This article will provide an overview of the various options for international expansion and some local aspects that need to be considered in Asia, one of the most popular expansion targets, especially for SMEs. You will also learn how EDI can simplify your expansion and help minimize your risk by eliminating certain barriers such as different languages or time zones.
By deciding to expand internationally, your company will have a number of other decisions to make. The lure of tapping into large markets outside one’s national borders is tempting, but you need to create a detailed plan. What markets are you going to target and what kind of expansion makes sense for your business?
Standardization and automation simplify expansions
Language problems have caused many vacationers to put their feet in their mouths when trying to speak with locals. Language barriers and lack of cultural knowledge can also lead to misunderstandings in the world of business. What might just be fodder for funny stories when it happens on vacation could be fatal to your business’ success.
So what should you do to avoid such risks? There are all sorts of etiquette guides out there that give comprehensive basic instruction in the customs relevant to doing business in a variety of countries and cultures. Things aren’t quite as easy when it comes to acquiring the language skills necessary for an expansion, especially if the language you need to learn uses something other than our Latin alphabet or differentiates words based on tones. It can take a while for your language lessons to pay off. You simply cannot learn languages like Mandarin overnight and even after many years of lessons, many people can only dream of being fluent enough in Chinese to conduct business. What else would you expect when even using the global language of English still leads to problems and you still need to bring in translators and interpreters to handle business deals? You need to realize that international expansion is often quite expensive and challenging.
One solution was proposed decades ago with the easy-to-learn artificial language of Esperanto, but it failed to take off. Instead, thankfully, standards for the electronic data interchange (EDI) were developed. At least data transfers can enjoy the benefits of standardization and automation.
Instantly solving a major language problem through standardization
To ensure that data can be smoothly exchanged with foreign business partners as you try to enter international markets, the standardization of communication processes is essential. A few standard sets of characters are enough to exchange data electronically and to ensure that different alphabets can be recognized across national borders and received correctly.
What advantages does EDI provide when expanding internationally?
Suppose you want to integrate a new customer or supplier into your network, but they speak another language. EDI standards make sure that not only are messages clearly identified and transformed, but also received correctly by the recipient. This facilitates communication with foreign partners enormously. Ordering and invoicing can be done fully automatically, reducing labor costs and human sources of error.
Currencies and units can also be automatically converted, making it easy to send invoices to countries with other currencies.
If you rely on the existing EDI infrastructure of a professional service provider for EDI/B2B cloud services, you don’t need to worry about meeting prerequisites and any potential problems and risks associated with EDI. Find out more about the 5 principles for your EDI success in our free eBook which you can download here.
The appeal of international expansion
Many US corporations at an advanced stage of internationalization need products and services similar to those they obtain from SME partners back home. So why not take the chance and think about expanding to markets where the big players have already established a foothold? If you manage to enter a foreign market by working with a partner, you’ll quickly find more opportunities to acquire new business customers. As globalization continues apace, this strategy can be promising since new markets also offer new potential.
Identifying the right international markets for your company
Once you’ve decided to expand, the next question is where. Ideally, you’ll look at your existing customer base for ideas. Where are your major customers already active and is there any chance of further cooperation? What does the competitive situation in each country look like and what opportunities and risks can be identified? Classical business analyses and subsequent comparisons of different markets can provide a meaningful basis for your decisions.
Of course, both the economic situation of different countries and linguistic aspects play a role, because, despite the standardization of electronic data interchange, the human-to-human communication in other matters must be taken into account. If language barriers are expected, this should be considered in your decision.
Opting for a meaningful international expansion strategy
Another important consideration is what kind of international expansion you want. Is a small sales office enough at first, do you need a full-blown office set-up, should you franchise your operations, or find a partner as part of a joint venture? This last option can be useful if your company has only limited cultural and linguistic competencies to contribute. By partnering with a local company, it should be easier for you to overcome such challenges. This type of cooperation also helps to recruit team members for your new foreign office. This will ensure that they understand the culture of their future employer to ensure smooth cooperation.
Other countries, other customs, other things to consider
Other rules, other laws, and other business climates apply to countries outside your own. All these points should be included in your expansion decision and in particular whether the selected country places special requirements on foreign companies. As an example, let’s take a look at the challenges you might face in the Asian market.
What makes Asia a different place to do business
One well-known and popular market for expansion is China. It is currently booming and many companies have set up shop there. The most popular way to enter the market is as a “wholly foreign-owned enterprise”, i.e. a 100% subsidiary, but equity joint ventures and mergers & acquisitions are also possible. Although merging with a Chinese company may result in conflicts due to different goals, it does greatly simplify access to the market thanks to the local partner’s cultural knowledge and network. You’ll need to decide which form of market entry makes the most sense for you based on your particular situation.
One aspect common in many countries in Southeast Asia is the high humidity, which, for example, has to be considered in the packaging of foodstuffs. The climate causes food to spoil much more quickly and it may be so disadvantageous to you that entering the market might not be profitable.
You should also expect that the way you do marketing will be different than at home. A campaign that would be a hit in the United States might offend Asian customers and be a big flop. If you have limited knowledge of the market, you should definitely consult with a specialist marketing agency in the destination country in order to ensure you have a fighting chance as you enter the market.