There is little doubt that your company can benefit hugely from tapping into the global market, especially in the internet business. If you do happen to have doubts about this, check out our article “Hiring from other countries: Is it worth it?” where we take a look at the numbers.
Successfully entering a new market is no small task. Hiring, marketing, operations, sales—there’s a lot to keep track of. First and foremost, you need to understand the country you’re trying to infiltrate.
What could happen if you don’t? Possibly something like this:
Your product is a hit in your home market. Everyone loves it. Encouraged by your success, you try to double or triple your user base by quickly expanding to other countries. Then you find that your product doesn’t fit local user behavior at all: Time and money wasted without results. Disheartening, expensive, and entirely preventable.
Here are 3 tips to help you avoid the pitfalls of global expansion.
1. Don’t go too far too fast
As a general rule, it’s easier to expand to countries that are culturally similar to yours. These similarities, determined by a number of historical and geographical factors, can help you decide where your first foray into global expansion should take you.
If you’re from a European company, developing your business within the EU is most likely going to be much easier than in Asia. Most of the EU shares the same currency and fairly similar cultural values. Similarly, if you’re based in Southeast Asia, expanding within the region will probably make more sense to you.
Your first new market is going to be the hardest, so pick your closest similar market to start with. Once you’ve figured out a basic playbook based on your first experience, you can be more aggressive and confident in your expansion.
You might feel tempted to tap into markets like China or Japan because of their sheer size and the opportunities they offer. Don’t do it if you have no experience tackling other—easier—countries. Leave the tough ones for when you’ve had a few practice runs with your neighbors.
2. Understand the market
One product rarely fits all markets. Take Uber as an example. Its home country is the US, where it mostly works very well, apart from some issues with individual state laws.
In the Asia-Pacific (APAC) region—a huge area consisting of many unique cultures and sets of laws—Uber needed to try a more localized approach. Applying the same model to most Asian countries was never going to work.
With plenty of capital ($10.41B investments in total, Feb 2016 by Crunchbase) at their disposal, Uber has been testing different strategies in APAC by hiring locals. Uber’s China team has grown from about 50 employees at the end of 2014, to a couple hundred in early 2016.
As a result of these efforts, Uber seems to have figured out models that work for them in Asian countries. For example, a cheaper version of Uber (People Uber, similar to UberPOOL in some US cities) exists in China, driven by local competition. UberMOTO is available in Bangkok, offering motorcycle rides. This solution is a perfect fit for a city notorious for its chaotic traffic.
It takes time and effort to break culture barriers and understand foreign markets, but these are investments you need to make if you want to succeed.
3. Become global by being local everywhere
The trickiest part of expanding to another country is finding someone familiar with your product as well as the local environment. Your existing team knows your product well, but not the user needs in your target country. Hiring a marketing agency or someone to work remotely leaves you with the risk that they won’t get a full understanding of your product and company.
You probably don’t have the resources Uber has, so start small. Your best bet: Simply hire a local from your target country to join your team. By working together with the rest of your team, your new hire will get to know your working style, your product, and your customers. By then, they’ll be able to answer your questions about their home market as it relates to your product specifically.
Here are 5 questions they could help you answer:
- Are the customers in this country facing the problem we’re offering to solve?
- What are the existing solutions on the market?
- How do people find similar services?
- How important is the local language compared to English?
- Should we partner with local businesses, and are there any unwritten rules we should be aware of?
You can decide on your next move once you have a clear and concrete picture of the market from a local who knows your product.
Your potential global market size is directly related to the cultural diversity of your team. The former is not going to grow without the latter, so build a team that can take on the world.