Pursuing international business opportunities offers more potential for success as the world continues to climb out of the economic recession of the last decade. According to The World Bank, the worldwide economic growth of 2017 is carrying over this year, with an expected growth of 3.1%, thanks to gains in investment, manufacturing, and trade.
With new and emerging markets opening up to foreign trade and investment and consumers in long-established markets regaining purchasing power, the big question for you and your business is how to capitalize on new international business opportunities.
Let’s take a look at the different ways to get involved in the global economies and explore some of the things to consider before taking the plunge.
Four Types of International Business Opportunities
For companies already doing business in the U.S., there isn’t any better single market out there. Household spending in the U.S. accounts for nearly one-third of household consumption—a whopping $13 trillion annually. Despite the high ceiling for growth, though, the U.S. market isn’t the end-all-be-all of markets.
Taking on international business opportunities can be very profitable for many companies. Businesses already excelling in their home market have a few advantages when they go global.
According to Entrepreneur, some of these advantages include:
The chance to repurpose existing products and services
Diversifying markets to reduce risk
Counterbalancing seasonal demand cycles
Finding new competition and niches to grow your brand
If you’re considering going global, the primary goal is, of course, to grow your business. There are a few ways to do this, and each avenue has its own advantages and risks.
1. Import & Export
Small-to-medium sized businesses account for 98% of exporters and importers and one-third of trade when measured by dollar value. Importing and exporting goods is the classic way to pursue international business opportunities. Global trade continues to be strong for almost all industries, so now may be the right time to jump into it for your company.
Importing goods can provide companies a few competitive advantages, including access to new goods in demand but normally unavailable in the home market and access to goods produced at a lower cost which can then be sold for a greater profit margin.
Exporting goods can make a lot of sense, according to The Hartford, if you have aging products that could be repurposed with minimal effort for other markets, or if you’ve exhausted your domestic market and need a new consumer base.
Granted, the import/export game isn’t without its risks. Each country has its own duties, regulations, and prohibitions to consider. Going global also means being subject to trade agreements like NAFTA. Free trade agreements are increasingly in peril these days as many countries—including the U.S.— adopt protectionist stances towards trade.
When you import, you also have to make sure you find the right partners and sources for your goods, since your business will rely on them a lot. Even industry giants like Apple have been hampered by supplier issues for their iPhones.
But the international business opportunities are there for companies interested in importing and exporting goods and services. By putting in some research into overseas markets and suppliers, companies can increase their growth and reduce costs.
Licensing is an ideal route for companies with products that are difficult to export or that already have an import/export business, but would like to increase their international market growth. Licensing is an agreement between two companies in which one company shares proprietary knowledge and processes with a foreign company in exchange for royalties.
According to The Balance, there are several benefits to entering into a licensing agreement with foreign companies, including:
Requiring minimal capital and less risk
Opening up closed markets
Maintaining intellectual property use
Avoiding taxes on imports
The Balance warns that companies should take care to protect intellectual property and ensure that the licensee is committed to the same level of quality with the products.
Licensing can be a great choice if you’re looking to minimize your company’s risk and complexity when entering into a new foreign market.
For retail businesses looking to grow their influence in foreign markets, international franchising is a popular way to expand abroad. Many fast food giants use franchising as a way to grow their brands--in fact, that’s how Subway came to surpass McDonald’s by nearly 7,000 locations worldwide.
Franchising is an excellent way to leverage a successful brand name while minimizing up-front risks, as foreign investors assume much of the initial costs. According to The Balance, franchising can be a very effective way to grow a brand abroad because international franchisees are able to better navigate the culture.
Companies can outsource several parts of their business, such as manufacturing, IT, logistics, and customer service, in order to reduce operating costs.
According to the Small Business Chronicle, outsourcing manufacturing processes can tap into a skilled workforce and result in lower costs, but it can also result in concerns about security and control over the process.
Another popular choice is to outsource business processes, like hiring, to take advantage of cutting-edge automation technologies.
If you’re looking into outsourcing as a way to save money, you’re not alone. Nearly 60% of companies cite cost-cutting as the primary reason they choose to outsource.
Should You Go Global?
Now that you know the different ways you can go global, the real question is whether you should go global. Here are some of the things to consider when looking into international business opportunities.
1. Conducting Foreign Market Research
Before jumping into any new market, it’s critical to do market research to make sure there’s a desire for your products and services.
According to Gut Check, when conducting foreign market research, it pays to do so in multiple countries at once, as this can help you identify cultural nuances, keep the costs of the study down, and generate more consistent data for future expansion.
2. Working in Foreign Languages
To successfully conquer new markets, companies will need to master languages beyond English. Translation can be a stumbling block from the the beginning of market research through the entire product lifecycle.
When pursuing international business opportunities, translation is a leading reason to invest in a strong local partner who can help manage local differences in culture and language.
3. Becoming a World Traveler
If you’re going to do business abroad, odds are international travel will be involved. Whether it’s finding new franchising partners, companies to outsource manufacturing, or doing market research, going global will help you rack up the frequent flyer miles.
4. Understand the Legalities
Doing business in foreign markets provides a lot of opportunities for growth, but you need an experienced legal team to help you handle your entry into new markets to properly manage trademarks and intellectual property.
Things like packaging can be heavily regulated, especially for consumer products. Even marketing is subject to different rules abroad: just this year, the E.U. passed strict new online consumer protections, known as the General Data Protection Regulation (GDPR), that affect the way companies collect user data. It’s important to understand differences like these to keep your business out of legal trouble.
5. Secure International Financing
Depending on how you plan to enter a foreign market, you may need to secure more funding to make it a reality. U.S. companies can take advantage of the Export-Import Bank of the United States, which can provide financing when private companies won’t. The goal of the Export-Import Bank is to help develop competitive American businesses in foreign markets, so they’re a great partner.
The Logistics of International Business Opportunities
One area companies don’t consider enough when developing a strategy for international business opportunities is how they’ll manage the logistics of their expanded business. Fulfillment, shipping, warehousing, duties, and regulations get more complicated when going global.
Online marketplaces like Amazon and eBay are creating a generation of consumers who expect fast and affordable (if not free) shipping. Increasingly, companies are focused on balancing cost and service while improving final mile fulfillment. Providing a great logistics experience for customers is critical, but managing the world of duties, regulations, and shipping costs can be challenging for many companies to tackle on their own.
Whichever of the four methods you use to get your brand into the global market, you’ll likely have to deal with shipping at some point. Finding the right partner(s) is essential in order to conquer international logistics.
Even if you already have an established logistics program, advances in logistics including drones, blockchain technology, big data, and elastic logistics are reducing costs and improving processes. Now is a great time to audit your logistics process to take advantage of these advances and cost-saving measures.
SkyPostal Opens Up Latin American Markets
If you’re considering expanding your business into the Latin American market, SkyPostal may be the right partner to help you conquer the logistics of international business. Since 2001, SkyPostal has worked with local providers to develop consistent, secure, reliable, and affordable end-to-end logistics serving the Latin American markets.
Learn more about SkyPostal and see how we can help you expand into this emerging region.