List of expenses required for International expansion (Overseas sales channel development)
release 2021.10.25 update 2024.3.13
Today I would like to get a rough idea of the costs involved in international expansion.
I know,, it’s necessary for budgeting.
I had heard at some workshop that it would cost about 5 million yen in total over three years, and I told the president about it,
I would like to know the breakdown,
Also, I would like to know the rationale?
That’s right!
The cost required to develop international sales channels varies depending on whether only EC or international sales are involved.
First, the necessary costs will vary depending on whether international expansion is done solely through EC or also through visits to local companies (international sales).
The cost will also vary depending on whether the company will repeat a “first-time” international expansion for a while or eventually shift to a “full-scale” international expansion.
In other words,
(1) What do you want to do as a method of developing international sales channels?
(2) How serious are you about international expansion?
The cost will vary with
How much it will change is summarized below for reference.
If you just want to open a store on a cross-border e-commerce site, you only need 100,000 yen to get started.
Yes.
But if we were to exhibit at an international exhibition, even if we got a subsidy, it would cost us 500,000 yen,
Traveling to meet with potential agents would cost as much, right?
Yes.
If the product or service can be completed only with online support, i.e., cross-border e-commerce, there is no real international sales cost.
Even if on-site visits are necessary, the cost of business trips can be reduced because online business meetings have become possible over the past several years.
Travel expenses?
As is the case with e-commerce sites, the cost of setting up a website, video, SNS, and other information dissemination tools for international markets, as well as a receptacle for international inquiries, has become more and more necessary in recent years.
Um, I have a question.
My friend’s employer wants to expand B2C products (consumer goods) internationally.
In order, do you try cross-border EC for a few years and then look for a local distributor?
Do you exhibit at international trade shows after finding that distributor?
What is the order?
Good question.
Ho, I’ve been complimented (blush).
What is the order in which you will proceed with the international expansion of your B2C products?
(1) Cross-border EC development (only)
(2) Combination of cross-border e-commerce and participation in international trade shows (via exhibitors) → finding international distributors/retailers
There are two patterns of
Of course, we do not develop cross-border e-commerce, nor do we build our own e-commerce site,
(3) Participate in international exhibitions (via) → Find international distributors/retailers
There is still a way to proceed, though,
In the future, cross-border e-commerce development will become a necessity, whether only listing on major platforms or building one’s own e-commerce site from scratch.
This is because a cross-border e-commerce site that allows direct sales to international customers is one of the most powerful tools for making your company and products known when expanding overseas, and is a convenient tool for not only the general international consumer, but also for overseas buyers, who can instantly see how your brand/worldview is being communicated.
If, after setting up a direct virtual storefront with the convenience of cross-border e-commerce, the company also wants to promote retail sales overseas, it will be necessary to talk with international buyers about what kind of collaboration is possible.
For more information on finding international distributors and exhibiting at international trade shows, please also read the following.
Is your overseas marketing functioning?
Do you know what the knacks of overseas exhibits are?
Cross-border e-commerce (only)” refers to selling directly to international consumers without wholesaling to international distributors/retailers. This is an option that has been increasing in recent years when wholesale sales are difficult due to profit margin issues or product characteristics.
For example, since Japanese products are not inexpensive, the end-user price may be too high to sell if the distributor/retailer’s profit is included, and therefore wholesale sales are not or cannot be made.
Too expensive to sell,” is a common response to international expansion.
On the other hand, there are many companies that have been in the international expansion market for a long time that already have international distributors/retailers and have already participated in many international exhibitions, but some of them do not develop any cross-border EC because of the complicated traffic arrangements with their international distributors/retailers. Or,
However, there are some companies that have started to build cross-border EC sites in order to develop new customers that they have not been able to develop so far, while trying to separate themselves from their existing customers. Although we are now in a transitional period between old and new distribution, companies that handle “B2C products,” which are exported to international markets, will probably be in the minority in not developing cross-border EC at all.
(It seems to be difficult to organize the traffic between face-to-face sales and online sales…)
By the way,
What about B2B merchandise?
Parts, devices, mechanical things, etc,
Cross-border EC sales of B2B merchandise, or production goods, are not yet numerous.
However, there are international companies that are developing EC for B2B products as if they were B2C products, so cross-border EC for B2B products will also increase.
Just at this point in time,
(1) Foreign language corporate website (only)
(2) Foreign-language corporate website and participation in international trade shows (via exhibitors) → Finding international distributors
The two patterns would be
I see. (2),
Is it sometimes possible to find international distributors right after the site is launched?
There are. Specifically, it is a niche industry.
If you can create a situation where a search in English for the name of the product, the technology used in the product, or the name of the application of the product will find several pages of your site in the top 30 or so,
If you set up an international corporate website that implements the correct keyword settings and updates it appropriately, you will receive specific inquiries via your site.
On the other hand, for products that are highly versatile or in industries where there are many competitors, it may be difficult to receive inquiries from potential distributors from abroad simply by launching a website.
(So far, it’s not even in the top 50…)
It will take 1-3 years for international operations to get off the ground.
Is your budget set to take about three years for international expansion to get off the ground?
Yes.
It takes three years, (I thought it would be about a year…)
It is fully equipped with a website and sales tools that work well for international markets,
Not only the people in charge but also the management were able to adapt to a different culture,
As well as international marketing and international branding,
If only we could manage our international IP and international risks,
You can get your international expansion off the ground in as little as one year.
(It’s a little hard for us, it seems.)
Not many Japanese companies, large or small, can expand internationally in one year.
The difference in cost between first-time international expansion and full-scale international expansion is rather large.
It is quite an expense to spend up to about 5 million yen for 3 years just to build an international agency network.
Yes.
Ah, but
How about this.
