Global competition and a firm’s decision to enter a global market come with benefits and challenges as with many business decisions. But we do know, after decades of economic development and research, that competition aids a growing world economy and does not hinder it.
An organization has potentially many reasons to consider expanding globally, such as growth, the pursuit of efficiency and innovation, gaining knowledge or simply blocking out the competition in certain markets. But expanding globally is not a simple endeavor and requires careful strategy as presented in this research.
Firms have many considerations when entering global markets, however, not the least of which is costs. Companies forming a well-developed strategy however can seek out locations that provide cost advantages to both labor and/or materials and production supplies to enhance their global expansion strategy. (Poulsen et al., 2017) This is especially organizations that are headquartered in smaller home markets that may benefit from the expansion of resources outside of their domestic economy. (Poulsen et al., 2017)
Firms must be aware of the markets they are entering, however, each with its own set of rules and regulations. While government market control is widely unsuccessful, in some cases, limitations like tariffs, treaties, and other regulations can force innovation within an organization. (Govindarajan & Ramamurti, 2011) Markets also can be widely influenced by social relationships, both political, and consumer social relationships with the ever-expanding influence of social media. (Cuervo-Cazurra Alvaro et al., 2019)
Social media has become an ever-increasing accessible way for a company to expand its global brand awareness. Organizations that would have historically been too small to easily enter a foreign market are able to spread their brand recognition in locations they did not previously have access to. Research shows that global brand awareness can increase a customer’s willingness to pay higher prices for the brand. (Kim et al., 2019)
Consumers have entirely different relationships with brands now due to social media influences like Facebook pages. Brands have morphed into “brand personification” as brands have developed a personality of their own. (Chen et al., 2015)
However, it is critical for firms to still consider their market as well as perceptions like the ethical concerns over outsourcing cheaper labor. (Kim et al., 2019)
As global accessibility continues to expand due to technology and social media influence and access around the world, more research is needed to understand the impact, especially on smaller organizations of a global expansion.
A previously small business now has the technology to employ individuals around the world with the same roadblocks as in decades past. But it’s unknown what new challenges may create for these companies.
As previously poor economies “flatten” more research is needed to understand how that may impact the global stage. These companies previously provided more cost-effective labor and supplies however that balance may not be maintained as these economies continue to develop and grow.
If your team is not used to working across time zones, you may need to carefully consider schedules and expectations as part of a global expansion plan.
How to Expand Your Global Footprint
Look at joint venture opportunities
The easiest way to enter a new market is with a turnkey opportunity to reduce costs as one of the biggest barriers to entry. If acquisitions are still out of range, looking for partnership opportunities and joint venture relationships to help your small business expand could be the path forward.
Successful joint ventures usually require some benefits on both sides of the table. For a small tax practice looking to expand its global footprint, identify a firm in a location that you would like to expand, that may benefit from your services. For example, if you are a US tax preparer who specializes in expat services for clients moving to Australia, identifying a firm in Australia that will be able to handle Aussie taxes, but also has a need to meet US tax filing requirements for their client could be an ideal partnership.
Do a tech stack review
Expanding globally in a cost-effective way requires the right technology. Your team in all locations will need to have a system in place to securely access files and communicate virtually. Things to consider that might be solvable with technology are challenges with language barriers and time zones.
If your team is not used to working across time zones, you may need to carefully consider schedules and expectations as part of a global expansion plan. Communication is key, so virtual communication should be a top priority. Not every country has the same cybercrime laws, which is also a critical technology piece to understand as part of your global expansion strategy.
Build your brand recognition
This can be aided by partnering up with someone that already has boots on the ground such as your joint venture partner. Otherwise, you will want to make sure you have a carefully crafted marketing strategy in place. Not every country does business the same way and you need an understanding of the demographics you are marketing to.
Additionally, you need a clear understanding of your competition before entering a new market. Preparing a full SWOT analysis can help you identify ahead of time how much market share is available in any given location as well as what needs are not currently being met in the market.
Ideally, your chosen location for expansion offers both open market share (it is not currently monopolized by existing solutions) as well as having a need your firm can fill that’s currently not being met by competitors.
Chen, K., Lin, J., Choi, J. H., & Hahm, J. M. (2015). Would You Be My Friend? An Examination of Global Marketers’ Brand Personification Strategies in Social Media. Null, 15(2), 97-110.
Cuervo-Cazurra Alvaro, Gaur Ajai, & Singh, D. (2019). Pro-market institutions and global strategy: The pendulum of pro-market reforms and reversals. Journal of International Business Studies, 50(4), 598-632.
Govindarajan, V., & Ramamurti, R. (2011). Reverse innovation, emerging markets, and global strategy. Global Strategy Journal, 1(3-4), 191-205.
Hout, T., Porter, M. E., & Rudden, E. (1982). How global companies win out. Harvard Business Review, 60(5), 98-108.
Kim, M., Moon, S., & Iacobucci, D. (2019). The Influence of Global Brand Distribution on Brand Popularity on Social Media. Journal of International Marketing, 27(4), 22-38.
Poulsen, R. T., Jensen, K., René Schrøder Christensen, & Jiang, L. (2017). Corporate Strategies and Global Competition: Odense Steel Shipyard, 1918–2012. Business History Review, 91(4), 707-734.
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