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If you’re like most B2B companies, you’ve factored international expansion into your growth strategy. Your initial business plans may even hinge on tapping into new markets. You’re not alone; in fact, in the State of Global Expansion 2020 report, 90% of businesses surveyed said they have plans to enter into a new market in 2021.
Global expansion to strengthen your reputation and revenue
There are many reasons to take your company global. Besides increasing brand awareness and securing market dominance, you can:
- Increase your reputation as a mature vendor in your niche
- Increase your accessible market and sales revenue
- Create a competitive advantage by providing a product that works across territories and satellite offices
- Drive innovation with new audiences and by hiring new talent
Before starting your expansion, make sure your business is ready. Ask yourself these questions to help you decide whether domestic or international sales is the best way for your company to flourish:
- Does your product offer a solution needed across the globe?
- Are you prepared to hire employees in-region to close sales?
- Will your product need to be tailored for different territories?
Popular international expansion strategies
Unlike restaurants or consumer goods, B2B SaaS companies have some flexibility in how to approach expansion. Here are the most common strategies, as highlighted in this Principles of Management course:
- Indirect sales: Companies that may not have the infrastructure to expand their direct sales teams often utilize channel partners to aid in expansion. A partner program is a cost-effective way to gain global reach.
- Standardization strategy: Since many B2B SaaS products solve universal problems ( for example, CRM, marketing automation, etc), your company can treat the world as one market. There’s less need to tailor how your product functions for local audiences.
- Multi-domestic strategy: While the overall business is still overseen and controlled by the home office, regional managers have the flexibility to customize packaging, sales incentives, marketing campaigns, and pricing models to best serve their customer base.
- Transnational strategy: Companies that use this approach are able to maintain economies of scale by standardizing their products across all markets while still allowing each country to win on pricing against local competitors.
- Licensing: Instead of handling expansion directly, businesses can license their trademarks and patents to a company in a target region who then sells the product. The licensee pays a fee to the licensor in order to use this intellectual property and is responsible for any manufacturing, sales, and marketing efforts. This is a low effort, high return investment strategy.
- Franchising: Similar to licensing, a company in a target region can use the intellectual property of a business to reach an audience. The difference is that the parent company can enforce very strict business rules that must be followed. There is less operational freedom for the franchisee.
- Joint venture: Lastly, your business can collaborate with a company in your target country by joint ownership of a business and it’s operations. Having the reputation and knowledge of a local brand helps reach ideal customers faster. With equal ownership, both companies have to decide which one invests the most resources and how to split the profit.
Determining which markets to expand to first
Before beginning an international expansion strategy, conduct market research for your target countries. Find out if your products are suitable for the local culture, laws, religion, and other values of that country. Consult local experts to understand local laws and customs and answer these two questions: Is there a need for your product? Can you make a profit in this country based on your pricing model?
Finally, prioritize countries that are not already dominated by a popular incumbent provider. Instead, start with regions where there is less direct competition. If a target country is technologically behind your homebase, you can tailor a simpler version of your product to accelerate adoption.
Expansion strategy considerations
Market research will tell you the market size and potential growth opportunities for each new country. It can also highlight risks. For example, some countries don’t have stable local economies and costs can skyrocket unexpectedly. In some places, it may be illegal to sell your product, and if it is legal there can be restrictions on how you sell your product.
In North America, subscription based pricing is typical for B2B SaaS products. But local views on pricing models may differ. First, find out how your local competitors are pricing and selling their products. Maybe your model could be more advantageous to local businesses, but at the same time, they could see long term contracts as too risky.
Don’t forget about currency exchange rates. Western European buyers can probably purchase your product at comparable pricing to US buyers. Elsewhere, like India and much of Asia, will need a much lower price – but they’ll also have a lower operating budget.
International and local regulations
Each country will have unique tax codes, and some may be unrealistic to operate in because of high taxes for your type of goods. Also, banking regulations vary considerably. Find out how easy it is to set up a bank account in your target country. Factors like lengthy approval processes or limitations on how foreign entities can create bank accounts will slow down your plans. In some cases, your only options may be setting up a separate entity in the country or using international banks.
When you’re only selling domestically in the US, you don’t have to worry about the strict GDPR privacy laws of the European Union. But if you interact with any of their citizens, you’ll have to meet the GDPR security requirements or face large fines. Finally, ask what employment laws are enforced before hiring anyone. Some countries have at-will employment rules while others make it harder to fire an employee.
Business and cultural norms
In the US, the average length of a B2B software evaluation is almost two years. In France, the same evaluation can take up to two and a half years. Any number of factors can influence this time frame like the number of stakeholders expected to be involved in the decision-making process or your brand’s reputation in that country.
Cultural factors also regulate the appropriate way to approach potential clients, how to negotiate contracts, and whether your sales team should travel to meet prospects face to face before closing a deal.
First, take a holistic approach to your interntional expansion strategy. How will you use revenue gains from one market to finance your expansion into new markets? Or, alternatively, will you re-invest your profit back into the same market’s growth?
All of your marketing resources and collateral will need to be revamped for each new target country. What resonates with audiences in the US may not work in the UK or Indonesia. Customize your value proposition, KPIs, marketing campaigns, and pricing for each market.
Bring in local marketing experts that can attract customers and avoid offending buyers. Next, create location-based content including website copy, advertisements, and blog posts. Don’t just translate the same content from your U.S. website into the local language.
Determine which channels are the most effective in the target region. While local social media platforms may be an easy way to reach a new audience, some cultures may lean more towards trade shows, webinars, industry events, and local conferences or summits. Our current need for virtual events makes it easier than ever to reach global audiences that are ideal buyers in each target country.
Rely on local partners
Recruiting a local channel partner network is a great way to understand your new market and stay in compliance. These partners can navigate local language and customs as well as set expectations on how a sales evaluation should be conducted. Many customers will prefer to buy from a local company that they trust, instead of from an international company.
Partners can be onboarded into your partner relationship management tool so they have access to all technical and marketing resources. You can even collaborate on location specific campaigns to better serve your audiences.
Make sure that your partners are putting your interests first. Set up marketing development funds to reward partners who follow up on leads in a timely manner and sell your products by the rule book.
Main takeaway about expanding into international markets
Developing and implementing a global expansion strategy is one way to set up long term success for B2B companies. Through reaching new audiences, as well as hiring new talent, companies have everything they need to innovate and grow like never before.
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