August 20, 2024
Expanding your business internationally is like setting sail on an uncharted sea—exciting, but with its fair share of challenges. But with the right strategy, that global voyage can be a smooth one. The international strategy of global expansion is often the first step companies take when they look beyond their borders. It’s a relatively low-risk approach that allows businesses to test the waters before diving deeper into more complex international operations.
An international strategy is essentially an extension of a company’s domestic approach, where the main operation remains centralized, and the products or services are exported to different countries. This strategy typically ranks low on both global integration and local responsiveness, meaning that while the company’s operations are standardized, there’s minimal adaptation to local markets.
So, why would a company opt for this approach? Simple. It’s the easiest and least costly way to start exploring global markets. Think of it as dipping your toes in the water before taking the plunge. Companies like Red Bull, Moet & Chandon, and Victoria’s Secret have used this strategy to great effect, exporting their products to various countries without making significant changes to their branding or operations.
Here’s what makes the international strategy appealing:
But let’s not sugarcoat it—there are challenges. For one, the cost of exporting, including taxes and tariffs, can quickly add up. Coordination can also be tricky when your entire operation is based in your home country, especially when it comes to supply chains and customer service.
Another challenge is language and cultural differences. Even though you’re not heavily customizing your offerings for local markets, you still need to ensure that customers can understand your products and services, as well as how to purchase them.
According to a recent Forbes article, nearly 73% of global consumers prefer to buy products in their native language, which means that even with an international strategy, some degree of localization is often necessary.
An international strategy is ideal when you’re looking to explore new markets without committing too many resources. It’s particularly effective for luxury brands or products where the country of origin is a key selling point. For instance, French champagne or Swiss watches—these products carry a sense of prestige simply by being from their home countries.
But this strategy isn’t just for luxury brands. It’s also a good starting point for companies in industries with relatively low operational complexity, where the product or service doesn’t need to be extensively tailored to local tastes.
Global expansion is no longer a luxury—it’s a necessity for growth. In 2023, the global business expansion market was valued at over $400 billion, with a projected growth rate of 8% annually over the next five years. A large portion of this growth comes from companies employing international strategies as their first step into global markets.
According to a report by the International Trade Administration, U.S. small and medium-sized enterprises that exported their goods had 20% higher productivity and were 12% more profitable than those that only operated domestically. This shows that even with the challenges, an international strategy can significantly boost a company’s bottom line.
While an international strategy is a great starting point, it’s often just that—the start. As companies gain more confidence and understanding of their new markets, they may transition to more integrated and localized strategies. But for those first crucial steps, sticking close to home while reaching out to the world can be the perfect balance of risk and reward.
In our upcoming article, we will discuss the Multi-domestic Strategy of Global Expansion—a game-changing approach that allows businesses to tailor their products and services to meet the unique needs of each local market. Check out the full article and discover how this strategy can help you connect with customers on a deeper level.
Book a demo with Alariss Global today and start your journey toward global success.
