Have you conducted a feasibility study in the overseas country?
It is essential that a local feasibility study be carried out to confirm the potential of your business before endeavoring to discover new customers and roll out new businesses overseas.
A feasibility study must be done whether you are investing in, or exporting to, the overseas country.
Introduction
When considering international expansion, you must first formulate a business plan, but there are many elements of this you won’t understand or can’t be sure about if your research is all on paper. These elements will only become clear once you go to the locality, meet the related companies, and actually listen to their stories.
In order to decide whether or not to pursue your business, sometimes you must conduct not just one, but several feasibility studies in the locality to gather materials that will allow you to make an objective decision.
Reasons for conducting a feasibility study for exporting include
- There are no exhibitions being held that suit your product or target
- There is very minimal information on the industry itself
- You have no idea whether or not there is a need for your product in that country and, if there is, what kind of need it is
As you can see, in the initial stage of international expansion, feasibility studies are crucial in determining whether your product/service is needed, and how it can be further improved.
You need to be somewhat careful when conducting a feasibility study for investment purposes.
The reason for this is that there is a surprisingly high number of companies who do carry out a feasibility study but not to a suitable extent, then proceed with establishing a factory and stores, only to withdraw from the market without ever making a profit.
If the feasibility study is appropriate, normalcy bias can be removed to a certain extent, however conducting a feasibility study merely on a superficial level will not be very helpful in achieving this.
Normalcy bias: Humans’ tendency to ignore or underestimate negative information that would inconvenience them. In other words, overly-high expectations lacking foundation and not considered with sufficient levelheadedness. E.g. “Even if other companies fail, we will succeed at overseas investment, but we need to act right now!”
I’ve never carried out a feasibility study before. In the case of investment, what kind of things should we investigate in the locality?
Below is a list of the main points you need to know in order to proceed with your investment plans.
- Can we secure customers?
- Can we establish a production base?
- Can we secure suppliers?
- Can we hire employees?
- Can we manage the business itself?
- What are the points to be careful of?
The website of Japan’s government body promoting bilateral trade and investment, JETRO, provides a great deal of information regarding what you need to do in order to set up a production base overseas and whether or not such a move is advisable.
JETRO ? Learn about systems/procedures for international expansion
You may hire a local consultant to investigate some points but, just in case, you should also obtain details on the entire process, such as which authority was asked what question and how they responded.
It may also be a good idea to visit the Japan Embassy, JETRO, Chamber of Commerce or Japanese Association and assertively communicate the kind of business you hope to roll out in the locality, then be briefed on the locality’s specific circumstances.
It isn’t easy to find a local supplier that meets your quality standards, however if you only connect with Japanese-owned companies, you will not have much of a price advantage, therefore you should investigate both local and Japanese-owned companies. In most cases, local suppliers are used in countries other than Asia.
One approach to securing employees is visiting universities, vocational schools, etc. as well as having interviews at personnel service companies. You would probably also be able to find out about local circumstances through consultations with an accounting firm or legal firm on the premise of entering into an advisory contract with them.
Even going to see Japanese-owned companies already operating in the locality may help you confirm points about similar industry types, as well as other industry types.
One point to be careful of when conducting a feasibility study for investment purposes is that hardly no one you consult with about investment opportunities will say to you, “Please do not invest in us,” and if such a person did exist, they would most likely be your competitor.
Most parties, whether they be an industrial park, real estate agency, personnel service company, accounting office, law firm, auditor, supplier, or even a customer, will welcome you with open arms.
In addition, local government bodies and investment ministries will practically roll out the red carpet and shower you with all sorts of flattery about special incentives and comprehensive support.
However, if you think about it carefully, the locality is the one receiving the investment, and the Japan side (you) is the one paying the money. As far as the region in question is concerned, the more overseas investment, the better!
It is a given that the target region will praise the company that will invest there, and such praise has no more actual value than greetings. This kind of welcoming mode in no way guarantees the feasibility of your business in the locality.
Also, there are too many cases to count where the local (Japanese-owned) company has welcomed an SME from Japan with open arms then, before you realize it, it becomes a case of dual, or even, triple vendors, and ultimately the original company that welcomed you is not really your customer at all.
(Regarding 1. Can I secure customers?, please see the Feasibility Studies for Exporting section discussed later)
I’ve never carried out a feasibility study before. In the case of exporting, what kind of things should we investigate in the locality?
Below is a list of the main points you need to know in order to proceed with your exporting plan.
- Will our product sell?
- What are the barriers to selling?
- How can we sell more?
- What are the points to be careful of?
To acquire such knowledge, you can interview local consumers and ask them about how they feel when they actually use your product. Alternatively, you could make an appointment with a candidate customer company and ask points 1 through 4 listed above. Meet with business operators delivering to your competitors or the affiliates thereof to find out about your competitors’ circumstances.
