It’s a big world. Why settle just for the UK market, when the sweet sounds of your cash registers ringing could be heard from all over the world? While many companies have most certainly enjoyed growth and diversity by expanding to foreign climbs, there are also considerable risks and threats to navigate.
In this article we’ll explore some of the issues an SME owner should consider before taking their business to compete abroad. Make sure you have answers to the below issues in particular:
- Does the demand for your product or service actually exist abroad? It’s extremely risky to simply speculate that there will automatically be sufficient demand for your goods abroad. Different geographical locations have distinct and narrowly defined markets which could present a stark and unpleasant surprise for SME owners who decide to just turn up, and hope for the best. A more prudent approach would be to test foreign markets directly. Conduct research about parallel markets abroad and create a plan on how you can tap into them with poise and efficiency.
- Foreign exchange risk. This can go either way – when you do business abroad, you’ll almost certainly need to accept payment in the host nations currency. This brings foreign exchange risk – what happens if the pound significantly weakens against the currency which you’re trading in abroad? Any profits could quite easily be gulped up by a weak and moping pound. If this is likely to cause you sleepless nights, there are specific hedging techniques that can be applied to protect against currency risk – and at the very least, losses on foreign exchange are considered tax deductible.
- Cultural branding. You may need to tweak your brand and marketing to fit the foreign market you’re aiming for. This is a common tactic with many large corporations who repackage and rebrand the same goods for sale in different countries.
- What is the competition like? Your SME may be cock of the walk locally, but just how aggressive is the competition in the foreign markets you aim to set up in? Will you be able to compete on the same battle grounds? If you’re trying to break into a mature market abroad – perhaps one with an established monopoly or cartel – your business may face a struggle gaining sufficient market share.
- Does your USP still apply? You may have a unique selling point in the good old UK – but you would need to analyze this in a whole new light when you set up abroad. Check what the competition is offering, and whether your specified USP holds up against it.
- Red tape and logistics. If your SME presence abroad will need a physical location, this can present a whole new set of expenses and challenges. Some countries are notoriously tricky to set up shop in, often requiring energy sapping levels of red tape and administration to hurdle past. There are also often specific laws and permits that will need to be observed before you can legally open a presence abroad.
Taking on board these points can help any SME to go international only after due consideration and planning – to ensure that no nasty business surprises lie in wait over the ocean.