Category: Business Insights

A time comes in every business’ lifecycle when it needs to expand to new markets and regions in an attempt to keep growing. However, such a move can be overwhelming and cost-heavy, especially if not planned out strategically.

Here we will go over the different types of international expansion strategies with examples. Comparing these different strategies and entry modes can help you decide how to plan your business’ global expansion.

Topics covered

• How to Enter the Global Market
  • Global Markets Post-COVID-19
  • How to Create an International Expansion Plan: 5 Key Steps
• Types of International Expansion Strategies
  1. Multidomestic Strategy
  2. Global Expansion Strategy
  3. Transnational Strategy
  4. Foreign Direct Investments (FDIs)
• Common International Expansion Entry Modes
• How Can Global Call Forwarding Help Your International Expansions Efforts?

Expanding Internationally: How to Enter the Global Market

Before we get started, why should your business even consider entering the global space? And are the benefits of expanding internationally worth the costs and risks? The short answer is, it depends. It depends on the kind of business you operate and how you execute your international expansion strategy.

When done strategically, there are many benefits to expanding internationally, including:

• Access to new markets and a diverse customer base
• Increased ROI and profits
• Access to local and skilled talent and workforce
• Global business recognition and reputation
• Establish regional offices
• Stay ahead of the competition
• Access to foreign investment opportunities.

And since you open new revenue streams, you can expect the ROI and profits to offset the costs spent in entering new markets. But for everything to fall in place according to plan, you first need a solid international expansion plan.

Global Markets Post-COVID-19

Expanding globally after COVID-19 can seem a bit challenging. But with the right plan and resources, you can enter a new market smoothly and cost-effectively and add a new customer base to your business profile.

The key to successfully expanding your business is to:

1. Create a clear global expansion plan.
2. Choose the right international expansion strategy.
3. Identify the best entry mode for the new market.

Let’s look at each of these factors in detail.

How to Create an International Expansion Plan: 5 Key Steps

Before we compare the different types of international expansion strategies and entry modes, let’s look at the critical steps involved in creating a global expansion plan. This will give you context about what your business needs so you can identify the right strategies for international growth.

1) Pick the Right Markets to Enter

The first thought generally is to expand to a big, metropolitan area. However, certain businesses and industries do better in less developed and developing regions. Depending on your business type and stage of growth, identify the right markets and regions for your business to expand. And local market research can help with this.

Don’t know where to start? Here is a list of the best countries to expand to in 2021.

2) Conduct Market and Competitor Research

Then, you need to analyze how well your product or service will do in this new region. Is there a demand or market for your products or services? What is the quality of that demand? What demographics or portion of the population can afford to buy your products? How many competitors will you face? What is the demand for these competitors, and what resources do they have available? How does that stack up against your organization?

3) Understand Country and Governmental Regulations

Every country has its own foreign investment regulations. And so, before you start setting the groundwork for your expansion plan, you first need to familiarize yourself with these regulations. You can do so by visiting the country’s primary website or their trade website. For example, the United States has an International Trade Administration website where you can get information for US and international businesses. You can also learn more about these regulations on the country’s embassy websites.

4) Finalize on Entry Mode(s)

Next, you decide what entry mode is best suited for your business. Below we define and compare the different entry modes you can choose from.

You might even consider keeping a light footprint. That is, holding off on infrastructure and heavy investments till your foreign operations have grown and matured. You may decide to hire a few local employees and use cloud-based communication solutions to manage your operations. Have these employees identify untapped opportunities, conduct market research, and test the market gradually. This will help you save costs in the long run and ensure higher ROI.

5) Prepare Marketing and Expansion Plan

Once you have identified your markets and entry modes, you can start making a global expansion and marketing plan. This will outline your moves, budget, advertising campaigns, overhead requirements, and so on.

Learn more about global expansion best practices and planning strategies in our free global expansion guide.

Types of International Expansion Strategies

Here are the different strategies to expand internationally. But which one of these international expansion strategies is suitable for you depends on your business’s specific needs and goals. So educate yourself on the options available and make a decision accordingly.

1. Multidomestic Strategy

A multidomestic strategy focuses more on catering to locals within the new market. It is known as the strategy that sacrifices efficiency to improve the responsiveness of local requirements. Rather than forcing its parent country’s requirements and preferences onto the new market, it customizes its offerings and services to better meet the needs of the locals in the new market. As such, marketing and advertising efforts are geared towards the locals instead of taking a universal approach. A great deal of local research is required to execute a multidomestic strategy successfully.

