For startups that are already at an advanced stage of their development, the question arises as to whether and how their own product can be marketed internationally. Internationalization is particularly suitable when there is high demand for the product and favorable conditions in other countries, or when the domestic market has become less attractive due to strong competition, falling demand, and rising costs. However, there are a number of points that should be considered to ensure that internationalization is successful. Christian Neugebauer, speaker in the field of internationalization, industry, innovation and internationalization expert in the Startup Unit of the Chamber of Commerce and Industry for Munich and Upper Bavaria, in this guest article.
DO 1: Implement strategic planning
Strategic planning increases the chances of success in internationalization. Those who consider early and systematically why they want to internationalize and which markets they want to target will be more successful in the long run. You should also strategically plan the subsequent market entry and development of the foreign market.
DO 2: Target the right markets for internationalization
Instead of letting chance determine which market you want to expand into, you should consider in a more structured way which foreign market is the right one for your company. If you're looking for new sales markets for your product, eight questions are important:
• Is there sufficiently high demand for your product in the foreign market or in third-party markets that are easily accessible from there? Is this demand driven by high growth in the industry or the product-specific niche?
• How strong is the competition on the foreign market?
• Are the technical requirements and infrastructure in place for selling your product on the foreign market and for your customers to use your product?
• Are there legal hurdles, such as difficult-to-obtain product approvals or permits for production, distribution, etc.?
• What marketing measures (pricing and product design) and logistics are necessary to reach your customers in the foreign market and tap into their demand?
• Is the supply chain secure? Are there suitable suppliers in the foreign market, or can existing suppliers be taken abroad (for example, by expanding into the same foreign market)?
• Are there enough skilled workers in the foreign market that can be recruited for your company?
• Is there sufficient budget for the specific internationalization project?
DO 3: Find the right form of market development
There are various organizational options for selling your product in a foreign market. The simplest is export. If the location conditions are more favorable than in your home market, local production through a licensee or franchisee may be an option. If transferring know-how to an external contractor is too sensitive, you can also operate production and/or distribution in the form of 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. The right form 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
Almost every foreign market has local difficulties and obstacles that are difficult for a foreign company to overcome. This is where it's advantageous to have a domestic partner on board. A domestic partner has more detailed market knowledge and is better connected within the country. This allows problems, such as obtaining permits from local authorities or working with domestic suppliers, to be resolved more quickly. A domestic partner is also usually better at communicating with customers in the foreign market in the context of marketing and sales.
DO 5: Review and adjust your company’s capacities
Once you've decided which foreign market you want to expand into, you should align your strategic planning with your company's capabilities. Five points are particularly relevant:
• Is the financing of your internationalization project secured? Does your company have enough equity to survive even difficult phases of international expansion? Do you have access to external capital to finance the development 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 staff 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 accommodate internationalization? Can you centralize or decentralize your organization depending on the needs of the foreign market? Can you flexibly adapt your business model and business processes?
• Can your company guarantee the quality of your products even when produced and/or distributed abroad? Poor quality sells poorly and can jeopardize success in the foreign market.
• Has your company implemented risk management? Internationalization exposes you to certain risks that don't exist in your home market. These 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 will give you basic recommendations for action. For any further questions, please contact International, Industry, Innovation of the Chamber of Commerce and Industry for Munich and Upper Bavaria and the IHK Startup Unit with advice and support
What do you need to be successful abroad?
Further information on internationalization and export reports for country markets worldwide can be found at the Bavarian Foreign Trade Portal.