You can obtain an overall picture of the industry and related chronological information from industry experts, XX industry associations, and YY industry institutes. Ask distributors and/or wholesalers about the differences in importing restrictions and distribution. Also, you can refer to media and free newspapers/magazines to obtain information on industry responses and consumer trends.
Points to be careful of regarding feasibility studies for exporting are, in the case of production goods, asking carefully about a potential customer’s concerns regarding switching to a new product, or in the case of consumer goods, gathering as concrete information as possible about other companies’ trends, particularly in regards to local sales price.
Moreover, if you can also research about the products closely related to your product and products in different categories, you will have a better variety of materials to refer to when making decisions.
An exporting feasibility study is the opposite to investment insofar as it is the target region that will be paying the money and the Japan-side (you) that will be receiving it. As such, local parties won’t roll out the red carpet when you conduct your feasibility study, therefore you are more likely to gain an understanding of the actual circumstances through truthful evaluations and frank opinions.
After I conduct a feasibility study, how can I judge whether my business has potential or not?
If your business has practically no potential, then, in actual fact, you probably won’t even be able to begin building an international expansion business plan at all. Well, you could put together some of the necessary documents, but your gut will probably be telling you that it is not the right move to make in terms of a good reason to invest right now, sense of mission, your company’s past/present/future connections, etc., therefore it would be quite difficult to persuade others of your business’ worth.
It is very difficult to make a decision about whether or not you should proceed when it isn’t necessarily the case that your business has no potential, but it’s difficult to say with certainty that it definitely does.
The reason for this is, if the business (and the company running it) is neither nay nor yay, not only will the decision of whether or not you should attempt international expansion be a difficult one, but so too will all decisions afterwards be.
In other words, there’s a high possibility that your business or company is not answering the current needs of the market, and that you have no awareness of this.
In the dramatically-changing VUCA* era, not sincerely facing the current situation which you can’t make a clear decision on leads to greater risk of more “unknowns.”
If you decide against international expansion, you can inject all your resources into domestic business. If you decide for international expansion, then you can solemnly go about doing the things that must be done to achieve such a goal.
If you cannot steer yourself firmly in either of these directions, it means you will spend more time at a standstill.
This may be the perfect opportunity for you to thoroughly think about things such as;
Why am I at a loose end?
Do I understand the true concerns of customers?
Am I stretching the company’s current resources and achievements to impossible limits for the sake of the future and international expansion?
What do I really want to do?
＊ VUCA is an acronym for “Volatility,” “Uncertainty,” “Complexity,” and “Ambiguity.” It is used to describe a state in which unexpected things happen repeatedly and it is difficult to predict the future. The state of the world in the 21st century can be described as VUCA.
Warren Bennis and Burt Nanus 1985 book titled Leaders：The Strategies for Taking Charge
However, if you establish an international expansion business plan and can carry out a local investigation to the stage where you are only unable to confirm a certain point, or if you can clarify just one more point you would be able to identify whether or not expansion would be successful, then you can say that your business has potential (although unsure of the extent) rather than has no potential.
After that, it’s all a matter of multiplication.
Business feasibility x company president’s preparedness x business capital x qualities of staff on the ground
In reality, every year there are a set number of SMEs that make the decision to attempt international expansion after completing a feasibility study and proceed with exporting or overseas investment.
Perhaps the points common to all companies that succeed at international expansion are,
- they are thinking far into the future,
- and they don’t mistake things that can be achieved with hard work for things that are, in fact, impossible.
Right now, we live in a very peculiar era where, over the next century, the population will slowly shrink back to what it was one hundred years ago.
If the population declines, no doubt so too will the number of companies.
In order to compensate for the fall in the workforce, there will be an acceleration of DX strategies and AI introduction, which will no doubt lead to a series of doors opening to a much different world than ever before.
If you steel your will to making international expansion a reality for you and develop the necessary capabilities, your SME will most certainly gain strength.
Even if you don’t end up attempting international expansion, it will no doubt help you gain the muscle power to ride the oncoming wave into the unknown.
International expansion is no special endeavor.
All it takes is knowing your overseas customers, developing the necessary capabilities, forging a strategy, then, with a “chin up!” approach, staying passionate and…just going for it.
Just going for it, you say?
Wow, that’s a grand proposal.
It seems I have a long road ahead of me, but I must stay committed!
We really do live in a rare era!
It makes me kind of excited.
(Gosh, you were so unwilling at first) …now you’re excited? (sob, sob)
The scenery looks different to me now.
International expansion might actually be much more fantastic than I imagined.
Wonderful!
I’m really feeling your enthusiasm, both of you!!
International expansion is only possible with the determination of the company top executive and enthusiasm of the employees in the field.
Please definitely forge a future where your company’s products are being accepted and loved abroad!
Looking forward to it!
If you ever face difficulties, feel free to reach out to us here at Paccloa Q.
We’ll come running!
Even if we are at the far reaches of Earth??
Um…(sob, sob)
Just kidding! (LOL)
Please look forward to our success. We’ll do our best!!
That’s the spirit!
Good Luck !!
