A key important factor when considering feasibility of international expansion is the business model.
International expansion may be a prime opportunity to think carefully about what the strongest business model is for your company.
Introduction
Factors such as customers, distribution, competition, etc. change in overseas markets.
Depending on the extent of change, you may need to change your company (product and price) drastically.
Accounting for the possibility that your company may have to change, if anticipating your permissible scope or changing your company would be too difficult,
it is important to consider a way for your company to succeed even overseas; in other words, your company’s optimal business model, before beginning international expansion. Such consideration may include singling out your target country.
What is an “exclusive business model?”
Every business has a business model. If your current business has sustainable produced profit, it means you have a solid exclusive business model.
In order to really understand your business model, we recommend formulating an International Expansion Plan (Export Edition) or International Expansion Plan (Investment Edition).
By preparing a plan, you can get a broad sense of your company’s overall status and future potential, including your domestic business inventory, unique strengths, relationship with competition, changes in customer needs, issues you’ve not yet addressed, future outlook, and options.
Once you have a plan, you can do a “health check” and take “x-rays” of your company.
For example, you may discover that…
- You’ve poured personnel resources into the business with the highest sales for many years however, due to the current state of the world, there are no grounds for this business growing from next year onwards, so perhaps you should revise personnel allocation
- You shouldn’t just withdraw from businesses with low profit. Rather, it may be wise to consider whether you could expect stable profit by changing distribution and product strategy
- Rather than rolling out each business separately, by focusing on elemental technology to advance by individual technology, you could make your company’s strengths visible and perhaps discover new customers…
Through these so-called “x-rays” of your company, you can see the “skeleton,” or in other words, your company’s business model, by assessing what sort of logic and which customer values you are betting on.
Can’t we just apply the same business model as we do in Japan?
Sometimes international expansion can be achieved with the same business model that a company uses in Japan, however other times success is difficult if no changes are made. In order to tell which case applies to you, you must first investigate the distribution, competition, market, potential customers and other factors of the country you plan to expand into or export to.
If the target country has similar needs to Japan, few competitors, and a similar distribution structure, business expansion may be possible, however, the trade-off of low barriers is that it is also easy for competitors to enter.
You must make a decision by looking at the whole picture; in other words, not just the “points” visible to you right now, but a “line” extending one to three years into the future that incorporates risk also, put together a Plan B and Plan C to fall back on, as well as anticipate competition and market changes.
Would a new business model tailored to international business be readily accepted?
When restructuring your business model for the international market, you may only need to change a portion of the existing model, or renew it altogether.
In the case of a new model, the risk and cost are high as you will be rolling out a new product or service in a new market where you have no experience. You will no doubt need an elaborate plan and local surveys to test your product, untried on the domestic market, for the first time overseas.
However, in the overwhelming majority of cases, most SMEs proceed with international expansion by partial correction to their business models. A good way to proceed would be by making further corrections as the need arises due to the fact that business continuity is greatly impacted by local regulations/standards and competition.
Sounds like a great opportunity to rethink our business model!
I am getting the feeling our international expansion will be a success!
Oh no, this is merely the first step!
Oh…really?
There are many risks involved in international expansion that don’t become apparent until you’ve begun the process.
Next, let’s learn about the risks associated with international expansion and how to avoid them!
