Developing Your International Strategy: 9-Step Process For Success

There comes a time in many an organization’s development when they start looking beyond their home country to take advantage of opportunities in international markets.

If this is you, then you’ve come to the right article. Use this as a starting point to help you launch your international strategy.

What Is An International Strategy?

An international strategy is a plan or approach that a company adopts to conduct its business operations outside its home country. It covers the ways an organization markets and manages its products, services, and operations across different countries.

What Are The Benefits Of An International Strategy?

Market expansion and growth

A primary reason for international expansion is to increase sales and revenue by tapping into new customer bases.

A popular example is Apple, whose expansion into the Asia-Pacific market now generates about a third of its revenue.

Reduced risk

Related to the above, spreading operations across multiple countries reduces dependence on a single market, mitigating risks such as local economic downturns, market saturation, wars, or natural disasters.

Access to new talent pools

Expanding internationally allows companies to access a broader talent pool of skilled workers from around the globe who can also provide knowledge about their home market.

A prime example of this is Google. Google has established R&D centers in various countries, including India, Israel, Canada, the United Kingdom, and Switzerland. 

These centers allow Google to tap into local expertise and innovations, fostering a diverse and dynamic working environment.

To make international hiring easier, it’s now increasingly common practice to use an employer of record. These take on the legal responsibility of employment and help with admin and compliance. You can read more in our article what is an employer of record.

Reduced business costs

Opening operations in new countries can help organizations reduce costs through:

• Access to new manufacturing facilities and methods
• Cheaper labor
• More affordable raw materials
• Tax incentives
• Regulatory savings
• Improved supply chain efficiency.

Of course, organizations looking to save costs must be careful to abide by local regulations and behave ethically or risk fines and reputational damage.

Creating An International Strategy: 9-Step Process

So now you’re convinced of the benefits of an international strategy, how can you go about it? 

1. Define Your Business Objectives

• Set clear goals: First things first, establish what you aim to achieve with your international expansion. This could include increasing or diversifying revenue, accessing new talent, or reducing costs.
• Align with corporate strategy: Ensure that your international business objectives align with your overall strategy and long-term vision.

2. Conduct market research

• Identify potential markets: Assess various international markets to identify where your needs might be met. A common framework used here is the PESTLE (political, economic, sociological, technological, legal, and environmental).
• Understand local regulations and cultural norms: As part of your research, seek to understand local laws, employment regulations, and cultural practices that could impact business operations. 
• Identify potential risks: Asses economic, political, legal, and cultural risks in potential markets (again, PESTLE can help).

3. Assess internal capabilities and resources

• Evaluate internal resources: Assess your company's readiness in terms of finances, human resources, and operational capabilities.
• Identify skill gaps: Determine if existing employees have the necessary skills for international operations or if additional training or hiring is required.

5. Develop entry strategies

• Choose your mode of entry: Decide whether to enter through exporting, licensing, franchising, joint ventures, or setting up a subsidiary (more on these shortly).
• Local partnership considerations: If opting for joint ventures or partnerships, choose local partners wisely, considering their market knowledge and business reputation.
• Develop risk management strategies: Create strategies to mitigate identified risks, including contingency plans.

6. Adapt your products, services and operations

• Customization: Adapt your products or services to meet local preferences, regulations, and cultural nuances.
• Pricing strategy: Develop a competitive pricing strategy that reflects local market conditions, purchasing power, and competitor pricing.
• Develop Global HR Policies: Create HR policies that are globally consistent yet adaptable to local laws and cultural nuances.
• Talent management: Plan for talent acquisition, development, and retention in the new market. This may include expatriate management, local hiring, and training programs.

7. Develop a marketing and sales strategy

• Brand positioning: Position your brand in a way that resonates with local consumers and differentiates you from competitors.
• Marketing campaigns: Create targeted marketing campaigns that leverage local media, social media, and other channels to reach your audience effectively.
• Sales channels: Determine the most effective sales channels for your products, whether it be direct sales, online platforms, or retail partnerships.

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8. Ensure compliance and risk management

• Regulatory compliance: Put measures in place to ensure that your business complies with all local laws and regulations, including labor laws, tax requirements, and trade regulations.
• Legal protections: If possible, protect your intellectual property and ensure you have the necessary legal agreements in place.

9. Monitor and evaluate performance

• Key performance indicators (KPIs): Establish KPIs to measure the success of your international strategy, such as market share, sales growth, profitability, and customer satisfaction.
• Regular reviews: Conduct regular performance reviews to assess progress and make adjustments as needed.
• Feedback loops: Collect feedback from local teams, customers, and partners to continuously improve your strategy and operations.

What Are The Modes Of International Expansion?

Above I alluded to the different ways organizations can choose to enter new markets. I’ll now go into these in a bit more detail:

Exporting

Direct exporting: Selling products directly to customers in the target market without intermediary partners. This method is straightforward and requires minimal investment.

Example: A manufacturer selling its products online to international customers.

