Expanding into new markets is an exhilarating endeavour for startups, but it is one that must be tempered with a great deal of caution and preparation at the risk of wasting time, energy and resources better spent elsewhere.
It provides a plethora of benefits, from increasing brand awareness, to gaining access to skilled talents, increasing revenue, diversifying risk and more. Essentially it provides a foundation for long term success.
In this article, we want to share a few tips for startups entering the international market.
1. Account for Cultural Differences
Before expanding into a new market, it is vital to gain an understanding of its culture and differences. The concept of teamwork, say in Denmark, may differ significantly from the concept of teamwork in China or Vietnam.
Researching into the cultural makeup of your target market will help you avoid damaging faux pas and allow you to tailor your products to suit the market.
Consider marketing efforts highlighting individual efforts–in a culture that prizes communal efforts, such marketing will fall flat.
2. Let Market Research Guide Your Decisions
The internet is littered with so many tales – proven and anecdotal – of internationalisation efforts that went awry due to insufficient market research.
Starbucks expected Australian coffee drinking habits to be similar to that of Americans. The market disagreed. Starbucks served sweeter coffee options than Australians preferred while charging more than local cafes.
In the first seven years, it accumulated US$105 million in losses, and it had to close 61 of its 90 locations. As of 2018, there were only 39 Starbucks cafes in the Brisbane, Melbourne, Gold Coast and Sydney areas catering to tourists.
Market research allows for data-backed decision making on the types of products or specialities a market might value or buy. If done well, it provides insights into demographics as well as trends on what type of marketing and sales will be most effective.
Roshni Mahtani, Founder and Group CEO of theAsianParent startup, echoes the sentiment. She noted that when it comes to internationalisation, it is important to “Conduct thorough market analysis to ensure that there is a market for your product or service, and to size up your competition.”
She adds that it is essential to confirm that a product or service is able to fulfil a gap in the market.
3. Build a Network
In 2007, the Organisation for Economic Co-operation and Development (OECD), ranked reliable foreign representation 5th in a list of 10 barriers small enterprises face in internationalisation.
The report recommended intensifying efforts to remove these barriers, specifically limitations in finance and related resources, international contacts, and relevant managerial knowledge.
To this day, building a network of local and international partners continues to be a crucial factor in successfully navigating a new market. A strong network puts you in touch with like-minded professionals, prospective customers or relevant connections in your industry which can open the door for business opportunities
On groundwork crucial to overseas expansion, Rhonda Wong, CEO and Co-Founder of the Singapore proptech startup company Ohmyhome, says “Getting connected to the people and companies who are important to your business takes a lot of effort and while it may not always have business collaborations outcomes, it always helps to have friends. It could be directly related or complementary businesses.”
She found that they usually have lots of market insights to share as well as pitfalls to avoid.
4. Collaborate with Small Businesses
Most startups make the mistake of only prioritising collaborations with large corporations in their efforts to expand internationally.
Small businesses may in fact be better to get a foothold into a new market. Chiefly because smaller businesses may have fewer requirements for collaboration and can serve as a credible reference to potential partners thereby demonstrating that the startup’s product or solution is feasible in the new market.
For a startup, gaining credibility is a difficult battle, but once gained, it can become a powerful marketing tool.
One way to find local partners is through community events, expos, and trade shows where you can come face-to-face with potential partners and get a feel for whether a partnership is viable.
Scaler8 also provides Open Innovation opportunities with established businesses in Germany for startups to collaborate with.
5. Engage Market Expansion Experts
The arduous task of expanding internationally can place a business in a precarious position if done incorrectly.
Credible expansion experts facilitate local establishment through a combination of in-depth knowledge of the culture, its business landscape, regulatory environment as well as relevant key players in the public and private sector. This empowers startups to accelerate their penetration into new markets with reduced risk through leveraging existing networks and expertise.
Ready to collaborate?
As part of the Global Innovation Alliance, Scaler8 is helping Asian startups and SMEs gain access to new markets. We guide companies through each step, from understanding whether the overseas business expansion is right to establishing a local presence in select international markets.
Join Scaler8’s new cross-border initiative: Scaler8 Open Innovation.
This initiative will match startups to established German corporates who are looking for innovative solutions to their high-priority problem statements. Scaler8 will help participants collaborate effectively in a fast-tracked, low-risk and cost-effective manner.
Submit your interest now here.