Global market expansion refers to a business entering and establishing new markets outside its home country
This can involve a range of activities, including establishing a physical presence in international markets, building relationships with customers and partners, adapting products and services to meet the needs of the new market, and complying with local laws and regulations.
Global market expansion can bring many benefits to a business, including increased market size, competitiveness, diversification, and access to new talent and resources.
However, it can also be challenging, requiring a business to navigate unfamiliar cultural, legal, and business environments.
What are the benefits of expanding into global markets quickly?
Increased market size
Expanding into new, foreign markets can help a business increase its customer base and revenue, leading to overall growth and success. This is because a business can reach a larger group of potential customers interested in its products or services by operating in new markets. This can help to increase the size of the market for the business and potentially lead to increased sales and revenue.
For example, suppose a business' base country is the US and expands into Chinese markets. In that case, it can potentially reach a much larger customer base than it would be able to in just the US alone. This can help the business to grow and become more successful by increasing its customer base and revenue.
Increased competitiveness
Expanding into global markets gives a business a competitive advantage by giving it access to new customers and markets. This is because a business operating in one market may be disadvantaged compared to its competitors operating in multiple markets.
For example, suppose a business that primarily operates in the US expands into another target country. In that case, it can reach a new group of customers who may not have been accessible before. This can help the business to increase its market share and become more competitive in the global market.
Expanding into new markets can also help a business learn about new technologies, business practices, and customer preferences, which can help it to stay competitive.
Diversification
Expanding into global markets can help a business diversify its operations and reduce the risk of relying on one market or group of customers.
Diversification can be important for businesses because it can help to reduce the impact of market fluctuations or changes in customer preferences on the business. For example, if a business that only operates in one country experiences a downturn in that market, it could have a significant impact on the business. However, suppose the business operates in multiple markets; this may offset any decline in one market with growth in another, which can help to smooth out its overall economic performance.
It reduces sole reliance on the domestic economy and boosts economic activity in foreign financial markets - a way of not putting all of one's eggs into a single basket.
Access to new talent and resources
One of the biggest advantages of expanding into new markets is that it can give businesses access to new sources of talent and resources. This can help the business to innovate and stay competitive.
For example, by expanding into a new market, a business may access a pool of skilled and diverse talent that it may not have been able to tap into before. This can help the business to bring new perspectives and ideas to its operations, which can drive innovation and competitiveness.
Additionally, expanding into global markets can give businesses access to new sources of raw materials, suppliers, and other resources. Helping the business to reduce costs and improve efficiency.
Seven strategic steps to global market expansion
A strategic business model can stimulate growth by allowing a business to expand quickly into global markets. It provides a roadmap for success and helps the business to anticipate and address potential challenges.
While it may be risky, as is the nature of commerce, it is possible to do what other multinational companies have attempted and succeeded in before. Here are seven steps to global market expansion:
Step 1: Define your business goals
Defining your goals is an important first step in developing a strategic plan for global market expansion. This will help you identify the specific outcomes you hope to achieve through your expansion efforts. Some examples of goals that a business might set for global market expansion include:
- Increasing market share: Expanding into global markets can help a business to increase its market share and become more competitive. This might involve targeting new customer segments or entering new markets where the business has little or no presence.
- Generating new revenue streams: Entering the global market can also help a business to generate new revenue streams by accessing new customers and appealing to their interests. This might involve launching new products or services or entering markets where demand for the business's existing products or services is strong.
- Gaining access to new resources: Expanding into new markets can also give business access to new sources of talent, resources, and opportunities. This might include access to new suppliers, distribution channels, or sources of financing.
Step 2: Research your target markets
Researching potential target markets is important in developing a strategic plan for global market expansion. This will help you identify which markets offer your business the best opportunities and develop a plan for entering those markets. Here are a few things to consider when researching target markets:
- Market size: Consider the size and its potential for growth. Larger markets may offer more opportunities for your business but may also be more competitive.
