Today’s entrepreneurs face a world of opportunity but also a world of competition. That means finding new markets is often a matter of survival. However, many entrepreneurs aren’t sure where to begin when it comes to international expansion.
“First, do an assessment of your company’s strengths and weaknesses, and then consider why you want to go into a particular market,” says Frank Pho, Vice President, Global Expansion, at the Business Development Bank of Canada (BDC). “Is it to increase your revenues, reduce your costs or replace customers lost during the recession? The answers will help you decide where to go.”
When Vortex launched in 1995, its entire market was North America. Today, a significant part of its growth is coming from Asia and Europe. But with 100 employees, Hamelin says the company has had to be careful when deciding where to focus its limited resources. A company that spreads itself too thin risks alienating customers in its domestic market.
Due diligence is essential
One way to grow your business and share risk is to work with agents and distributors, but due diligence is essential. Don’t pick the first prospective partner that comes along, Pho advises.
“In Canada, you’d probably interview three or four prospects, do due diligence on each, and interview a second time before you hire them,” he says. “Be equally vigilant when meeting with potential agents overseas.”
Vortex has gone even further, developing a profile for the ideal distributor: One who can sell products based on quality, not price, and can build a market.
Another common pitfall is assuming the product you sell in Canada will be the product you sell overseas. In Vortex’s case, it made minor design modifications to meet safety standards and regulations in Europe. It also worked with local product designers to add features and aesthetics better suited to particular markets.
For other companies, the demands of regulators and customers may require even more reengineering and redesign.
“This can represent a significant cost for some companies, if they have to retool their production or open up new production lines in foreign markets,” says Jayson Myers, President and CEO of Canadian Manufacturers and Exporters. “You also have to make sure the product includes features that customers in a given market want.”
In sum, companies must strive to thoroughly research the markets they are targeting, a task that includes:
trying to understand customer attitudes and desires;
finding the right local partners;
finding out about relevant laws and regulations;
considering appropriate pricing;
identifying potential competitors; and
- gauging other risks.
“You need a good business plan that shows how you serve your customers and make a return on your investment,” Myers says.
And you must be willing
And you must be willing to be patient, Pho says. Assume it will take twice the time and twice the money it would in North America, with a few failures along the way, before the sales start flowing.
“I’ve seen too many companies become discouraged and give up too soon,” Pho says. “If you anticipate hurdles and prepare for them, you won’t be as likely to abandon ventures prematurely.”
Back at Vortex, Hamelin agrees. He says opening new markets starts with relationship building and realistic expectations. It’s a strategy that has worked for the company. It now has more than 4,000 installations across three continents and a worldwide distribution network.
“Attend a trade show to learn who the players are, meet with potential customers and gain some short-term experience in the market before you fully commit,” Hamelin says. “And, most importantly, don’t get too low on opportunities that fall flat, because new doors will open that lead to success.”