If you continue your first international expansion (subsidized each time), for many, many years, it will cost you a good deal less….
…
If you can get a grant and go to an international exhibition every year, that’s the way to go! (Good point!). (Good point!)
Hmmm, I wonder if grants are the kind of thing that the same company can get each time for the same purpose…and the application paperwork is a lot of work,
(Yes.)
If it is an application document, I will do my best to prepare it!
I know that there is probably no subsidy that the same company can reliably obtain year after year for the same purpose,
There are a few companies here and there that are submitting grant applications in that manner with this in mind.
See?
It’s true, isn’t it?
However, when the subsidy is the only thing you can rely on,
While we may be able to continue our first few international expansions, shifting to a full-fledged international expansion will be difficult.
International expansion is the first step in “first-time international expansion” to try it out.
Why?
Earlier, we reported that some companies can make international expansion in one year.
Why can we expand internationally in one year?
The reason is that we already have a brand for international markets, and our internal system for dealing with possible risks in international markets and dealing with different cultures is rock solid. All that remains is to sell.
Such a “Ready steady GO” situation is not something that can be achieved spontaneously, but is the result of deliberate preparation that takes a considerable amount of time and money.
If a company is not doing so now, it must first be Ready steady for international markets.
It will not be easy to take the pie from foreign companies that are actually selling well or taking market share in international markets now, or to create new markets, without having the right products and systems in place.
(…)
It would be a very good thing if we could expand internationally with a good combination of available subsidies.
However, the use of discontinuous subsidies for continuous international expansion is based on “what if” and “if only” assumptions,
It is difficult to get on track in three years, and it is best to allow for a decade or so.
(Oh, so much.)
Ten years is a bit…too long.
Just imagining that five years from now, our company will not have much international expansion, I feel that would be a bad idea.
By the way, do international companies also take time to expand to other countries?
I wonder if Japanese companies are the only ones that take a special interest in this…
International companies also take time to expand to other countries.
Except for startup companies that have been international from the beginning, general companies that have specialized in the domestic market will take time, just like Japanese companies.
For example, a family-owned winery in Germany, which I visited 10 years ago to promote a certain product, exhibited at Foodex Japan (Makuhari Messe), the largest food exhibition in Japan, four years ago, and we met again by chance! I was surprised,
The next year, he exhibited again, and when I met him again, I asked him if he was making good progress in finding new customers. He replied, “Not so much.
As you know from having been to dozens of international trade shows, it is not easy to sell one’s own products to international consumers.
But I will exhibit again, though, he said.
(Continuity is power to all mankind…)
It would not be so easy.
Yes.
Let me ask you a few more questions.
Even if they will eventually shift to full-scale international expansion,
What is the difference between “first-time international expansion” and “full-scale international expansion” activities?
For our first international expansion, our priority is to try out products and services that we do not yet know if they will sell internationally, without spending too much money.
If you want to expand through cross-border e-commerce, start selling on platforms such as Amazon and Etsy and see how international customers respond.
Exhibit at international trade shows where government support is available, meet with local buyers, and travel locally to meet with potential companies for the first distributorship agreement.
Subsidy programs are often limited to eligible exhibitions and travel objectives, but the fact that the government will cover 1/2 or 2/3 of the costs is attractive to beginners.
What a generous government services,,
However, not all applicants are selected for grant projects, and there is a screening process.
(But there’s a screening process…)
Full-scale international expansion will shift to the next stage of making it a viable business.
Identify the barriers to continuing international operations, remove them one by one, and set them aside.
I see…
When you first start out in the international market, even if you know the barriers, you don’t have the budget to take action to remove them one at a time.
Yes.
It takes 10 years because the barriers are not reduced.
That’s right.
International expansion strengthens the product and the company through “full-scale international expansion.
The average cost for one year of full-scale international expansion is between 500,000 yen and 3,000,000 yen higher than the cost of first-time international expansion.
The price difference is the cost of completing the product and the company for the international market quickly and reliably.
With such a large budget, we can deal with the anticipated risks from the early stages of international expansion.
To take advantage of this opportunity, you will be able to make the necessary trial-and-error decisions, including intellectual property protection, compliance with local regulations, design and distribution choices that avoid competition, and brand building that will attract international customers.
In the first iteration of international expansion, where there are few costs that can be borne by the company, it is necessary to bypass the risks that can be anticipated in advance, as they cannot be anticipated in advance.
The mission, design, and business model will not be sufficiently vetted, and the company will lack the ability to communicate its appeal to international customers. This makes it difficult to sell what can be sold.
…
We do not want to leave in the middle of an international expansion.
Yes, that’s right.
I understand that the key to international expansion is to quickly and surely perfect the product and the company for the international market,
I was imagining now that in three years, if we were able to expand internationally, things would change considerably within the company.
Successful international expansion will make the company and its products much stronger than they are today.
In fact, that is the greatest advantage of International expansion for small and medium-sized enterprises.
Not only to increase international sales, but also because in the process of adapting the company to international business, many things that could not be done will become possible precisely because of the capabilities acquired for International expansion,
The products and the company are refined, improved, and strengthened one or two ranks beyond comparison to what they were before the company did not have international expansion.
What you couldn’t do, you will be able to do….
That’s good.
I am looking forward to seeing how the company will change, but also because it is fun to actually sell products internationally,
Once you have shifted to full-scale international expansion, we encourage you to run as fast as you can!
(Eh. All power?)
（I’m not very good at running.)
・・・・,
Yes, it is.
I need to seriously think about budgeting to run as fast as I can…,
Yes!
(Are you getting worked up, Mr. President? ) (If that’s the case…)
Let’s see,
Running may also be relatively easy.
Nice x 2
That’s what I’m talking about,
That’s the way it should be!