- Competition: Research the competitive landscape in each market to understand the level of competition you will face. This will help you to identify any potential barriers to entry and to develop strategies to overcome them.
- Cultural and legal differences: Be aware of cultural and legal differences between your home and potential target markets. This will help you to adapt your products and marketing messages to local preferences and to comply with local laws and regulations.
- Infrastructure: Consider the quality and availability of infrastructure in each market, including transportation, communication, and financial systems. This will help you to understand the feasibility of operating in each market.
Step 3: Assess your available resources
Assessing your resources is important in developing a strategic plan for expanding into overseas markets. This will help you understand the tangible and intangible assets available to support expansion efforts and identify any additional resources you may need to secure. It is crucial to consider economic volatility; some asset classes to consider include:
- Financial resources: Consider your financial resources, including cash on hand, credit availability, and projected cash flow. This will help you to understand what you have available to invest in expansion efforts and to identify any potential financing needs.
- Human resources: Assess your human resources, including the skills and experience of your team and any gaps that may need to be filled. This will help you to understand what you have available to support expansion efforts and to identify any additional staffing needs.
- Physical assets: Consider your physical assets, including any property, equipment, or facilities available to support expansion efforts. This will help you understand what you have available to support expansion efforts and identify any additional assets you may need to acquire.
Step 4: Develop a market entry strategy
Developing a market entry strategy is a part of business operations when international trade is considered. It will help you determine the most effective way to enter your target markets and develop a plan to establish a presence in a foreign country. Here are a few things to consider when developing a market entry strategy:
- Direct presence: Establishing a direct presence in a market can be a good option for businesses with the resources to do so. This might involve setting up a local office, warehouse, or other facilities and hiring local staff to support operations.
- Partnerships: Forming partnerships with local businesses or distributors can be a good way to enter a market without incurring the costs of setting up a direct presence. This might involve establishing a joint venture, licensing agreement, or other partnership arrangements.
- Intermediaries: Using intermediaries, such as distributors or agents, can be a good way for a business to enter a market without incurring the costs of establishing a direct presence. This can be a particularly useful option for businesses that are new to the market or have limited resources.
Step 5: Create and implement a marketing plan
Creating a marketing plan is an important step in a strategic plan for global market expansion. This will help you to reach your target customers and establish your brand in your target markets. Here are a few things to consider when creating a marketing plan:
- Target audience: Clearly define your target audience in each market, including demographics, interests, and purchasing habits. This will help you to tailor your marketing messages and channels to reach your target customers effectively. Understanding domestic demand in the target country is an effective way to narrow down the target audience.
- Marketing messages: Develop marketing messages tailored to your target audience and highlight the benefits of your products or services. Consider adapting your messages to reflect cultural and language differences in your target markets.
- Marketing channels: Identify the most effective marketing channels for reaching your target audience in each market. This might include social media, email marketing, paid advertising, or other channels.
- Budget: Allocate a budget for marketing efforts in each market, including one-time and ongoing expenses. This will help ensure you have the resources you need to reach your target customers effectively.
Step 6: Establish a budget
Establishing a budget is one of the most essential factors to consider when planning international business expansions. This will help you to allocate resources effectively and to ensure that you have the financial resources you need to support your expansion efforts. Here are a few things to consider when establishing a budget for global market expansion:
- One-time expenses: Consider any one-time expenses you will incur as you enter new markets, such as setting up a local office or warehouse or acquiring new assets.
- Ongoing expenses: Estimate the ongoing expenses you will incur as you operate in each market, including marketing, employee salaries and benefits, rent, and other expenses.
- Financial projections: Develop financial projections for each market based on your budget and expected sales and revenue. This will help you understand your expansion efforts' financial impact and identify potential financing needs.
- Contingency planning: Allow flexibility in your budget to account for unexpected expenses or changes in market conditions. This will help you to be prepared for any unforeseen events that may arise as you expand into new markets.
