5 Common International Expansion Mistakes and How to Avoid Them

Contributed By:

Adi Vaxman

- Guest Writer

Co-Founder and CEO, Tripda

Among 480 small and medium enterprises from 12 countries surveyed by the Economist Intelligence Unit in February, a majority see expanding  their business internationally as the future. 

Nonetheless, entrepreneurs can make one of several common mistakes at this time that should be avoided at all costs:

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1. Skimping on talent.

Many startups are tempted to hire young, yet inexperienced workers simply because it's possible to hire someone for less. But don't make this mistake.

From February to April this year, Wells Fargo surveyed 254 U.S. executives who conduct business overseas and found that 50 percent felt the cost of labor could negatively affect their international success.

Although the budget may be tight, hiring skilled workers is not the place to cut corners.
Having the right team is one of the most important factors for success. Don’t let some imaginary number dictate critical hiring. Remember that talent is an investment and be willing to pay accordingly. Hire the absolute best person possible to lead new markets to success.

Hiring local talent to manage the team, instead of promoting employees without relevant experience, can also lead the venture to success. Among the executives surveyed by Wells Fargo, 55 percent said they rely on customer and vendor feedback for valuable information to guide operations. Local professionals will have a better idea of what customers want and are in a better position to listen to and understand their needs.

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2. Not designating a remote decision maker.

Organizations must give local-market teams the authority to execute decisions to the best of their abilities while continuing to be closely involved. Micromanaging will do more harm than good.
To allow a local team to thrive, the office needs strong leadership to make decisions. Hire a point person to make tough calls and establish clear expectations of when that decision maker has full authority and when he or she should consult upper management across seas.

Also, don’t let internal bureaucracy cripple the speed of bringing something to market. The new team should be focused on building, executing and growing rather than filling out endless Excel spreadsheets to appease people across the ocean.

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3. Not visiting enough or just arriving to criticize.  

Show the right type of leadership, especially in the early stages of a new operation in a fresh market. Although the local team should have authority, the company’s veteran leadership needs to show its presence, as well.

Communication is key. Set up specific times to chat with a remote team by phone or video each week. During these calls, don’t just check in and don’t waste team members' time by requiring them to list the status of every project.

These smaller tasks could be handled through email or text messaging. Instead, listen to their concerns and ideas and offer advice and insight. Take this time to build relationships and establish rapport.

When visiting a new operation in person, leaders should strive to learn, not criticize. It’s important to keep eyes and ears open to what members of the local team have to say. Get to know them and their experience, and use it to the company’s advantage.

Be a resource to the team, not a company figurehead. Dedicate the visit to truly work in that location instead of just keeping tabs on what the new team is working on. Visits are not the time to tell everyone how to run the show. It’s the time to support and learn.

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4. Going abroad for the wrong reasons.

Businesses frustrated with the lack of growth in the domestic market may set their sights on the global market.

A survey conducted by Chase in January and February of nearly 1,100 executives of midsized companies and 2,387 small business leaders across the country found that 73 percent planned to expand to reach new markets and customers.

Although the promise of emerging markets is enticing, understand that global expansion is a long-term investment, not a get rich quick scheme.

Among the 480 small and medium enterprises from 12 countries, 40 percent earned zero revenue from international operations when surveyed by the Economist Intelligence Unit in February. But 72 percent of the companies surveyed expected to earn 11 percent to 50 percent of their revenue internationally in five years.

Businesses looking to make a quick buck shouldn’t expand. But those that are patient, plan for gradual growth overseas and are prepared to take their time may  reap long-term benefits.

5. Preparing  too late.

Expansion should not be an afterthought. Companies that fail to prepare for globalization early on will have a more difficult time transitioning to other markets.

Only a third of the small and medium enterprises worldwide surveyed by Oxford Economics in April 2013 do business solely in the country they are headquartered . By 2016, the number of small firms operating in six or more nations will more than double, the report found.

As global expansion becomes more and more important, companies should be prepared as soon as possible. An early expectation of expansion will guide strategies, internal operations and decisions to build a global company. Without this early mindset, companies might have to spend extra time rebuilding the infrastructure of the business when they do decide to expand.