STARTING a business has never been easier, but scaling one has never been harder. For those that do succeed in their home markets, formulating plans to expand overseas is often the next step in scaling up. After all, slowing growth in any one country is common - even inevitable - once a business has successfully penetrated the market. Yet international expansion is no easy feat.
Minister for Finance Heng Swee Keat addressed the challenges faced by startups and SMEs in recent Budget announcements for 2019, stating that ambitious Singaporean businesses "can only thrive if they scale up, and venture into new markets." He also revealed plans to support aspiring, high-growth local firms via better financing options and technology adoption.
But financing and technology is only part of the recipe for international success.
Scaling internationally requires a deep understanding of your customer in each potential market. To really succeed in international expansion, a business needs to be customer-obsessed, not self-obsessed.
Even large enterprises fail to adopt this mindset. After opening 90 locations in Australia within a span of a mere eight years, Starbucks was forced to close 61 of them.
According to Gartner, this was because there wasn't enough time for the Australian customer to develop a want and need for their coffee, but arguably Starbucks simply didn't appeal to Australians' tastes. Starbucks served sweeter coffee options than Australians liked, while charging more than existing local cafes.
When even giants find themselves failing to succeed in new countries, on first impression it gives little hope to ambitious, growing companies who are setting their sights on international expansion.
However, there are a few things that the successful ones get right.
Identify areas of demand through inbound marketing
Businesses who are executing an inbound marketing strategy are likely already creating untapped demand from international markets.
For example, if a company in Singapore is attracting people to its website via Google by creating helpful content aimed at prospective customers - which many are - it's likely that the same content is also being found by people searching in other countries too. Those visitors are likely turning into leads that are unable to be sold to until the business expands into that country.
This data is invaluable when assessing opportunity in new markets as it helps to identify areas of unaddressed demand for your products or services.
Assess market potential holistically
Of course, it is also fundamental to identify and measure a market's potential when formulating an international expansion plan, but many businesses fail to look at the bigger picture beyond the total addressable market. In fact, there are lots of other factors to consider depending on the type of business:
- Digital sophistication of the market: Considering most high-growth businesses are heavily reliant on digital infrastructure, it's important to develop a deep understanding of the local digital sophistication of the market in question.
For example, many emerging markets in Asia Pacific, such as India or Indonesia, are often mobile-first, or even mobile-only. Combined with still-developing wireless network infrastructure, businesses might consider rolling out "lite" versions of their apps and services, or at least ensure that their customer experience (from their website to chat experience) is well-optimised for mobile.
- Cultural "distance" from the business' existing headquarters: Does this particular country have a different working culture? What internal processes need to change in order to be successful in a different country?
Adapting to different ways of doing business is important in providing a remarkable customer experience - without that, a business will struggle to grow anywhere - so it's important to understand how easy or difficult this will be.
- Competitive assessment: This isn't just about whether you have competitors in-market and who they are, it's about assessing the customer experience being provided, and whether there's opportunity to better serve these customers.
It's rare that a company has no competitors in a given market, so it's important to identify how your offering is better for the customer.
Businesses that can provide an outstanding customer experience are the ones that will benefit from word-of-mouth recommendation, and as a result will grow better.
Strategic and considered go-to-market
When evaluating aspects of your go-to market strategy, it is vital to have a balanced view of growing your customer base against the cost to acquire new customers.
At a very basic level, if the lifetime value of your customers in a market is high, then it is feasible to spend more to acquire them. This might mean hiring on-the-ground salespeople to have a physical touchpoint and really connect with customers, or running large marketing events.
If the potential customers have a low lifetime value, it's probably not the best idea to deploy a field sales team. Instead, figure out a low-touch path to purchase that doesn't compromise the customer experience.
Prioritise growing better over growing faster
Slow and steady (with the customer at the heart of every decision) is what wins the race. No matter how enticing a new market looks, businesses need to take a customer-obsessed approach to international expansion.
Entering a new market but failing to maintain a remarkable customer experience will damage any business in the long run, as unhappy customers won't hesitate to tell their peers to stay away.
The goal should not be to grow fast at any cost, but to grow sustainably, with a customer-obsessed approach to expansion. That's how companies grow better, and that's what it takes to build a successful international business.
- The writer is Managing Director, APAC, HubSpot.
- This article first appeared on aseanbusiness.sg, part of The Business Times.