Step 7: Monitor and adjust your plans accordingly
Every good business leader knows that monitoring and adjusting your plan is an important step in strategic planning for international growth. This will help you to track your progress, identify any challenges or opportunities that arise, and adjust as needed to ensure that you are on track to achieve your goals. Here are a few things to consider when monitoring and adjusting your plan:
- Key performance indicators (KPIs): Identify key performance indicators (KPIs) that will help you to track your progress in each market. These might include sales and revenue, market share, customer satisfaction, and other metrics.
- Regular review: Schedule regular review sessions to assess your progress against your KPIs and identify any areas where you fall behind or exceed expectations.
- Adjustments: Adjust your plan as needed based on your progress and any changes in market conditions. This might involve shifting resources to different markets or adjusting your marketing or sales efforts.
- Communication: Keep your team informed about your progress and any adjustments to the plan. This will help everyone to stay aligned and focused on achieving their goals.
In today's digital age and era of globalisation, businesses must think strategically and act swiftly
The rapid growth of a business is inevitable in today's market economies, especially when profitable foreign investment crops up and everyone wants a slice of the pie.
Time-sensitive opportunities for global expansion can be defined as opportunities that may be available for a limited time or require a quick response to take advantage of them.
These opportunities can arise for various reasons, such as changes in local economic conditions, shifts in market demand, or the availability of strategic partners or resources.
Aspects of globalisation, such as rapid industry growth, advanced technology, and increased connectivity, are also huge factors in the time-sensitive nature of global expansion.
For example, a business may be able to enter a new market at a more favourable time due to changes in local economic conditions. This might include entering a market experiencing economic growth or a weak local currency, which can make the business's products or services more competitive and increase revenue potential.
Alternatively, a business may be able to secure a strategic partnership that could benefit its expansion efforts. This might include partnering with a local company to gain access to its distribution networks or customer base or partnering with a company with complementary products or services.
Overall, time-sensitive opportunities for global expansion can provide valuable benefits to a business, but they may require the business to act quickly to take advantage of them. However, it's important for a business to carefully consider each opportunity’s risks and rewards and ensure that it has the resources and support it needs to succeed in a new market.
Conclusion
You should also act now on global expansion to stay ahead of the competition and capture a larger global market share. The future of global expansion looks promising, with increased demand for global products and services, increased competition, increased use of technology, increased focus on sustainability, and increased focus on local markets.
Expanding your business internationally can be a daunting task, but it can also be extremely rewarding. Following the tips outlined in this blog, you can expand your business internationally and capture a larger global market share.
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If you want to grow your business in overseas markets, we can help you find the right partner in another country. We'll work with you to find a local partner best suited for your needs, and then we'll handle all the details of setting up a new office in their country.
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When COVID-19 began to spread in 2020, many factories and businesses shut down, impacting the global supply chain. According to Axios, 75% of U.S. companies saw their supply chains disrupted early in the pandemic.
The pandemic also caused one-fourth of companies to experience a 50% drop in sales, according to the World Bank. Approximately 1.4 million manufacturing jobs in the U.S. were lost early in the pandemic, according to the National Association of Manufacturers.
Geopolitical issues such as the U.S.-China trade war added to the disruptive forces affecting the global supply chain.
What is supply chain management, and why is it important? Supply chain management is the overseeing of the flow of goods and services from raw materials to final products. It includes all the processes involved in getting products to customers, such as shipping.
As the global economy recovers, demand and supply continue to be at odds with each other. Take, for example, the more than 80 container ships that were waiting to be offloaded outside California ports in mid-November 2021 as the holiday shopping season began, according to a Bloomberg report. This logjam provides a visible example of the importance of effective supply chain management.
Supply chain management keeps the mechanisms of supply and demand operating smoothly so that people have access to goods and services. From sustenance and shelter to the way we work and entertain ourselves, a well-oiled supply chain is critical for maintaining economic stability and a functioning society.
