main factors that should be analyzed before and during the business internationalization process., in order to reduce risks and maximize opportunities.
Evaluate your company's capacity before going international
Before making the leap into international markets, It is essential to analyze whether your company is prepared to face the process, under what conditions it could do so and what destination it should be oriented towards.
To do this, it's important to conduct a thorough analysis of your business's internal situation, the competitive environment in your sector, and the real opportunities abroad.
A useful and simple tool to begin this diagnosis is the analysis SWOT, which will help you identify your weaknesses, threats, strengths and opportunities, and answer many of the questions that may arise during this initial stage.
Make sure your company can handle exports
Selling a product or service abroad is not particularly technically complex, but it does involve significant risks that should not be underestimated.
Therefore, it is key to be certain that you can fulfill the commitments made to international clients.
If your activity is based on products, your production capacity will need to not only cover planned orders, but also allow you to compete effectively in the new market.
If it is about services, you must check that you can lend them with collateral.
Your proposal must be viable in the long term, robust enough to respond to unexpected spikes in demand.
Planning is therefore an essential aspect at this stage.
Clearly define your internationalization objectives
each company has a different business model and a specific value proposition, so there is no single valid strategy for going abroad.
The key is to clearly define why you want to internationalize your business.
Do you only want to sell your surplus production? Will you tentatively enter a new market? Or do you aspire to become a truly international company?
Depending on your goal, you'll need to adapt key aspects such as the timeframe you can afford, your communication strategy, and the economic and financial plan that will support this new phase.
Choose the right market and study it thoroughly
Before launching into operations abroad, it's essential to conduct a comparative analysis of several countries and select the one that offers the greatest opportunities for your company.
To make the right decision, carefully study factors such as:
- The general economic context of the country,
- The life cycle phase in which your product or service is within that market,
- The profile of the local consumer,
- The cultural and social peculiarities that you must respect,
- The competitive environment, the level of demand and the supplier network,
- And, of course, the legal framework that regulates business and commercial activity.
A thorough understanding of these aspects will make the difference between a solid entry and premature failure.
Design the most appropriate internationalization strategy
Once you've identified your target market and decided what products or services you'll offer, it's time to define how you'll enter that country.
The choice will depend on multiple factors: the type of product or service, the distribution channels available, the level of control you want to maintain, the budget you have available, and the type of growth you are looking to achieve.
Below, we show you the main alternatives:
Direct export modalities
- Own sales department: Representatives of your company travel periodically to the destination country to directly manage sales.
- salaried representative: a worker hired by the company that manages the client portfolio from the international market, with greater connection and commitment.
- Commercial subsidiary: an option that provides greater operational control, local knowledge and benefits in international tax planning.
- International online sales: facilitates marketing without the need for a physical network in the destination country.
- commission agent: operates within a specific area with its own customer base; it is compensated for each successful transaction.
Indirect export modalities
- Distributor: The foreign customer purchases the products directly or through an intermediary who manages the delivery.
- Trading company: manages the entire supply chain, from the country of origin to the destination market.
- purchasing agents: They are responsible for finding suppliers and managing the acquisition of products for export.
Formulas for collaboration and alliances
- Export consortium: Companies collaborate to jointly access foreign markets, sharing costs and resources.
- piggy back: a company uses the commercial infrastructure of another, already established in the target country.
- Joint venture: a temporary alliance between companies to join forces, share risks and achieve common goals.
Non-trading entry strategies
- Production contract: A local company is responsible for manufacturing all or part of the products.
- Assignment of technological licenses: Technology or know-how is transferred to a foreign company.
- Deductible: Rights to use the brand and business processes are granted in exchange for financial compensation.
- Own production center: industrial facility in the foreign market for the direct manufacture of the product.
Consider the barriers to entry to the new market
One of the most critical aspects when internationalizing a business is knowing in advance the obstacles that could hinder —or even prevent— the marketing of your products or services in the destination country.
These barriers They can affect the viability of your strategy, so it's essential to identify them in advance and adapt your offering to meet the requirements of local regulations.
Below are the main categories of barriers that may arise:
- Customs barriers: These are taxes applicable to imports, such as tariffs or special levies, which can make your product more expensive and reduce its competitiveness.
- Trade barriers: These include quantitative limitations (quotas, import quotas, or quotas), restrictive regulations, poor protection of intellectual and industrial property, legal obstacles to foreign investment, or even economic embargoes.
