Companies that expand strongly in international markets have seen their total revenue grow by up to 8% and experience a shareholder return that’s 37% higher than that of slower growth companies.
So as enticing as the prospect of global expansion may seem, you need to approach it with a well-crafted strategy to capitalize on the opportunities. Let’s take a look at the possibilities, challenges, and steps to take your business global, unlocking new horizons for growth and success.
8 Key benefits of expanding a business globally
1. Market diversification
Expanding globally allows businesses to diversify their product offerings and cater to the unique needs of different markets. This diversification mitigates risks and overreliance on any single product, market, or customer base. By tapping into new markets, companies can:
- Offset seasonal sales fluctuations by entering markets with countercyclical demand patterns.
- Reduce vulnerability to economic downturns in any one region by having a global portfolio.
- Extend the lifecycle of products by finding new areas with unmet demand.
- Identify opportunities for new product innovation based on diverse market needs.
- Achieve economies of scope by leveraging existing capabilities across multiple product lines.
Real-life example: LetsGetChecked is a US-based medical supplies company that specializes in mobile medical testing kits. These kits can be used for testing a variety of terminal illnesses, including STDs and COVID. Entering new markets prompted the development of specialized testing kits, such as those for Ebola and STIs, maximizing their reach and impact.
Market diversification also insulates companies from disruptions like political instability, natural disasters, or regulatory changes in any single market. A diverse global footprint provides a buffer and fallback options
2. Scalability and cost efficiency
When a company goes global, it can produce goods on a larger scale, which often leads to lower costs per unit (economies of scale). This can increase profit margins and make the company more competitive in the market. Specifically:
- Higher production volumes spread fixed costs over more units, reducing per-unit overhead
- Bulk purchasing of raw materials/components at lower negotiated rates
- Opportunities to build larger, more efficient manufacturing facilities
- Ability to leverage specialization and division of labor across a larger workforce
The increased efficiency and lower costs allow for higher profit margins that can be reinvested into expansion, R&D, marketing, and other growth initiatives.
3. Innovation opportunities
Entering new markets exposes businesses to diverse challenges and consumer needs, fostering innovation and problem-solving. Different markets have unmet needs shaped by local culture, regulations, resources, and preferences.
Example: LetsGetChecked developed an STI testing kit in response to the high prevalence of such cases in Portugal, showcasing the potential for innovation when catering to local market demands.
Solving unique local problems drives product innovation that can then be an asset in other markets. It prevents stagnation and myopic thinking.
4. Brand recognition
Global expansion can significantly boost brand recognition and awareness, enabling businesses to establish themselves as industry leaders. Think of Zara’s ubiquity: When you go global, your brand gains recognition.
Having an international presence:
- Increases credibility and perception as a large, powerful brand
- Facilitates word-of-mouth marketing across borders
- Allows for unified global marketing/advertising for efficiency
- Reinforces the brand identity consistently in consumers’ minds
Brand recognition is a pivotal intangible asset that enables premium pricing, loyalty, and future growth.
5. Risk management
By operating in multiple markets, businesses can mitigate risks and leverage insights from one market to navigate challenges in another. This diversification strategy can help businesses stay ahead of potential pitfalls and adapt more effectively to changing conditions.
6. Financial opportunities
Global expansion opens doors to new investment opportunities and financial partnerships. As businesses enter markets with different resources and industries, they can explore diversifying their portfolio and capitalizing on lucrative ventures. These financial opportunities improve cash flow, cost of capital, and overall financial flexibility.
7. Workforce diversification and skilled labor
Expanding globally facilitates access to a diverse talent pool and skilled labor force. Businesses can tap into local expertise, fostering a dynamic and culturally diverse workforce that drives innovation and growth.
Expanding globally facilitates access to a diverse talent pool and skilled labor force. Businesses can tap into local expertise, fostering a dynamic and culturally diverse workforce that drives innovation and growth.
- Access to specialized skills/education strengths of other countries
- Multicultural perspectives that enhance problem-solving
- Localizing some hiring reduces costs and provides market insights
- Ability to attract and retain top talent globally, rather than just locally
A diverse global workforce drives creativity, cultural understanding of markets, and a sustained competitive advantage.
8. Partnership opportunities
Global expansion often attracts interest from local businesses, governments, and industry experts seeking mutually beneficial partnerships. These collaborations can unlock new avenues for growth, knowledge sharing, and market penetration.