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How to overcome the five key challenges of international expansion

October 18, 2021

Today, many entrepreneurs and SMEs dream of taking their company global. If this is something you’re working towards, you’ll already know that there are lots of hurdles to overcome for success.

International expansion comes with challenges in terms of laws, languages, local businesses and more. Fail to prepare, and your endeavour could end up being very costly. It doesn’t matter how big your business is, either. Even corporate giants like Tesco, Walmart and Starbacks have experienced spectacular failure when they expanded into foreign markets.

Here are five key issues you’re likely to face as your expansion plans commence, along with some advice on how to overcome them.

1. Cross-border payments

Expanding internationally will require you to send money to individuals and organisations such as employees and suppliers in other countries. However, making international payments can be incredibly slow due to the number of intermediaries involved. Things get especially tricky when the money isn’t going straight from A-B. A payment sent from Ukraine, for example, may have to go through Russia or Germany, and then India, to be received in Sri Lanka. Not only is this slow, all these intermediaries can mean that processing and foreign exchange fees really stack up, making the process costly.

To avoid extortionate fees and ensure your cross-border payments reach recipients as quickly as possible, it’s important to find a payment services provider with the technology required to overcome these challenges. For example, Danish fintech Inpay’s cross-border payout solution provides a low-cost, fast and secure multi-currency cross-border payments as an alternative to SWIFT wire transfers. Due to the company’s direct access to domestic clearing channels, money can bypass the usual intermediaries to reach its destination, speeding up the process and cutting costs.

2. Language barriers

Communication is key in the business world, so you need to be ready to overcome all potential language barriers. If not, there could be disastrous results. In addition to making awkward or even disrespectful comments while communicating via phone or email to your contacts abroad, you also risk making huge blunders in your international marketing materials. There are countless incidents where brands have been lost in translation. For example, the Honda Jazz was originally released as the Honda Fitta, until the company learned that ‘fitta’ was slang for women’s genitalia in several Scandinavian languages.

This is why it’s so important for you to have professional native-speaking translators, interpreters and consultants in each country to ensure you don’t make this mistake. Don’t even think about relying on Google Translate, which is a useful tool in some circumstances, but far from perfect. These human assistants will also have a deep understanding of the different cultures, helping you tailor your communications to each place specifically, improving your knowledge of the markets and, in turn, your chances of success.

3. Tax codes & compliance

Taxes, fees and tariffs for international trade can be a minefield, in addition to all the trading standards and regulations you’ll have to be aware of. If you don’t comply, this will ruin your expansion plans and rack up significant costs. Understanding all these details is arguably the biggest challenge you’ll face and it could take months to complete all the necessary paperwork.

Unfortunately, there is no quick solution to this. All you can do is take your time and study all the details before you do anything. As long as you’re sensible and don’t rush, it should become clear which steps you need to take. You could always consider hiring accountants and lawyers in the relevant countries if you want that extra assurance.

4. Local competition

You may believe you have a great product, but who’s to say there’s not a company already offering the same thing in your target country? You have to suss out the local competition before you decide to commit to your local expansion plans. Chinese consumers, for example, tend to prefer local brands— a trend further accelerated by the pandemic. Therefore, you’ll have to conduct intense market research to ascertain whether your product is likely to take off there, or whether you should consider alternative locations.

You’ll have to work hard to convince the international market that your brand can be trusted and is superior to the competition. Find out exactly what your competitors are doing so you can plan how to counteract the advantages they have and make your product stand out. You could also consider collaborating rather than competing with other brands in your sector. This will allow you to make use of their local knowledge and expertise and make the transition to a new country much easier.

5. Supply chain risks

Managing an international supply chain can be a serious challenge, especially where distance, cost and time are concerned. There are lots of risks, such as long delays, losses while goods are in transit, issues at customs and more. This is why proper planning is essential to prevent these situations from arising. Doing so will also minimise the likelihood of overstocking or understocking key products, or spending far more than you expected.

Planning and managing a global supply chain is complicated, but business software and services provider G2 recommends following these five steps to simplify the process:

Research local laws regarding business expansion and supply chain management.
Guarantee compliance with both local and international laws.
Understand the risks on the supply and the demand sides, and consider how you’d adapt to unexpected events such as a major weather event, change in labour law, or geopolitical development.
Plan and perfect your supply chain, and make sure you can maintain the low cost and quality of products while scaling.
Consider using supply chain planning software to help streamline your workflow.

Conducting due diligence and forging a solid plan will help your supply chain keep ticking in spite of any unexpected surprises.