What Is Supply Chain Management?
Supply chain management is the handling of the entire process of turning raw materials into a final product. Without the supply chain, we would not have access to food and health products, or the items that allow us to work, travel and entertain ourselves. Supply chain management involves a network of suppliers connected via a centralized management process. Each supplier acts as a link that moves a product along a chain of production, from raw material suppliers to manufacturers to retailers.
In the past, the supply chain management beginning-to-end model was mostly rigid — every link in the chain was touched in consecutive order to get a product from raw materials to the consumer. But lessons from the recent disruptions highlight the importance of flexibility in the supply chain management process.
What supply chain management is today is largely a result of market evolutions, digital transformations, and changing consumer preferences. Here are a few examples:
- Different ways to buy. Consumers have many choices when purchasing products. They can buy products in physical stores or online, for example.
- Climate-conscious consumers. Consumers have become more aware of how products are manufactured. They want to know about products that are climate-friendly. This affects the initial stages of the supply chain, where manufacturers need to incorporate sustainable practices and sourcing in their operations.
- Evolving trade policies. When a manufacturer is unable to get raw materials from one supplier because of a trade policy, it must be able to adapt quickly and pivot to a new source for its raw materials.
Role of Supply Chain Management
Supply chain management sets the foundation for economic growth by enabling the exchange of goods between businesses and consumers. The important role of supply chain management and its impact on economic growth is possible because of the entities involved in the supply chain, which include the following:
- Materials processors. This includes companies that process raw materials, such as metal, rubber, and wood, from natural resources.
- Manufacturers/producers. These are the companies that create the products available for sale, turning raw materials into products for consumer use. Not all supply chains produce physical products. For example, in the energy sector, energy producers use raw materials, such as coal, to produce a form of energy for consumption.
- Vendors. Also known as sellers, vendors sell products to the next link in the supply chain. Manufacturers can also be vendors.
- Warehouses. Once the products are sold, they need to be stored. Warehouses are often located in major hubs where those involved in the next link in the supply chain can acquire them and ship them to distribution centers.
- Transportation companies. Examples of transportation companies include freighter, container ship and trucking companies. At this point in the supply chain, the products arrive at another site with one purpose: to distribute the product to retailers.
- Distribution centers. Distribution centers are regional facilities that house the products to be redistributed to retailers, wholesalers, and, sometimes, directly to consumers. A distribution center can include refrigeration facilities to preserve perishable products.
- Retailers. At the tail end of the supply chain are the retailers who sell products directly to consumers in shopping centers, stores, and online.
In considering what supply chain management is and why it is important, it is useful to highlight other business functions that impact or are affected by the supply chain.
- Product development. This is the process of introducing and bringing products to the market. It can also involve updating or renewing an existing product. Product development hinges on the materials available to make a product and the ingenuity of individuals to design, engineer and determine the purpose and function of a product.
- Marketing. It is often said that a good product sells itself. In reality, organizations must try to stimulate demand for their goods. This is where marketing comes in. Marketing strategies include advertising and promotion, packaging, pricing, product placement, distribution, and target audience selection.
- Operations. A key aim of operations managers is to ensure the inner workings of a business run efficiently to maximize productivity and reduce costs.
- Distribution. This function is often considered part of the marketing mix. It describes the process of making products available to end-users in business and consumer markets, whether through direct or indirect distributors.
- Finance. This area works with departments like sales to set revenue goals, acquire money or capital and decide how to spend and invest.
- Customer service. This function plays a critical role in how an organization is perceived by its customers. The aim of customer service is to serve customers throughout the buying life cycle, from providing information that may help customers make informed decisions to supporting customer inquiries and troubleshooting customer problems.
Why Is Supply Chain Management Important?
Modern supply chains help improve living standards by enabling consumers to buy essential products at lower costs. This is because an effective supply chain streamlines the process of getting products to market, and ultimately to consumers.
