How businesses can reap the benefits of international expansion

| November 27, 2019

Businesses looking to grow and expand their operations should consider going international to generate more or new revenue streams, investment opportunities, cost reductions, diversification opportunities, and recruiting options.

However, to reap the benefits, it’s essential to have a strong plan in place that includes risk mitigation strategies to ensure the success of international expansion efforts, according to Atradius.

Mark Hoppe, managing director, Oceania, Atradius, said international expansion offers significant business benefits as long as the risks are mitigated. When business owners can take a strategic approach to international expansion, they can achieve strong growth both financially and in terms of their business footprint.

There are five ways companies can benefit from international expansion:

1. Foreign investment

Companies could benefit from foreign investment prospects by creating connections and expanding. Some governments offer investment incentives to companies who are looking to expand into the area. Businesses may consider this the best option when looking to grow as it contains an assured financial benefit.

2. Renewed revenue streams

Businesses may have depleted domestic customers, especially if they sell items consumers may only buy once occasionally. Or they may be struggling to saturate the local market. Expanding globally can provide an opportunity for quick and sustainable growth.

3. Diversified customer base

Diversifying a customer base can create a more resilient company. The more markets a customer operates in, the less affected it may be by local economic fluctuations. Even if there is a drop in the demand in one country, a business can still be sustainable because of ongoing demand in the other countries.

4. Improved recruitment opportunities

Businesses improve recruitment as there is a larger pool of talent that is sourced. Employment opportunities are also generated which lets businesses find the right person for the job and expand their staff. If there is a shortage of staff within the industry, a company may need to expand internationally so that they can fill the gap.

5. Strong competitive advantage

Expanding globally could create a competitive advantage against rival companies. By being the first or only brand in the market, a company can significantly improve its brand awareness and brand recall. A business may need to create this competitive advantage if they are struggling within their current market.

Mark Hoppe said, “Businesses expanding internationally can achieve a variety of benefits but there is also risk associated with moving into an unknown territory. Alongside the potential to access new markets and revenue streams comes the risk that these new customers won’t pay, whether due to their own mismanagement or external forces that prevent them from being able to pay. Regardless of the reason, the company looking to expand will suffer if its customers don’t pay and this can affect operations at home as well as the expansion efforts.

“Before embarking on an international expansion plan, it’s advisable for organisations to seek professional advice to ensure the strategy is correct.

“Trade credit insurance can help these organisations expand with confidence by protecting them against the financial losses that can come from late or non-payment by their customers. Furthermore, a trade credit insurance provider can help the company undertake due diligence on potential new customers, getting the information they need to decide whether to do business with them at all, or whether to offer tighter payment terms, for example. Armed with this information, Australian organisations can look to international markets more safely.”