These are strange times, with wars, weather and a COVID-19 pandemic reshaping the global business landscape. For many executives, surviving is a fight to the death and expanding internationally seems like a pipe dream. But a business leader with big aspirations still needs an international strategy.
The movement of goods and people has slowed in the last two years, but global business isn’t going away — it’s evolving.
The death of distance is a key driver for international business in 2022. Despite the short-term supply chain crunch, improved logistics, travel and technology are enabling goods, people and ideas to move around the world faster than at any other time in history. We can communicate and work with customers and suppliers who were unreachable just a few short years ago.
Limitless opportunity = unbridled competition
What this means for service providers is that international markets are more accessible than ever before. Increased uptake of technology-enabled service delivery equals lower barriers to entry. In other words, if you have a great product that can be delivered without you needing to be there in person, and a powerful message that resonates with your audience, you suddenly have almost limitless potential to sell anywhere.
The downside to limitless opportunity is a massive increase in competition. If barriers to entry fall and you can suddenly sell anywhere, people from all over the world can suddenly sell into your home market too. And if they can create and sell a better product at less cost and market it with equal flair, that’s the end of your market share.
The truth is that the dark side of borderless markets (increased competition) should be just as great a driver for a perceptive CEO as its bright side (increased opportunity).
Foreign competitors are not the only worry — you can’t afford to ignore the threats at home. Some of your canny domestic competitors have already realised that they can turn geo-arbitrage to their favour.
They’re using web developers and designers from Jamaica, graphic designers from Hungary and Slovenia, bookkeepers from India and virtual assistants from the Philippines to source services for themselves and their clients at a fraction of the cost of buying domestically.
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They are able to reduce their cost of goods sold and undercut you, while still making a profit. Expanding overseas remains a smart way to counter the threat from overseas competitors and local firms capitalising on geo-arbitrage to compete with you at home.
Reach more customers
Access to international markets enables access to more customers. This matters for any company that only has clients in one geography, and is especially true if you are based in a country (like Australia) that has a relatively small domestic market.
Spread your risks
The expression “don’t put all your eggs in one basket” applies equally to investment portfolios and customer bases. A business can pay dearly if too many of its clients are concentrated in one country and conditions change quickly. If you only sell in one market and there is a downturn, new competitors appear, regulations change or your machinery fails, sales may drop dramatically, putting the company at serious risk. Diversifying your markets offsets risk in the domestic market by opening up opportunities with new clients, new partnerships and joint ventures, as well as new opportunities to develop products for specific geographies.
Diversification can also help smaller companies survive tough economic times and political volatility, factors which are increasingly important as global politics and the dynamics of international trade continue to shift rapidly and unpredictably.
Every astute CEO wants to reduce expenses and going global can help. Even though COVID-19 has manufacturers everywhere reevaluating supply chain reliability and looking for supply chain solutions closer to home, you may still find more economical solutions to your production and manufacturing challenges offshore. And in Asia, low taxes and set-up schemes abound as to attract foreign businesses to set up onshore.
Overseas markets may generate higher returns, especially if they are less advanced, attractive or competitive than your domestic market. Difficult markets usually attract fewer foreign companies and you may find that there is a blank space in the market that you can fill, potentially allowing you to charge a higher premium than you can attract at home.
Increased company value
Lastly, nothing increases the value of your company like an international footprint. When a management team can demonstrate to investors that it is selling internationally, they’ve flagged the potential for making a lot more money, for all the reasons I’ve touched on here. Simply put, companies with international reach have an unfair advantage over their domestic cousins.