Some key reasons why supply chain management is important to include:
- Basic life necessities. Through supply chain management, individuals access necessities such as food and clothing, as well as life-saving medicines and health care products.
- Power and light. People use electrical energy for homes and businesses for light, heat, and air conditioning. The energy supply chain involves the transformation of raw materials into usable energy and uses supply chain management principles to bring energy resources to consumers.
- Infrastructure. Interstate highway systems, railroads, ports, and airports facilitate the exchange of goods between businesses and consumers.
- Jobs. Supply chain management plays a critical role in job creation. Supply chain professionals work in areas such as transportation, warehousing, inventory management, packaging and logistics information.
When considering why supply chain management is important, it’s worth noting the potential repercussions of an ineffective supply chain. For example, a lack of raw materials can result in a manufacturer not having the resources to create a product that is in high demand. A scarcity of that product can result in abrupt price hikes, impacting consumers.
Disruption of the Pandemic
The pandemic played a major role in disrupting the current supply chain in several ways. For example, many factories in low-cost manufacturing hubs in Southeast Asian countries such as Vietnam, Indonesia, and Malaysia shut down or slowed production, hitting global companies hard financially.
A disruption at any point in the supply chain can create problems for everyone. Here’s an example of a chain of events due to the disruptions caused by the pandemic:
- Millions of Americans, nearly all at once, stayed in their homes due to the lockdowns.
- Many of them placed orders for goods, such as desks for homebound children learning remotely and furniture for home offices.
- These materials are mostly imported from Asian countries, which faced deadly variants and many
- This led to some factory shutdowns, which hit retailers hard because supply was not available to meet the demand.
- Factories that remained in operation often reduced their activity, contributing to tighter supply and increased prices for raw materials.
- When the price of raw materials went up, the cost of products increased.
In some cases, product prices rose abruptly. Food prices were affected as well. Prices for meat, poultry, fish, and eggs went up 10.5% for the year ending in September 2021, according to data from the U.S. Bureau of Labor Statistics (BLS).
As global markets recover, demand is increasing while manufacturing is still limited, creating a mismatch in the equilibrium between supply and demand. In economic theory, this is known as the scarcity principle.
Geopolitical Factors
Geopolitical forces can tighten the supply of global commodities, creating artificial disruptions in the supply chain. Recently, sanctions and the crackdown on supplying microchips to Chinese companies have disrupted the global semiconductor industry. In a world heavily reliant on technology, the global shortage means limited access to components that run our devices, computers, and electronics. Carmakers have also reported declines in sales due to problems in the global supply chain, including microchip shortages.
Another aspect of geopolitics that affects supply chain management is taxation and documentation at ports. Every country has different rules, regulations, and laws that can often change. This means that exporters and importers must be in tune with the changes to ensure their products make it to their intended destinations. Missing important documentation can mean that a shipment of products may sit at a port indefinitely, creating financial losses for businesses.
Role of Information Systems in Supply Chain Management
Supply chain management has many moving parts, requiring systems and tools that help streamline processes, improve efficiency and strengthen accuracy. The role of information systems in supply chain management is to help businesses manage supply chains through scheduling, sourcing, supplier management, and data analytics.
These systems help organizations oversee the key elements of the supply chain, from resource development to logistics. They can help organizations keep track of different participants in the supply chain, including suppliers, warehouses, transport companies, retailers, manufacturers, and customers.
The primary role of information systems in supply chain management is to ensure businesses have access to the information they need to make the right business decisions. For example, operational visibility allows companies to assess fluctuations and anomalies in their business. By leveraging data in their internal systems (and public data), businesses can act intelligently on identifying and solving supply chain issues before they become big problems.
