Many companies grow their business and dream of expanding into other countries. Currently, at least 20,000 Brazilians are running businesses abroad, according to Brazil's Ministry of Foreign Affairs. Of these, around nine thousand (or 45%) are in the United States, one of the markets that attracts the most entrepreneurs worldwide.
But the rules for operating in one country can be very different from another. The U.S. market, for example, has its own peculiarities, and understanding them is essential for success in the new destination as well. But what is the internationalization process, in practice, and how does it actually work for a company?
Broadly speaking, internationalization comes down to the process of integrating a given business into foreign territories. It's a practice that helps secure a competitive advantage over rivals, in addition to being an alternative for businesses during periods of economic instability.
But even though it may seem like a relatively simple initiative, it needs to be weighed against countless variables to succeed. One of them is conducting a market study specific to the segment the company operates in, as well as a careful assessment of how the target audience will accept the product or service, since consumption habits are strongly shaped by local culture. There's also the need to understand the level and practices of competition for the sector or product in that region.
This work will help determine whether or not it's viable to invest in the international market, and whether there is, in fact, room and opportunity for the company to grow on foreign soil. Beyond that, once you have a macro view, you'll be able to weigh whether the investment is likely to pay off — or even whether the return will match expectations relative to the investment it will require.
It's meticulous work that requires knowledge and attention to detail, and establishing a foothold in the American market goes far beyond what's often called the "American Dream." Choosing this path — or not — is a decision that should be made intelligently and with both feet on the ground.
Below are some aspects that should be weighed when internationalizing your company:
1) Why consider internationalization?
There are a number of advantages and benefits for companies that begin operating in other countries.
The whole process needs to be very carefully weighed and guided by parameters that steer the project's execution, but, generally speaking, these business opportunities can secure a major advantage in an increasingly competitive economy.
Some of the main advantages of internationalizing a company are:
Gaining new markets: one of the incentives for starting to explore other geographic regions is the opportunity to reach consumer markets that haven't yet been tapped. This can include acquiring consumers with a similar profile to those in your home country, or exploring verticals that haven't yet been tested. There's also the possibility of adjusting for seasonality differences between the markets the company operates in.
Building up market experience: operating in new markets in other countries isn't always an easy task. As a result, it's quite likely that, along the way, your company will build up a wealth of experience that can make a real strategic difference for the organization.
Building a global brand: to compete in international markets, there are a number of requirements imposed both by institutions in the home and destination countries and by customers in the new market itself. As a company internationalizes, it's inherent that the level of quality and value delivered to customers improves as well.
Risk mitigation: by starting operations in other countries, operational and market risks can be diluted, or balanced, if managed strategically. Risks tied to each country's or market's local environment can vary widely, and affect demand for your products and services differently. Lower dependence on the local market can help ensure the business survives during times of crisis.
2) How do you actually internationalize a company?
The first step in planning internationalization is to study and confirm that the new market has room for your product or service. This includes research, market testing, prototype validation (in the case of product launches), and an assessment of acceptance.
This first step can help your company save energy and investment in the case of unproductive markets — for example, due to excessive competition, cultural barriers, high adaptation costs, and so on.
3) Align the company and its products/services with technical requirements and legislation
Beyond operating effectively in the new market, it's essential to ensure compliance with requirements and regulations. That's why understanding the country's legislation, the necessary certifications, and specific taxes makes decision-making easier, brings clarity to the business plan, and avoids legal and bureaucratic headaches, along with surprises and costs that could jeopardize the project's success. The United States is a market with great business potential, but with specific legal requirements — often varying by state, or even by county and city. Before deciding to bring your business to this market, talk to a specialized consultant who can give you clear parameters for that decision.
4) Map out your commercialization strategy
Before the internationalization operation begins, it's essential that the company already has every action plan mapped out for commercialization, with the goal of ensuring its viability in the market. Without sales, there's no chance of success. This should be the project's number one priority.
It's important that the internationalization plan include detailed planning of the strategies that will be used in the new market.
5) Does it make sense to buy an existing company to enter the U.S.?
The United States has been one of the main destinations for Brazilian entrepreneurs, and for good reason: there's a lot of market still to be explored there. In fact, acquiring a local business already established in the target market can be an effective internationalization strategy for your company. After all, you'd gain already-structured foundations and the expertise of local teams, along with client portfolios and, in some cases, already-established brands.
But, as with any strategy, some precautions are essential. Regardless of whether the acquired company is small or large, taking it over doesn't mean it's easy — or even desirable — to impose a new organizational culture on it. Part of what you acquire in this strategy is precisely the know-how of how to do business and operate in the new market. Properly acculturating the internationalized company is essential for success. In other words, you need to "nationalize" the company/business according to the culture and practices of the new market.
6) My company provides services. How should I shape the internationalization process?
The first tip is to understand the cultural differences of each market and segment. This mapping is crucial. Another point to analyze is the type of product or service that will be offered. Unless it's an innovative service, in most cases the best entry strategy is through mergers and/or acquisitions.
Other tips that seem obvious but make a difference:
- Create and host a website on a local domain — in the native language, of course;
- Hire specialized professionals to review site translations and to develop local marketing and branding, as well as create events and campaigns;
- Hire professionals who can provide support in understanding and gathering feedback on what local consumers do or don't want;
- Quickly guarantee full customer support by phone, chat, or email, always in the native language;
- Get to know, listen to, and respect the local consumer.