Advantages of multidomestic strategies

• Diverse customer base
• Increased local responsiveness

Disadvantages of multidomestic strategies

• Uncertainty because of tailored and customized strategies spread across various countries
• Hard to achieve economies of scale that would help reduce costs

Examples of multidomestic strategy

• MTV customizing programming on its channels in different countries
• Heinz removing garlic and onion in its Indian ketchup recipe
• KFC selling tempura crispy strips in Japan and pastries with chicken in France
• McDonald’s offering multiple vegetarian options in India such as McSpicy Paneer, McAloo, and Green Chilli Aloo Naan

2. Global Expansion Strategy

A global expansion strategy is the opposite of a multidomestic strategy. The global expansion strategy is centralized—that is, the primary office controls it. This strategy maximizes global efficiency, so products and services are standardized and not tailored for local markets. The business units in each country are considered interdependent and respond to the primary office.

Advantages of a global expansion strategy

• Low risk for the firm
• Emphasizes economies of scale
• More opportunities to utilize innovations developed at a corporate level
• Effective for firms whose product is mainly hidden from the user’s view and where differences in local preferences is not an issue or requirement

Disadvantages of a global expansion strategy

• Trouble gaining a high market share in local markets
• Coordinating strategies and operations may prove challenging to manage
• Resources need to be shared and coordinating across boundaries and countries

Examples of a global expansion strategy

• Intel
• Microsoft offers the same product globally but with local languages
• Procter & Gamble (P&G) creates global brands whenever possible

3. Transnational Strategy

A transnational strategy combines the multidomestic and global international expansion strategy to create an international expansion strategy that caters to both global efficiency and local needs and responsiveness. Therefore, the two main characteristics of a transnational strategy are:

• High global integration
• High local responsiveness

To this end, balance and flexibility are key to executing a successful transnational strategy. And companies that do so perform better than competitors using a multidomestic or global expansion strategy.

Advantages of a transnational strategy

• High efficiency and low costs
• Wider reach
• Diverse market

Disadvantages of a transnational strategy

• Difficult to centralize and manage international offices
• Potential risk of alienating local customers

Examples of a transnational strategy

• McDonald’s offers custom menu items globally but has a cohesive global identity
• Unilever sells different brands in different regions but still maintains a singular corporate identity

4. Foreign Direct Investment (FDI)

FDI is when an organization enters an international market by investing in that country. Of all the international expansion strategies, this one is a good idea when demand and size of the market justify the investment. Some things to keep in mind when considering FDI:

• Your business can benefit from low-cost labor and cheap materials.
• You can avoid import duties when you manufacture locally.
• There may be import restrictions and limits for certain products.

Advantages of FDIs

• Retain control
• Low-cost labor, cheap material and manufacturing costs
• Diversified investors portfolios
• Provides financing and technology to developing countries
• Access to subsidies, tax breaks, and other concessions from the government

Disadvantages of FDIs

• High investment required
• High risk, related to change in policies against foreign companies
• Investors may have fewer moral attachments
• Potential unethical access to local markets

Examples of Foreign Direct Investment

• Mergers & acquisitions
• Horizontal FDI, where a firm replicates its entire organization in different countries
• Joint ventures
• Research & development
• Facilities
• Sales and customer support
• Manufacturing and logistics
• Retail and services
• Administration
• Greenfield investments

Common International Expansion Entry Modes

There are a few different ways to enter a new global market. And each of these international expansion strategies comes with benefits and potential issues. Here we will look at the various international expansion entry modes that your business can choose from when deciding how to enter a new market:

How Can Global Call Forwarding Help Your International Expansions Efforts?

Global Call Forwarding has helped thousands of businesses enter new markets and regions cost-effectively. Whether you plan to open regional offices or want to conduct operations virtually, our cloud communication solutions can ensure that your business communicates with team members and customers efficiently. Our high-availability network and partnerships with local, regional providers enable us to offer our customers cloud phone numbers (local and toll free) from more than 160 countries worldwide. And our phone numbers come equipped with advanced call management features such as call routing, automated voice response, softphones, and more.

We can support your international expansion strategies and help you enter new markets with a light footprint and low overhead costs. And as your business grows, you can add more service lines and features to our highly scalable solution.

Expanding internationally is a big step, and we are here to make the process less stressful when it comes to business communication. Want to learn more about how we can help you set up more points of contact in different countries and regions? Speak with our representatives today or chat with us online!

New changes are happening all over the world — from adopting new business processes to nurturing social movements to adjusting to the global pandemic. And the much-talked-about Brexit deal is one of these major changes. Curious about what Brexit means for businesses in the UK and EU? In this article, we look at the different business-related areas that will feel the impacts of the new Brexit deal.

