All entrepreneurs aim at expanding their businesses and making them profitable and potent. But what should you do when you reach a point where it is impossible to develop any further? Should you take other markets into account? Are neighbouring countries enough or should you consider more distant parts of the world?
To begin, let’s highlight some of the main advantages of doing business on several continents simultaneously.
1. Reach a larger target group
This seems self-explanatory and is usually the main motivator for entering regional as well as international expansion, however, it is worth paying attention to a few less obvious advantages of global company expansion. Selling goods in distant parts of the world can serve as a solution for companies that offer seasonal product ranges and consequently struggle with periodic revenue drops such as agro-manufacturers. Due to differing seasons, when the demand for products ends on one part of the world, it begins on another and going global will allow such businesses to record revenues all year round.
Seasons are not the only cyclical circumstances that affect sales. The same principle also applies to holidays and other state or religious celebrations and festivities. Doing business on several continents allows you to take advantage of the different holidays across the globe to boost sales such as Chinese New Year or Black Friday.
2. Risk diversification
One of the key advantages of having an international presence is reducing reliance on one market to generate sales.
Doing business on several continents simultaneously enables you to compensate for losses incurred in one place with profits generated in other parts of the world. A company operating globally is protected from situations such as:
- Local changes in laws or customs that entail a drop in sales. This may include the imposition of additional charges on given goods (for example tax on sugary drinks), the introduction of restrictions or even sales bans (new emission standards, prohibition) or government restrictions that aim at discouraging customers from buying and using given products (e.g. smoking bans in public areas).
- Natural disasters such as hurricanes, floods, earthquakes, and other phenomena that can destroy factories, shops, or road or rail infrastructure, thus hindering the production, distribution, or sale of your products and services. Such calamities may also lead to a significant reduction in demand for your goods over a large area and for a long period of time.
- The appearance of new, powerful market competitors that can pose as a threat to your business. In such situations, revenues generated in other markets will allow you to endure a difficult period or even compete with your market rivals.
3. Cost reduction
Every entrepreneur knows that increasing the scale of business activity has an impact on the reduction of unit costs. However, doing business in several continents creates new opportunities for the company through the facilitation and remote management of certain activities in countries with lower labour costs such as manufacturing, R&D, and accounting.
4. Benefits from tax reliefs and government programmes
Entering a new market usually involves the creation of jobs and an increase in tax revenues. Hence, governments across the world provide tax incentives as well as other preferential conditions for the purchase or lease of premises to encourage foreign investment, which can significantly reduce your initial operating costs and increase revenues.
Moreover, depending on the nature of your industry, you could benefit from government programs that encourage the use of your product. For example, as part of the environmental policy, governments in many countries subsidize the purchase of electric cars or the installation of solar panels.
Even though the advantages of international expansion are numerous, there is still a concern with the difficulties of doing business on several continents simultaneously. However, the Internet era full of innovative telecommunication, banking, and transport solutions, enables you to make cross-border payments efficiently and swiftly with the use of a smartphone.
Need tips on how to choose where to expand to? Read our article on How To Choose your Next Frontier Market.