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:Â Â
- 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. Â
- 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.Â
- 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.Â
- 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 firstÂ
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?Â
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.Â
Expansion strategy considerationsÂ
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. Â
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. Â
International and local regulationsÂ
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.Â
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.Â
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.Â
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.
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