How is Brexit Affecting Business in the EU and UK

Companies and business owners across the EU and UK are worried about Brexit and business continuity. As the transition period comes to an end, many businesses in Britain and Europe are wondering, “how will Brexit affect my business?” From business travel to communication to new customs regulations, there are many ways the Brexit deal can impact your business processes. In this post, we discuss how Brexit will affect:

• Business Travel
• Working and Studying Abroad (Work Visas, Education, and Erasmus)
• Impact on Trade (Customs, Supply Chain, VAT Regime)
• Mobile Roaming and Calling Charges
• Online Services

Let’s get into the different ways that Brexit may affect businesses in the EU and United Kingdom.

1. Business Travel

One of the main areas that the new Brexit deal affects EU and UK companies is in regards to the new restrictions on business travel. Individuals traveling for work from the EU to the UK and vice versa have new regulations to keep in mind.

British travelers will face restrictions on their passports. For example, British travelers will need at least 6 months left on their passports to travel to the EU. While these travelers don’t need a visa to enter the EU, they will need travel authorization. At immigration, they may be questioned about the duration of their stay, returned bookings, financing plans, and so on. Conversely, national ID cards are no longer valid for European travelers entering Britain, except for particular cases. And EU travelers will need to go through customs checks at UK airports.

Other changes:

1. Additionally, duty-free shopping will continue. However, there will be new allowances for the quantity of goods you can bring back to the United Kingdom.
2. There is also a new set of rules and regulations to follow when driving abroad. UK licenses will no longer be recognized as the same as the EU. And British drivers driving in the EU may require an international driving permit.
3. The EU will lose access to professional service providers (doctors, veterinarians, engineers, architects, etc.) from the UK. These professions will not be automatically recognized in Europe. And UK professionals with these qualifications will have to jump through regulations to get recognized.
4. Financial services will also be affected. UK-registered and regulated banks have announced (and started making) plans to close accounts of citizens residing in the EU or EU economic area.

2. Working and Studying Abroad

With the new Brexit deal, working and studying abroad (between the UK and EU) has become more complicated. Since the Four Freedoms of the EU — freedom of movement of goods, capital, persons, and services — no longer apply to British citizens, they do not benefit from visa-less employment and education within the EU.

Work Visas

The UK will issue a new points-based immigration system that treats EU & non-EU citizens the same. With this new system, travelers from the EU, EEA, and Switzerland can travel to the UK for short trips without a visa. However, longer stays and employment will require an application under the new points-based system. As explained in TLDR News’ video on how Brexit will affect work visas, the points-based system requires applicants to accumulate a minimum of 70 points. Out of the 70 points, individuals applying must have a job offer (20 points), demonstrate a high skill level (20 points), and speak English (10 points) — these are mandatory. The remaining 20 points can be achieved through the other criteria as listed by the government.

Education and Erasmus

To study in any of the European countries, British citizens will require a visa from particular EU countries, if their courses run longer than 3 months. Additionally, they will no longer qualify for domestic fees when studying abroad. All of this makes going abroad for education more expensive.

Furthermore, British universities will no longer participate in the Erasmus program. This means that European students won’t be able to study temporarily in the UK through the program. And students who still want to pursue higher education in the UK will have to apply through the new points-based immigration system and deal with higher international fees.

3. Impact on Trade

While Britain was part of the EU, companies could buy and sell goods across EU borders without paying taxes. Additionally, there were no limits on the amount of items that could be traded. However, with the Brexit deal, a few changes come into effect:

Customs/Border Tariffs

Since exiting the EU Customs Union, Great Britain will longer enjoy the benefits of free trade, making the movement of goods across the EU and UK more difficult. Now, British importers and exporters (trading with Europe) are considered non-residents. Because of this, goods moving between the UK and EU now require customs declarations. However, these goods will not be subject to tariffs.

On the other hand, businesses that used to face competition from overseas (EU) companies will enjoy a competitive advantage. This is because UK customers will have to choose between expensive imports and cheaper domestic products.

Supply Chain

Businesses can expect delays in their supply chain, including shipping and deliveries, due to border checks and queues. It is expected that the “EU would immediately implement tough new checks on agri-food products, with no grace period.” This is not good news for perishable goods as they may get caught up in these checks and queues.

VAT Regime

UK will no longer be bound by the EU’s VAT regime. As a result, importers and customers receiving goods from the EU will be subject to VAT for imports. The British government might decide to change the system, including making new goods 0% VAT-rated. However, what exactly will happen in the UK related to the VAT regime is still not concretely decided.

