If you are SME thinking about expanding internationally, there’s systematically a moment of indecisiveness when you can’t really make up your mind, with the song “Should I stay or should I go?” by The Clash playing in loop in your mind.

Indeed, there’re always advantages and disadvantages of international development. Your heart is pumping up dopamine, thinking with excitement of the plethora of potential benefits that your new market has to offer. Yet, your adrenal gland is producing adrenaline and cortisol at the same time, as you still cannot shake the anxiety that keeps you up at night, when you think of the many challenges that you’ll have to overcome.

In a way, it’s also a lot like the song “Across the borderline” by Willie Nelson, which ominously says:

“There’s a place where I’ve been told, every street is paved with gold,
And it’s just across the borderline,
And when it’s time to take your turn, here’s a lesson that you must learn,
You could lose more than you’ll ever hope to find.”

It is, of course, crucial to weight both aspects before embarking on your journey. So, here is a short list of most common advantages and disadvantages that you have to consider before making a strategic decision.

Advantages

1- Attracting New Customers: International development allows you to access a broader customer base, significantly increasing your potential market size. But, for this to be the case, you need to make sure that you have the sufficient resources, in terms of marketing and communication budgets, or the proper distributors or partners, to reach your new targets.

2- Creating Economies of Scale: By expanding your operations internationally, your company can potentially benefit from economies of scale. This translates to reduced production costs per unit due to increased production volume, allowing you to offer competitive pricing and potentially increase profit margins.

3- Amortising Costs: Spreading fixed costs across a larger customer base can help your company amortize costs associated with research and development, marketing campaigns, and administrative functions. This can lead to increased efficiency and profitability in the long run.

4- Increasing Market Influence: Expanding internationally can enhance an SME’s brand recognition and market influence. By successfully establishing yourself in new markets, you can gain a competitive edge and project a more established and sophisticated image, potentially attracting new customers and partnerships.

5- Diversifying Increases Protection: Entering new markets allows your company to diversify its revenue streams, reducing its dependence on a single market. This can provide a buffer against economic downturns or fluctuations in specific markets, offering greater stability and resilience for the overall business.

Disadvantages

1- Shortage of Cash: International development often requires significant upfront investment, including costs associated with market research, establishing local operations, marketing and promotion, and hiring personnel. You need to ensure you have access to adequate financing to support your expansion endeavours.

2- Increased Capital Requirements: Beyond the initial investment, ongoing operational costs in the new market, such as rent, salaries, and compliance fees, can put a strain on your company’s financial resources. Careful budgeting and financial planning are crucial to ensure the sustainability of the expansion.

3- Loss of Control: Expanding internationally can lead to a loss of some degree of control over daily operations. This can be particularly challenging if you are accustomed to having direct oversight over all aspects of your business. Building trust with local teams and establishing clear communication channels is essential to mitigate this potential disadvantage.

4- Compromised Productivity and Quality Due to Lack of Resources: Managing operations across different time zones and geographical boundaries can be challenging, and your company may initially face difficulties in maintaining its usual level of productivity and quality. Ensuring adequate resources, training, and communication with your local team is crucial to overcome these challenges.

Now, there’s no sure recipe for making your decision, and no perfect mix for success, unfortunately. The weight of each advantage or disadvantage will vary considerably from one market to another depending on its legal framework, cultural specificities, maturity, and dynamic.

For example, in a country which raises obstacles on trading licenses to protect its domestic retailers, entering the market successfully may require to find the proper distributor(s) and opening a representative office to manage the implementation of the marketing strategy, the communication, and the business development.

In another one, where representative offices are impossible, where professional licenses are a must, and where the business culture is based on personal relationships, it will make better sense to create a joint-venture with a local partner to benefit from their local business networks, expertise and operations. And so on. It all depends on the local environment.

Yet, there a few things of which you can be certain.

First, you should never rush the decision to internationalise your activity. You may see a market that’s booming or hear of a competitor who’s exporting to a new continent, and feel that it is now or never, otherwise you may miss the train and fall behind. But the truth is that a successful expansion depends most and foremost on your internal capabilities and resources. Whatever opportunities a new market offers, you will never thrive in it if you are not ready.

Second, you should always adapt your strategy to your new target and never rest of your laurels. Indeed, graveyards are full of companies that copy-pasted the same strategy which had made their success in one market into a new one, only to find out that it didn’t work. Take Target in Canada, Best Buy in China, McDonald’s in India, and so on. You may be the strongest brand on your local market and yet fail if your values, your products, your place simply don’t speak to your new targets. It’s necessary to go back to the drawing board every time you consider entering a new market.

Fortunately, we are here to run the proper internal diagnosis, research the market, look for potential partners and prospects, and recruit the right local team, so that you can finally answer the question “Should I stay, or should I go?” with a confidence.

Click here to learn about the tailored solutions that we offer companies in their international development. Don’t wait, contact Artemis Business Care. Because “Chance favours the prepared”.