Information systems can also improve decision-making throughout the supply chain process by helping decision-makers to:
- Be aware of what’s happening at key touchpoints in the supply chain management process (operational visibility)
- Analyze information through visual dashboards and easy-to-understand data using analytics and emerging technologies (for example, machine learning)
- Find opportunities to improve the performance of the supply chain, which can lead to improved profitability and better customer experiences
Role of Finance in Supply Chain Management
The role of finance in supply chain management is vital. Finance and accounting functions bring stability and flexibility to supply chain management by helping suppliers and buyers in the following ways:
- Ensuring payment predictability and transparency. Using financial and accounting principles, organizations ensure a business has strong working capital and meets regulations and tax requirements.
- Extending payment terms. By offering flexible payment terms for items, finance departments at suppliers can help buyers optimize their cash flows, helping to strengthen the buyer-supplier relationship.
- Ensuring that taxes are Indirect taxation can be a complex process — tax is paid by different entities throughout the supply chain process. The taxes paid are reflected in the final cost of the product, but it is invisible to the customer thanks to finance’s involvement in the process.
- Decreasing Finance can play a key role in developing strategies that help other functions, such as customer service, to meet customers goals at the least total cost possible.
- Improving Firms rely on the role of finance in the supply chain to help control and reduce costs, resulting in opportunities to improve margins.
The role of finance in supply chain management is evolving to help organizations explore supply chain opportunities. This includes using advanced technology that shares financial and transaction data. This visibility into financial data across all entities in a supply chain can help in the creation of sophisticated financing programs focused on optimizing the balance sheet requirements and liquidity of all entities involved in the supply chain.
Finance also collaborates with other functions in an organization, including legal, marketing, information technology and operations, to enhance operational value and minimize risk.
Prepare for a Career in Supply Chain Management
Every step of the global supply chain is interconnected, and everyone involved — from producer to supplier to consumer — plays a pivotal role.
Supply chain management is vital to society, providing the mechanism for getting products into the hands of consumers, from essential staples such as food and medicine to luxury items.
In business, supply chain management allows manufacturers to make as many products as needed to meet market demand. It helps retailers reduce excess inventory and lower the cost of storing products. The success of sales and marketing relies on effective supply chain models that help ensure that the right quality product is available at the right place and at the right time.
For individuals interested in working in supply chain management, an advanced degree in business, such as an online MBA, can help them launch their careers. The Online Master of Business Administration from the University of Maryland’s Robert H. Smith School of Business prepares students to identify, evaluate and mitigate risk; improve efficiencies; and utilize cutting-edge supply chain technology applications.
Learn how the University of Maryland’s Online MBA program and its Supply Chain Management specialization, with courses including Global Trade Logistics and Innovative Solutions to Supply Chain Challenges, can help you pursue your career goals and become a leader in the field.
Recommended Readings
Why Get an MBA? It’s Still the Best Investment You Will Ever Make
Why Consider an MBA in Supply Chain Management
What You Can Learn About the Global Economic Environment Through an MBA
Sources:
Axios, “Coronavirus Has Disrupted Supply Chains for Nearly 75% of U.S. Companies”
Bloomberg, “Ships Keep Coming, Pushing U.S. Port Logjam and Waits to Records”
Council of Supply Chain Management Professionals, The Importance of Supply Chain Management
Forbes, “10 Ways Machine Learning Is Revolutionizing Supply Chain Management”
IBM, “What Is Supply Chain Management?”
Investopedia, “Scarcity Principle”
Investopedia, “Supply Chain”
Investopedia, “Supply Chain Management (SCM)”
National Association of Manufacturers, “How Coronavirus Is Affecting Manufacturers”
Reuters, “Global Economy Factories Hit by Pandemic-Related Supply Disruptions”
SourceToday, “What’s Causing the Supply Chain Shortages?”
SupplyChain, “What’s Causing the Global Supply Crunch?”
SupplyChainBrain, “The Increasing Role of Supply-Chain Finance”
The White House, “Why the Pandemic Has Disrupted Supply Chains”
The World Bank, “Tracking an Unprecedented Year for Businesses, Everywhere”
U.S. Bureau of Labor Statistics, Consumer Price Index