One of the conclusions of the recent COVID-19 pandemic has been confirmation of the benefits of diversification and internationalisation of companies. Companies already well prepared and sufficiently globalised have suffered its effects of this pandemic on a much smaller scale.
In such complex scenarios and with each country taking different measures in an uncoordinated manner, the diversification of business and investment strategies is a requisite to overcome all these difficulties and try to keep the ship afloat. Further, the marked increase in speed and technological leap caused by the crisis has in some aspects been truly noteworthy. Thus, modifications in business protocols have changed drastically, now favouring remote management and negotiation, making internationalisation processes noticeably simpler.
Expansion strategies
The reasons to attempt an expansion process are always varied. Typically, it is a strategy that seeks to increase sales volume, manage risk management, reduce production costs and/or find a solution to problems or unfavourable conditions in the place of origin.
Replicating a business concept and the local success of a project abroad will always involve tests, challenges and difficulties that are not easy to face for a company that does not have a properly trained team. Notwithstanding, erring on the side of a certain degree of arrogance and underestimating the complexity involved in entering a new market is a very common mistake, mainly in companies of a certain scale that also enjoy recognition in their home market. This valuation error is even more frequent if the company’s origin is a country of greater scale or development than the target market.
Difficulties
The possible strategies to enter a new market could be explained, perhaps from the least to the largest in terms of their degree of difficulty into: the export of finished products or parts or components for third-party products; alternatively, taking into account the product or service in question, the entering into franchising or licensing agreements or, finally, the establishment of companies with local teams or more robust collaboration agreements with professionals or companies in the target market.
In any case, it will initially be key to understand very well which is our target market, its level of local competitiveness for our products or services, its level of sector maturity, who our competition will be, the profile of our clients and the possible commercial and regulatory barriers to entry that we would have to overcome.
Read the full article published in elEconomista.es (Spanish) here.
