For startups that are already in an advanced phase of their development, the question arises of whether and how their own product can also be marketed internationally. Internationalization is particularly worthwhile when there is high demand for your own product and favorable conditions in other countries, or when the home market has become less attractive due to strong competition, declining demand, and rising costs. However, there are a number of points to consider to ensure that internationalization becomes successful. Christian Neugebauer, lecturer in the field of internationalization, industry, innovation, and expert in internationalization at the Startup Unit of the IHK for Munich and Upper Bavaria, explains the five most important DOs on the path abroad in this guest article.
Guest author Christian Neugebauer, expert in internationalization at the Startup Unit of the IHK for Munich and Upper Bavaria. (© IHK Munich)
DO 1: Implement strategic planning
Strategic planning increases the chances of success for internationalization. Those who think early and systematically about why they want to internationalize and which markets to target will be more successful in the long term. You should also strategically plan the subsequent market entry and exploitation of the foreign market.
DO 2: Target the right markets for internationalization
Rather than leaving it to chance which market you want to expand into, you should think more systematically about which foreign market is right for your company. If you are looking for new sales markets for your product, eight questions are important:
• Is there sufficiently high demand for your product on the foreign market or in easily accessible third markets from there? Is this demand driven by strong industry growth or product-specific niche growth?
• How strong is the competition on the foreign market?
• Are the technical requirements and infrastructure available for selling your product on the foreign market and for your customers to use your product?
• Are there legal obstacles, such as difficult-to-obtain product approvals or permits for production, distribution, etc.?
• What marketing measures (pricing and product design) and what logistics are needed to reach your customers on the foreign market and satisfy their demand?
• Is the supply chain ensured? Are there suitable suppliers on the foreign market, or can existing suppliers be taken abroad (for example, by having them expand to the same foreign market)?
• Are there sufficient skilled workers available on the foreign market who can be recruited for your company?
• Is there sufficient budget available for the specific internationalization project?
DO 3: Find the right form of market development
There are various ways to organize selling your product on a foreign market. The simplest form is export. If location conditions are more favorable than in your home market, production on-site through a licensee or franchisee may be an option. If sharing know-how with an external contractor is too sensitive, you can also operate production and/or distribution as a joint venture with a local partner. The most capital-intensive form, which best protects your own know-how, is direct investment abroad in the form of a foreign branch or subsidiary. Which form is right for your startup depends on your business model, your knowledge of the foreign market, and the protectability of your know-how.
DO 4: Find the right partner in the target market
In almost every foreign market, there are location-specific difficulties and obstacles that are difficult to overcome as a foreign company. It is advantageous to have a local partner on board. The local partner has more detailed market knowledge and is better networked in the country. This makes it possible to resolve problems more quickly, for example with permits from local authorities or cooperation with local suppliers. Communication with customers on the foreign market in the context of marketing and sales is usually also better handled by a local partner.
DO 5: Review and adapt the capacities of your own company
Once you have decided which foreign market you want to expand into, you should align your strategic planning with your company’s capacities. Five points are particularly relevant:
• Is the financing of your internationalization project secured? Does your company have enough equity to survive difficult phases when expanding abroad? Do you have access to external capital to finance the build-up of your business abroad? This can come from lenders (usually banks) in your home market as well as from lenders in the foreign market.
• Does your company have suitable personnel for internationalization? Are there employees who can manage internationalization because they have the appropriate foreign language skills and intercultural competencies?
• Is your company’s organization flexible enough to adapt to internationalization? Can you centralize or decentralize your organization depending on requirements in the foreign market? Can you flexibly adapt your business model and business processes?
• Can your company guarantee the quality of your products even with production and/or distribution abroad? Poor quality sells poorly and can jeopardize success on the foreign market.
• Has your company implemented risk management? When internationalizing, you take on certain risks that don’t exist in your home market. These can include currency risks, legal risks (including compliance), and risks related to intellectual property protection.
Do you want to conquer foreign markets with your startup and your products?
Then these 5 DOs provide you with basic action recommendations. For all further questions, the International, Industry, Innovation department of the IHK for Munich and Upper Bavaria and the IHK Startup Unit are here to help you.
What do you need to successfully take off abroad?
You can find more information on the topic of internationalization and export reports for country markets worldwide on the Bavaria Foreign Trade Portal.
