Many businesses look at global expansion as a way to increase profits and bring in new customers. While this can be the case in some situations, it can also lead to problems along the way. Before expanding into other countries, businesses must consider how this action could hurt them.
One of the problems many businesses run into when going global is cultural barriers. What sells well in one country may not necessarily sell well in another. If you do not consider the culture of the country you are expanding into, it could backfire. Some countries might take offense to your marketing efforts or your products. Companies must conduct market research before venturing into another country.
Another potential problem when expanding globally is currency exchange issues. The value of your country's currency can hurt your ability to trade with other countries. If you are buying supplies from another country, you want your currency to be strong. However, when selling products to another country, a weak currency can help you increase sales. Since exchange rates fluctuate frequently, this can be a source of problems for many businesses.
In some cases, you may run into regulatory issues. Countries often engage in free trade agreements that make it easier for companies to sell to other countries. Other countries make it difficult on sellers to move into their territory. You may have to pay unusually high tariffs or taxes throughout the process, which can put your product at a disadvantage. Companies will have to gauge whether the hassle of moving into certain countries is worth it.
When selling to another country, you may find it necessary to customize your products. For example, you may need to put labels on your products that are written in other languages. If you have a limited budget, this can be difficult. Product customization costs money and takes extra time to implement. If you have a global brand, you may not need to customize anything, but without a sufficient amount of marketing, this can be hard to achieve.
- Entrepreneur: Pros and Cons of Expanding Your Product Line; Kim T. Gordon; June 2004
- New York Times: Tips for Increasing Sales in International Markets; Ian Mount; April 2010
- New York Times: Weak Dollar Has Small Businesses Thinking Globally; Marci Alboher; January 2008
- Bloomberg Businessweek: Ten Tips for Going Global; August 2006