- technical barriers: These refer to certification requirements, quality controls, sanitary and phytosanitary standards, labeling regulations, product approval, packaging requirements, or environmental standards such as waste management and recycling.
Knowing these barriers in advance will allow you to anticipate potential setbacks and plan a safer and more effective entry into the international market.
Familiarize yourself with the essential documentation for exporting
Starting the path toward internationalization should not be hindered by bureaucracy.
However it is It is essential to know the necessary documentation in advance to avoid delays or problems in international operations..
Below, we summarize the main documents you should take into account as an exporting company:
- Commercial documents: They include the pro forma invoice (previous estimate), the commercial invoice (essential document for customs and collections) and the packing list (details of the shipment contents).
- Transport documents: Depending on the medium used, you will need to manage:
- CMR (Road Waybill)
- Bill of Lading or B/L (ocean transport)
- CIM (rail transport)
- AWB (air waybill)
- FIATA (for multimodal transport)
- Customs documentationSome of the most relevant forms are the SAD (Single Administrative Document), the ATA Carnet (for temporary goods) and the TIR Carnet (for international road transport under customs control).
- Specific certificatesDepending on the type of product, certificates such as:
- CITES (for protected species)
- Sanitary and phytosanitary products
- Veterinarians
- Quality certificates or other technical requirements of the destination country.
Having this documentation well-prepared will facilitate the export process and avoid costly delays in your international operations.
Study the culture and customs of the destination country
When negotiating with potential clients or introducing your product or service to a new market, there is one factor you cannot overlook: local culture.
Lack of understanding of the lifestyle, customs, or social norms can lead to failure in both negotiations and the acceptance of your business offer.
Even the best strategy can be compromised if it's not adapted to the sociocultural context of the country you're targeting.
Choose the most suitable payment method for your international business
The method of payment in international transactions depends not only on economic or financial criteria: it is also influenced by the payment culture of the destination country and the level of trust between the parties involved.
When choosing the most convenient payment method, you should consider three key factors:
- Trust between buyer and seller
- Collection security level
- Costs associated with the payment method
Also influences negotiating position.
If one party exerts significant pressure during the negotiation, it could influence the choice of payment method.
From the exporter's perspective, the ideal scenario is to receive payment at the time of sale.
To achieve this, it is important to know the different modalities:
Trust-based collection methods
When there is a strong and established relationship, options such as:
- Bank Transfer
- Checks
- Simple payment order
These instruments offer flexibility, involve low costs, and are used when the risk of default is low.
Alternatives with greater formality
La simple remittance It also requires a high level of trust, although at somewhat higher costs.
Furthermore, the documentary remittance and documentary payment order They offer greater security, although they imply a lower degree of trust between the parties.
They are suitable when the business relationship is not yet established.
The safest means of collection: documentary credit
El letter of credit It is the most guaranteeing system.
Through this mechanism, payment is made only when both parties have met the conditions stipulated in the contract.
The transaction is channeled through the buyer's and seller's banks, providing additional control.
Although its costs are higher, it offers maximum security for both parties, especially in new markets or those with higher commercial risk.
Design your strategy to connect with international customers
Effectively reaching your target audience abroad requires a clear communication strategy, the use of appropriate channels and messages that really generate interest.
The starting point is the development of a international marketing plan aligned with your expansion strategy and your business plan.
This plan should help you coordinate actions, adapt your messages, and define the most effective way to position yourself.
For that:
- Identify your target audience: Determine who your ideal customer is, where they are located, and how they interact with your competitors.
- Differentiate yourself: Define your competitive advantages and segment the market according to the objectives you pursue.
Rely on a strategy of marketing mix, adapting the four fundamental pillars:
- Product: Do you need adaptations for the new market?
- Price: Is it competitive and consistent with local purchasing power?
- Promotion: How are you going to promote your offer?
- Distribution/Communication: Through which channels are you going to reach your audience?
Do not neglect the international digital marketingOptimize your online presence through strategies such as:
- International SEO, to position yourself in the search engines of the target countries;
- SEM (pay-per-click advertising) adapted to local languages and customs;
- Social Media, tailored to the most popular platforms in each region.
Also, clearly define your deadlines and objectives, assigns a realistic budget and perform test A / B to evaluate which messages and channels work best.
Measuring and adjusting is key to achieving sustainable results.
RRYP Global, lawyers of international trade law.