Indirect exporting: Using intermediaries such as agents, distributors, or trading companies to sell products in the target market. This reduces the complexity and risk associated with entering new markets.

Example: A company partnering with a local distributor to sell its products abroad.

Licensing and franchising

Definition: Granting a foreign company the rights to produce and sell the company's products in exchange for royalties or fees. Licensing allows for rapid market entry with low investment.

Example: A software company licensing its technology to a foreign firm to develop and distribute the software locally.

Joint ventures 

Definition: Partnering with a local company to create a new business entity jointly owned by both parties. Joint ventures combine resources and expertise while sharing risks and profits.

Example: A car manufacturer partnering with a local automaker to produce and sell vehicles in a new market.

Strategic alliances

Definition: Forming a partnership with a local firm to collaborate on specific projects or activities without creating a new legal entity. Strategic alliances can provide market access, technology sharing, and resource pooling.

Example: A technology company collaborating with a local firm to develop and market new products.

Wholly owned subsidiaries

Definition: Setting up a fully owned branch or subsidiary in the target market. This method provides full control over operations and is often used when the company seeks a significant long-term presence.

Example: An electronics company establishing its own sales and service office in a foreign country.

Piggybacking

Definition: Partnering with another company that already has a presence in the target market to leverage their distribution networks and market knowledge.

Example: A smaller brand using a larger company's distribution channels to enter a new market.

E-commerce

Definition: Selling products directly to consumers in foreign markets through online platforms. E-commerce allows companies to reach international customers without a physical presence.

Example: An apparel brand selling its products globally through its website or online marketplaces like Amazon.

Foreign direct investment (FDI)

When it comes to direct invest, organizations have a couple of options:

Greenfield investment: Establishing new operations, such as manufacturing plants or subsidiaries, in the target market from scratch. This method involves significant investment but offers complete control over operations.

Example: A pharmaceutical company building a new production facility in a foreign country.

Acquisition: Purchasing an existing company in the target market. Acquisitions provide immediate market access and established customer bases but may involve higher risks and integration challenges.

Example: A beverage company acquiring a local drink manufacturer to enter a new market.

Mergers

Definition: Merging with a company in the chosen market(s) to combine operations, assets, and management to form a new, larger entity. Both companies typically share ownership and control of the newly formed entity.

Example: In 2000, Vodafone, a UK-based telecommunications company, merged with Mannesmann, a German telecommunications and engineering company. The merger allowed Vodafone to significantly expand its presence in the European market, leveraging Mannesmann’s established infrastructure and customer base in Germany and other European countries.

Brownfield investments

Definition: The purchase and development of existing assets, such as buildings, factories, or businesses, in a foreign market. This can include refurbishing, upgrading, and modernizing the facilities to meet the company’s standards and operational needs.

Example: In 2008, Tata Motors, an Indian automotive company, acquired the British luxury car brands Jaguar and Land Rover from Ford. The acquisition provided Tata Motors with access to established manufacturing facilities, advanced technology, and a strong brand presence in the global luxury car market.

International Strategy Challenges

Of course, like most new initiatives worth doing, there are risks and challenges involved and history is littered with international forays gone awry. Here’s what intrepid organizations typically have to contend with:

Cultural adaptation

• Understanding Local Culture: Adapting products, services, and marketing strategies to align with local cultural norms and consumer preferences can be challenging.
• Communication Styles: Differences in communication styles and business etiquette can lead to misunderstandings and miscommunication.

Employee integration

• Managing diverse teams: Integrating employees from different cultural backgrounds requires effective cross-cultural management and communication skills. For guidance, check out our article on managing remote teams.
• Workplace norms: Different workplace norms and practices can affect team dynamics and productivity. 

Regulatory and legal compliance

• Compliance with local laws: Ensuring compliance with varying labor laws, tax regulations, environmental standards, and business practices in different countries can be complex and costly.
• Intellectual property protection: Protecting intellectual property rights in foreign markets, where enforcement may be weak or inconsistent, can be challenging. Intellectual property (IP) infringement and theft are widespread in China, for example.
• Political and regulatory risk: Political instability and changes in government policies or regulations can impact business operations and profitability.

Operational challenges

• Logistics and distribution: Managing complex logistics and distribution networks across multiple countries, each with its own infrastructure and regulatory requirements, can be a headache.
• Supply chain disruptions: Dealing with potential supply chain disruptions due to geopolitical issues, natural disasters, or transportation challenges.
• Maintaining standards: Ensuring consistent quality of products and services across different markets with varying production and operational standards.
• Local sourcing: Managing the quality and reliability of locally sourced materials and components.

Financial challenges

• Exchange rate risk: Managing the financial impact of fluctuating exchange rates on revenues, costs, and profitability.
• Hedging strategies: Implementing effective hedging strategies to mitigate currency risks.
• Cost structures: Understanding and managing different cost structures, including labor costs, materials, and operational expenses, in various countries.
• Budgeting and forecasting: Accurate budgeting and forecasting in a dynamic and uncertain international environment.

