Your business still needs an international strategy. here’s why
These are strange times, with wars, weather and the COVID-19 pandemic reshaping the global business landscape. For many executives, survival is a life-and-death struggle and expanding internationally seems a pipe dream. But a business leader with big aspirations still needs an international strategy.
The movement of goods and people has slowed over the past two years, but global trade doesn’t stop, it evolves.
The death of distance is a key driver of international trade in 2022. Despite the short-term supply chain crisis, improved logistics, travel and technology are enabling goods, people and ideas to move around the world faster than at any other time in history. We can communicate and work with customers and suppliers who were unreachable just a few years ago.
Unlimited opportunity = unbridled competition
This means for service providers that international markets are more accessible than ever. Increased adoption of technology-enabled service delivery equates to lower barriers to entry. In other words, if you have a great product that can be delivered without you needing to be there in person, and a powerful message that resonates with your audience, you suddenly have nearly limitless potential to sell anywhere. or.
The downside of unlimited opportunity is a massive increase in competition. If the barriers to entry come down and you can suddenly sell anywhere, people around the world can also sell in your home market. And if they can create and sell a better product for less and market it with the same flair, that’s the end of your market share.
The truth is that the dark side of borderless markets (increased competition) should be just as important a driver for a savvy CEO as its bright side (increased opportunity).
Foreign competitors aren’t the only ones to worry about: you can’t afford to ignore threats at home. Some of your savvy domestic competitors have already realized that they can turn geo-arbitrage in their favor.
They use Jamaican web developers and designers, Hungarian and Slovenian graphic designers, Indian accountants and Filipino virtual assistants to obtain services for themselves and their clients at a fraction of the cost of a domestic purchase.
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They are able to lower their cost of goods sold and lower you, while making a profit. Expanding overseas remains a smart way to counter the threat of foreign competitors and local companies capitalizing on geo-arbitrage to compete with you at home.
Reach more customers
Access to international markets provides access to more customers. This is important for any business that only has customers in one geographic area, and it’s especially true if you’re based in a country (like Australia) that has a relatively small domestic market.
Spread your risk
The phrase “don’t put all your eggs in one basket” applies to investment portfolios as well as clienteles. A business can pay dearly if too many of its customers are concentrated in one country and conditions change quickly. If you only sell in one market and there is a downturn, new competitors appear, regulations change, or your machines break down, sales can drop dramatically, putting the business at risk. Diversifying your markets offsets risk in the home market by opening up opportunities with new customers, new partnerships and joint ventures, and new product development opportunities for specific geographies.
Diversification can also help small businesses survive tough economic times and political volatility, factors that are increasingly important as global politics and international trade dynamics continue to change rapidly and dramatically. unpredictable.
Master the costs
Any shrewd CEO wants to cut costs, and globalization can help. Even as COVID-19 forces manufacturers everywhere to reassess supply chain reliability and seek supply chain solutions closer to home, you can still find more cost-effective solutions to your production and overseas manufacturing. And in Asia, low tax rates and settlement programs abound to entice foreign companies to set up shop ashore.
Foreign markets can generate higher returns, especially if they are less advanced, attractive or competitive than your home market. Difficult markets generally attract fewer foreign companies and you may find that there is a gap in the market that you can fill, potentially allowing you to charge a higher premium than you can attract at home. .
Increase in business value
Finally, nothing increases the value of your business better than an international presence. When a management team can demonstrate to investors that they’re selling internationally, they’ve signaled the potential to make a lot more money, for all the reasons I’ve discussed here. Simply put, companies with international reach have an unfair advantage over their domestic cousins.