6 Things You Need To Know About Expanding Your Business Overseas
Planning to expand your business overseas?
With a limited consumer market in Singapore, growing internationally could provide access to a larger, more diversified consumer base. It may also be good for revenue growth: in 2016, a survey found that overseas revenue formed 53% of total revenue for small and medium enterprises (SMEs), and that overseas revenue is the driving force behind companies’ growth.
So, it makes sense for companies to expand overseas. However, before you take your business across the shores, here are six things you need to know:
Is there a need for your product or service in the market?
Before expanding your business abroad, you’ll need to make sure that your product or service will sell in your target market. This means finding out if there is an existing market for what you have to offer and if not, will there be a potential customer base who will be interested when your product or service has launched?
You’ll also need to identify local businesses to determine if the market is too saturated. While the presence of local competition means that there is an existing consumer base, having to compete with too many players or large, established businesses will hinder your overseas expansion plans.
Invest in research by hiring a market research firm, or by sending someone to your target market to conduct interviews and observe consumer behaviour.
Getting access to capital through government schemes
In order to expand overseas, you may need large upfront capital. Fortunately, Singaporean businesses have access to a few government grants, which include:
|Grant||What is it?||Eligibility||Benefits|
|Market Readiness Assistance (MRA) Grant||Offered to local companies who wish to expand their business globally.||Company is registered/incorporated in Singapore, has at least 30% local shareholding and an annual turnover not exceeding S$100 million.||Funds up to 70% of eligible costs, capped at S$20,000 per company per fiscal year.|
|Enterprise Development Grant||Supports projects that help upgrade your business, innovate or venture overseas.||Company is registered and operating in Singapore, and has at least 30% local shareholding.||Funds up to 70% of qualifying project costs.|
|Global Company Partnership Grant||Supports costs that go toward engaging a third-party professional to develop and/or execute strategies to grow capabilities for overseas expansion.||Company is anchored in Singapore, has an annual sales turnover of at least S$500,000 and a minimum paid-up capital of S$50,000.||Funds up to 50% eligible costs incurred in engaging a third-party professional to build up relevant firm level capabilities.|
Businesses can also consider government financing schemes like the Internationalisation Finance Scheme, which offers support to Singapore-based companies who are looking to venture abroad.
Getting past language and cultural barriers
When Pepsi entered China in the 1980s, it launched with the slogan “Pepsi Brings You Back to Life”. However, a translation gaffe turned the phrase into “Pepsi brings your ancestors back from the grave.” The suggestion that Pepsi could reanimate the dead didn’t go well with Chinese audiences, especially since ancestor worship was part of the culture in China.
While the veracity of this famous marketing blunder is actually uncertain, the lesson it teaches is genuine: ignoring language and cultural differences can botch your expansion plans.
Aside from extensively researching the cultural norms of your target market, consider picking up the local language. This could help you familiarise yourself with the local culture, as well as improve communication with local partners. While having bilingual staff on hand can certainly help with translation, being familiar with the language as a business leader signifies respect for the local culture and commitment to your expansion efforts.
Finding the right partners
According to the ASEAN Strategic Action Plan, SMEs perform better when they partner with other SMEs.
Outsourcing administrative, legal or financial tasks to local partners could be helpful, as they have a better understanding of local regulations and business practices such as local tax laws and company compliance regulations. In addition, partnering with local marketing agencies could help you overcome cultural hurdles and connect with your audience.
To build your network, start by looking at your existing contacts in Singapore. Do they have connections in your target market that you can benefit from? You can also take advantage of events or trade shows by scouting out connections and also determining the market potential of your product or service while you are visiting.
In the age of social networking, however, identifying potential partners is much easier. With platforms like LinkedIn, you can look up company profiles and investigate other content that they link to, such as company websites, blogs, or other social media profiles. This could help you determine if a particular company is a good fit for partnership, and could provide useful information to help you prepare for an initial meeting.
Besides that, you can leverage the ASEAN Economic Community’s efforts at regional integration by using resources like the ASEAN SME Service Centre to find local SMEs.
Hiring the right people
Maureen Low, Head of RSM’s ASEAN desk, told The Business Times that when companies internationalise, they face the dilemma of whether or not to send their existing team overseas to lead, or to recruit local talents to fill in management roles. The team may lack the knowledge to navigate unfamiliar issues in a foreign market, and their absence may affect the current business. On the other hand, local talents may not have the necessary expertise, and may develop values and culture that are incongruent with the home office.
To overcome this, Ms Low suggests grooming and sending the best talents overseas to run operations after the deputy succeeds in managing the existing business in Singapore. She also adds that companies should practise proper governance and reporting structures.
Similarly, Kwan Chong Wah, chief executive officer and co-founder of Acorn Marketing and Research Consultants, told The Business Times in the same interview that companies should keep a pipeline of young local talents for the future that you can envisage being your managers in three to five years.
There are lots of online tools that can make your transition overseas easier, more efficient and cost-effective:
- Market research tools. For initial market research, Google Trends can help you determine if there is an existing consumer base in your target market, while Google Global Market Finder helps recommend the best markets for your business.
- Cloud computing. Whether you’re working with customers and colleagues in other countries, setting up offices in different locations or travelling overseas for work, storing files in the cloud means that it’s easy to organise and share information.
- Speedy internet. Relying on cloud computing requires a fast internet connection. Businesses should ensure that productivity is not impeded by a slow connection, and that offices located in emerging markets have the same speedy access as their colleagues overseas.
- Translation services. Some online services will translate company materials like advertising or legal documents to fit the language and culture of your overseas market.
- International money transfers. Whether you need to send lots of bulk international payments or need to set up a receiving account, an international money transfer service like WorldFirst can help protect you from high fees and currency fluctuations.
Expanding overseas is a large, costly endeavour. Before diving in, every business looking toward international expansion should practise due diligence by gathering first-hand research and conducting market tests.
By being aware of the potential pitfalls and having knowledge of the language, culture and business practices of your target market, you can increase your chances for successful expansion overseas.