Strategic alignment

• Global vs. local strategy: Balancing the need for global consistency with the need for local adaptation in products, services, and branding.
• Decentralization: Deciding the extent to which decision-making should be centralized or decentralized to local management.

Risk management

• Geopolitical risks: Navigating geopolitical tensions, trade wars, and sanctions that can affect business operations and market access.
• Economic fluctuations: Dealing with economic instability and recessions in different markets that can impact consumer spending and business growth.

Technological challenges

• Technological integration: Integrating technology systems across different countries with varying levels of technological infrastructure and maturity.
• Data security: Ensuring data security and privacy compliance with different regulations, such as GDPR in Europe.

International Strategy Best Practices

With the above challenges in mind, what best practices can you use to ensure the success of your international strategy?

Align with corporate objectives

• Strategic fit: The Northstar of any new initiative, the international strategy must align with the company’s overall corporate strategy and long-term vision.
• Clear goals: Define specific, measurable objectives for the international strategy, such as revenue targets, market share goals, and brand recognition metrics.

Conduct thorough market research

• In-depth analysis: Perform comprehensive research to understand economic conditions, cultural differences, consumer behavior, regulatory environment, and competitive landscape in the target market.
• Get local insights: Engage with local experts and stakeholders for detailed insights and validate assumptions about the market.

Choose the right market entry strategy

• Entry methods: Select an appropriate market entry strategy, such as exporting, licensing, franchising, joint ventures, acquisitions, or greenfield investments, based on resources, market conditions, and risk tolerance.
• Adaptability: Be prepared to adjust the entry strategy based on market feedback and initial experiences.

Develop a robust localization strategy

• Product customization: Adapt products and services to meet local preferences, cultural norms, and regulatory requirements.
• Localized marketing: Tailor marketing campaigns to resonate with local audiences, using culturally relevant messaging and local media channels.

Build strong local partnerships

• Strategic alliances: Form partnerships with local businesses, distributors, and suppliers to leverage their market knowledge and networks.
• Joint ventures: Consider joint ventures to share risks, resources, and expertise with local partners.

Invest in talent and leadership

• Local talent: Hire and develop local talent who understand the market and can effectively drive business operations.
• Global leadership: Foster a leadership team with international experience and cultural sensitivity to manage global operations effectively.

Ensure regulatory and legal compliance

• Legal due diligence: Conduct thorough legal due diligence to understand and comply with local laws, regulations, and industry standards.
• Compliance programs: Implement robust compliance programs to manage legal and regulatory risks.

Monitor and Adapt

• Performance Metrics: Establish key performance indicators (KPIs) to monitor the success of the international strategy and track progress against goals.
• Feedback loops: Create feedback loops to gather insights from local teams, customers, and partners, and use this feedback to make informed adjustments to the strategy.

11. Foster cross-cultural understanding

• Cultural training: Provide cross-cultural training for employees to improve communication, collaboration, and cultural sensitivity.
• Inclusive culture: Promote an inclusive culture that values diversity and leverages the strengths of a diverse workforce.

12. Manage risks proactively

• Risk assessment: Conduct regular risk assessments to identify and mitigate potential political, economic, operational, and market risks.
• Contingency planning: Develop contingency plans to address potential disruptions and ensure business continuity.

13. Focus on sustainability and corporate responsibility

• Sustainable practices: Implement sustainable business practices that align with local and global environmental standards.
• Corporate responsibility: Engage in corporate social responsibility (CSR) initiatives that support local communities and enhance the company’s reputation.

International Expansion Case Study: Starbucks

A prime example of a successful international expansion strategy is the case of Starbucks. 

Hate it or love it, the ubiquitous coffee chain has successfully expanded its operations globally while maintaining a strong brand presence and adapting to local markets. 

Here are some key points from Starbucks' international expansion strategy:

Strategic partnerships and joint ventures

In many instances, Starbucks formed strategic partnerships with local companies to navigate regulatory landscapes and leverage local expertise. 

For example, Starbucks partnered with Tata Group in India to form Tata Starbucks, allowing it to penetrate the Indian market effectively.

In China, Starbucks initially entered through a joint venture with local partners (it later bought them out), which helped it understand and adapt to the local market.

Customization and localization

Starbucks adapted its menu to cater to local tastes and preferences. For example, in China, it introduced beverages like green tea lattes and red bean frappuccinos to appeal to local palates.

The organization leverages local knowledge by encouraging local teams to develop new products that it sometimes takes to other markets.

The company also designs its stores to reflect local cultures and aesthetics, creating a unique yet familiar environment for customers. In Japan, for instance, Starbucks opened a traditional Japanese tea house-style store in Kyoto.

Consistent training and development

Starbucks offers comprehensive training and development programs to all its employees, known as “partners.” These programs include the Starbucks Leadership Experience, which focuses on developing leadership skills and company values.

High-performing employees are given opportunities to take on leadership roles in different regions, promoting career growth and international experience.

Local sourcing

In some markets, Starbucks sourced ingredients locally to reduce costs and support local economies. For example, in India, Tata Starbucks sources coffee beans from local plantations.

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