4. Mobile Roaming and Calling Charges

Many are wondering if Brexit will bring roaming charges back to businesses and customers. More specifically, will Brexit mean that phone calls between the EU and UK are considered international?

While part of the EU, British phone carriers were subject to EU phone laws. Through these laws, people could call, text, and use data on the same terms in the United Kingdom and across Europe. In other words, they could use their data at no extra fees, even when within the EU. Unfortunately, these laws no longer apply to UK phone carriers. And carriers are not legally required to offer the same rates as they did before.

As of December 2020, Vodafone confirmed that they had no plans to bring back roaming charges. Other major operators — O2, EE, 3 — haven’t publicly confirmed that they will increase calling rates.

If roaming charges are brought back, businesses in and outside of Britain and the EU can use virtual phone numbers as an alternative. For example, an EU company can get a UK phone number to connect with local customers in the UK without worrying about roaming or international charges.

5. Online Services

Lastly, when within the EU, there was a legal guarantee that the UK would have access to online services. However, this guarantee is no longer valid. Individual providers will need to decide how to make adjustments and amend their provisions.

How Global Call Forwarding Can Help with Brexit

The Brexit deal has led to both victories and uncertainties for people of different sectors in the UK and EU societies. Global Call Forwarding can ease some of these concerns by providing businesses in the UK and EU with European virtual phone numbers to help transition more effectively. You can sign up for a virtual phone number or buy a toll-free UK number on our website. Or, speak with our global specialists at 1 (888) 908 6171 to get a better understanding of how we can support your business during this change.

Dealing with global customers is not always easy. Add to this, cultural differences, language barriers, and cultural nuances, and you have yourself a messy situation. However, you can prepare better so that you navigate these differences professionally and develop valuable relationships. Follow the appropriate international phone etiquette when conducting business interactions with international customers and clients.

What is Proper International Phone Etiquette?

When working with global customers and clients, you will have to have in-person, phone, and video conversations to move forward or close deals. Oftentimes, people are so used to doing business within their country or locally that they may be unaware of international business conventions.

International phone etiquette is the awareness of the differences and subtleties between various countries and regions and how to navigate these differences in order to communicate effectively.

How to Communicate Well with International Customers

So, what factors of international communication do you need to keep in mind when connecting with global customers? Here are some key elements to pay attention to:

1. Respect their Titles
When conducting business interactions, make sure you are aware of local conventions for addressing your attendees. Different countries have different cultural conventions for addressing one another. For example, in the US, using words such as “guys” may be common during business meetings. However, in countries like Japan and Germany, conventions are different: In Japan, it is polite to address someone by their first name, followed by “san.” On the other hand, in Germany, first names are not preferred. Instead, people are addressed by Herr/Frau followed by their last name. Being aware of these nuances can help you develop demonstrate respect and stronger relationships.

2. Listen Carefully and Actively
When dealing with international clients and business partners, a common challenge is understanding and interpreting accents. A second challenge is misunderstanding cultural references. To counter this issue, listen actively and carefully and when needed, ask for clarification. This is an important part of international phone etiquette. Furthermore, be clear in your own pronunciation and diction; speak slowly and clearly. If required, rephrase your sentence for better clarity and to avoid misunderstandings.

3. Don’t Use Slang
Avoid local and cultural slang, colloquialisms, or references as this may not work in an international setting. You will end up leaving your business partners or clients confused and they may see this as a sign of informality. In some cases, you may even offend some one. Awareness is required to identify and steer away from slang terms, phrases, and buzzwords.

4. Avoid Frustrations and Talking Down
Lastly, be careful when toeing the line of speaking clearly and dumbing down your words and sentences. You may run the risk of offending someone and sounding rude and patronizing. Be patient and focus on the common goal of communicating effectively.

Why is it Important to Practice Phone Etiquette?

Being aware of and practicing international phone etiquette can go a long way in securing essential deals and developing significant relationships. For many companies and clients, conducting business via phone and video conversations is a new shift.

In fact, some may still be apprehensive of closing deals without face-to-face interaction. If you do not show respect during phone conversations or are unaware of international business conventions, you may lose a valuable business relationship. And so, practicing phone etiquette can help you ease any discomfort and hesitancy.

The Do’s and Don’t of International Phone Etiquette

Below, we will look at the Do’s and Don’ts of international business phone etiquette for the following countries:

• Australia
• Mexico
• Brazil
• Russia
• China
• South Africa
• France
• Spain
• Germany
• UAE
• India
• UK
• Italy
• USA
• Japan

Invest in the Right Tools for International Communication

Global Call Forwarding can support your international communication efforts with our international toll free numbers. You can sign up online or speak with our global specialists by calling 1 (888) 908 6171.