New networks, higher visibility, increasing sales and much more: international expansion offers companies countless opportunities to grow their business. However, in order for such a venture to succeed, it must be perfectly prepared as well as confidently executed. Even established and large global corporations often fail when trying to enter a foreign market. Small and medium-sized companies often lack the human resources and know-how to succeed with this step. We therefore show you the 6 most common mistakes that can occur during an international expansion and how to avoid them.
1. Being unprepared
An expansion usually represents a financial risk and, with often uncertain prospects of success, devours a lot of capital, especially at the beginning. Nevertheless, one of the most serious and frequent mistakes we encounter in our daily work is the lack of preparation. The problem is that insufficient planning by companies that want to establish a second presence abroad only becomes apparent in the course of the expansion process. But at this point in time, the costs for the new subsidiary are already running. Making up for this neglect almost always noticeably delays the process and is therefore more expensive as well as less efficient. It therefore makes much more sense to invest time in developing a robust plan even before the market is actually entered.
Good preparation also includes knowing the target market in all its details. Studying statistics or data sets about it is not enough in the vast majority of cases and will most likely lead to the rapid failure of the expansion project. Especially in our specialized area, the transition between Eastern and Western Europe, there are striking differences in culture and mentality. These differences can only be properly evaluated and understood by local and qualified people. Countless attempts at expansion have already failed because of this. Therefore, we cannot emphasize this point often enough. An important aspect in this context is also the right personnel decisions, which we deal with in section 5.
The different legal environment with all its specific laws and requirements must be taken into account, as well as the local competitive situation and much more. Another important advice, especially for market expansions into German-speaking countries, is to work only with companies from the sales region into which you want to expand. Translations of websites, marketing materials and customer communications must not only be flawless and highly professional, but also perfectly adapted to the target market. Small mistakes or inconsistencies in the external appearance of a company immediately make it untrustworthy and unprofessional for customers, especially in Germany, Austria and Switzerland.
2. Wrong timing
Timing can be critical to the success of an expansion attempt, but it is difficult to master and influence. It is essential to analyze the rough economic environment at the beginning of your planning. Questions such as how the economy is performing in general, how your business and its customers are doing, what the consumer demand situation is like, as well as many others need to be asked in the process. However, we advise you not to stress the issue of timing too much. In our experience, it is much more important how to expand, rather than when. Opening up a market during an economic downturn, for example, can be just as reasonable in order to profit more than average from a coming upswing.
However, you should definitely take one step at a time. Do not open up too many markets too quickly and at once. In countless cases, across all industries and company sizes, we have observed that this can quickly lead to failure and often even jeopardize the actual core business in the home country. This aspect is strongly related to our next point, which is about unrealistic and false hopes.
3. Wrong expectations
False expectations can result either from insufficient planning, which we have already discussed in section 1, or from unrealistic expectations regarding a new customer group in a foreign market. We observe the latter over and over again with companies that have been successful in their home country for several years and have decided to expand their business abroad. Accustomed to success or in love with their own product, it is automatically assumed that foreign customers will immediately show similar demand in other markets. This circumstance often applies to companies expanding from Eastern to Western Europe or in the opposite direction.
False expectations are usually accompanied by massive miscalculations in the required budget, which is often estimated much too low or high. In this case, too low is the more serious mistake, as a lack of capital often forces the abandonment of an expansion that has been started and ultimately leads to an irretrievable loss of capital. Also on the subject of expectations, we can recommend to engage with local consumers on the spot. Accurate market analyses, consumer surveys and polls are essential for a realistic picture of the demand situation in a market. When in doubt, we always recommend planning too conservatively so as not to overestimate demand. This reduces costs in the medium term and avoids destroying false hopes. However, if you analyze and assess the respective market correctly and take into account all the other points in this article, nothing will stop your company's expansion success.
4. Lack of contacts
Non-existent contacts can be a major obstacle to building a business abroad. Established companies that dominate a sales territory typically have excellent connections to suppliers, wholesalers and other business partners for years or even decades. New players in a market lack this. It is therefore even more important to include the topic of networks in the planning for the expansion project.
In many cases, it may also be advisable to test the foreign exploitation first with a simple export venture. In this case, you do not set up your own local site, but simply sell your products to another country. This is usually done through local wholesalers and resellers. A major part of our work is for example to establish contacts and business connections. So we not only set up your own subsidiary for you, but also acquire customers and prospects as a commercial agent. In all our target markets Germany, Austria, Czech Republic as well as Switzerland and Slovakia, we are well connected and can support you perfectly in contact and contract brokerage. Learn more about our services of contract brokerage or contact us.
5. Wrong personnel choices
The question of suitable personnel is a crucial issue for new subsidiaries. On the one hand, you want to ensure a certain level of control from your home country. On the other hand, however, it is necessary to adapt to the respective market and to promote local, independent staff. Here it is necessary to find a practicable intermediate solution, tailored to the individual case. An example of this could be that a medium-sized company from Eastern Europe expands to Germany and appoints a bilingual person from the home country as managing director/country manager of the new market. In this case, however, the mindset and attitude of that person are also crucial. It is necessary to show a certain flexibility in order to adapt to a different environment. In the case of bilingual individuals, this requirement is often met due to family backgrounds or previous stays abroad. Employees under this manager should then be more rooted in the new market, as needed. Foreign managers should also be preferred in low- and mid-level management.
The key point is that the domestic business environment will never be the same as that of any other region. Thus, other, adapted decisions must also be made to ensure the long-term success of the company.
6. Saving in the wrong place
Besides all the aspects we have covered in this article, the most important thing is not to save money in the wrong place. A foreign expansion to a certain country is in the best case a one-time operation, but it involves a certain degree of risk. Therefore, this should not only be perfectly planned and executed, but also the corresponding financial funds should be provided sensibly. However, the emphasis here is on sensible, by which we mean efficient use of capital. Financial resources alone are definitely not a guarantee for corporate success. However, an appropriate budget for marketing, sales, personnel, translations and much more is essential for success abroad and should be in line with your own strategy and planning.
Conclusion
An expansion abroad promises countless opportunities for companies of all kinds. New customer groups, increasing sales, a higher level of awareness, and a strong brand are just some of the possibilities that can be achieved through a new branch. Nevertheless, risks can be found around every corner and it is necessary to take countless things into consideration.
We at AV-LEAD have specialized in exactly 5 target markets, which we know inside out. In Germany, Austria, Switzerland, Czech Republic and Slovakia we are represented by highly qualified and local experts. Together with them we analyze your target market, work out a detailed strategy, give strategic advice, arrange contacts as well as business partners, find wholesale customers and distribution partners, take care of excellent employees, translate documents, and much more. If you wish, we will even handle the actual expansion ourselves and take care of the administrative work. This way you can concentrate on business in your home market and profit from a successful foreign subsidiary. Learn more about our expansion services or contact us. We look forward to hearing from you!