In today’s global economy, companies of all sizes are establishing operations in foreign markets. This type of expansion can provide several advantages, including greater opportunities for market growth and diversification. The trend of Americans going global is also likely to continue. A 2016 survey by Wells Fargo found that 87 percent of U.S. firms believe that international expansion is necessary for long-term growth.
However, despite the growing number of U.S. companies expanding abroad, there are still many firms that haven’t made the leap overseas. If you’re on the fence about taking your company global, consider these five benefits of international business expansion.
1. New markets
According to the U.S. Small Business Administration, 96 percent of the world’s consumers live outside of America. For many companies, international expansion offers a chance to conquer new territories and reach more of these consumers, thus increasing sales.
For example, U.S. firms like Nike and IBM maintain operations in the Netherlands because it offers direct access to 170 million European consumers within approximately 300 miles. In fact, Holland’s connection to European markets is one reason why UPS recently opened a new $150 million facility in Eindhoven, one of the company’s largest investments in Europe.
2. Diversification
Many businesses expand internationally to diversify their assets, an action that can protect a company’s bottom line against unforeseen events. For instance, companies with international operations can offset negative growth in one market by operating successfully in another. Companies also can utilize international markets to introduce unique products and services, which can help maintain a positive revenue stream.
Coca-Cola is an example of a company that diversifies through global operations. This quarter, the company reported increased sales in China, India and South Korea, which benefited Coca-Cola worldwide. Coca-Cola also recently bought Mexican sparkling water brand Topo Chico in an effort to grow a more globally attractive and diverse portfolio.
3. Access to talent
Another top benefit of going global is the opportunity to access to new talent pools. In many cases, international labor can offer companies unique advantages in terms of increased productivity, advanced language skills, diverse educational backgrounds and more.
For example, when Netflix expanded to Amsterdam earlier this year, the company praised the city for enabling Netflix to hire multilingual and internationally minded employees who can expertly “understand consumers and cultures in all of the territories across Europe.”
4. Competitive advantage
Companies also choose international expansion to gain a competitive edge over their opponents. For example, businesses that expand in markets where their competitors do not operate often have a first-mover advantage, which allows for them to build strong brand awareness with consumers before their competitors. International expansion can also help companies acquire access to new technologies and industry ecosystems, which may significantly improve their operations.
5. Foreign investment opportunities
Finally, companies considering international expansion shouldn’t forget about the additional investment opportunities that foreign markets can offer. For instance, many firms are able to develop new resources and forge important connections by operating in global markets.
6.Improving Profit Margins
Improving profit margins is one of the most common reasons for entering international markets. When growth strategies are used up on the national level, the next path is often to seek out international growth. Distributing your products in additional countries increases your customer base. As you offer compelling solutions and build loyalty across international markets, revenue strengthens and escalates as well.
7.Competing for New Sales
Closely connected to the goal of improved profit margins is the desire to increase sales. Even if company operators generally are satisfied with revenue levels, international expansion can further improve overall revenues. The race to expand internationally is often about gaining a presence in foreign markets. Being the first to arrive in a new market can provide significant advantages.
If you don't enter a ripe market with your solution, competitors do. Not only do you miss the revenue source, but you lose out on other valuable assets that you could use to promote your company at home and abroad. In some cases, a strong domestic company gets overrun by a lesser player that succeeds globally and grows big through global synergy.
8.Recruiting New Talent
Operating in international markets also gives businesses access to a larger and more diversified talent pool. Employees who speak different languages and understand different cultures enhance connections with a broader customer base. Having an international brand that is well reputed will invite top talent to the company. Businesses can also structure global work teams in a way that allows for synergy in building a global brand.
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