Photo by moyan brenn
As the world becomes more connected and there is less fragmentation of the platforms used to distribute products, international expansion will start to look like an obvious choice and an inevitable path. However, there are things to consider before you start hiring to form an international expansion team.
Phase: The first thing to think about is whether you are ready to start expanding outside your primary market. Obviously, it doesn’t make sense to expand internationally when you are pre-product/market fit. You have to be at a phase where you aren’t trying to optimize your user acquisition, but at the phase of scaling up.
Leverage: Is the president using your product? Or are a third of the Fortune 500 companies paying for your product? If not, you need to figure out what you can leverage. This is important for PR, hiring, and business development in the country you are expanding into. A brand and credibility that the local market can recognize are important.
Landscape: It is important to understand the cultural, competitive, and regulatory landscapes of the market you are trying to enter. First, understand the strength of the local competition and your differentiators. If the differentiation is not strong enough and you don’t have a big enough lead, it will be very hard to outdo a local entrepreneur who is focused on just one market and has an advantage by being physically closer to the customers. This still applies even if a local competitor just makes a copycat of your product.
Expanding into another country takes as much effort as starting another company. Most likely, the same execution in the U.S. will not work in a different country. Early adopters may be different, nuances will be different, etc. Thus, you should also take into consideration the competition in your home ground. If you spread yourself too thin across multiple countries, you will give your closest competitor a chance to overtake you.
Culturally, does your product fit the market you are after? For example, in Japan tweeting was very right for the culture, and the country hods the record for the highest number of tweets per second. In contrast, LinkedIn found that in Japan, where the working culture is predominantly about loyalty and longevity to one company, getting people to upload resumes online was a steep uphill battle (times are changing though).
Are there regulations that will make it a challenge to provide the same product to the new market? Collaborative consumption, on-demand businesses, drones, and bitcoin all have to face different levels of compliance and regulations in each country.
Network effects: Do your current users, content, inventory or brand have network effects in the market you are entering? Being able to enjoy network effects from your home ground can make international expansion slightly easier.
I believe Facebook enjoyed some network effects in the U.S. that influenced users in Japan. Bilingual and international communities, and executives who frequently interacted with U.S. companies were strong early adopters for Facebook. Although these communities were small, they had high density, so this was a solid foundation for growth in Japan.
Although there are regulatory and cultural challenges in Japan, Airbnb is another example that has global network effects. Japanese users can use the same rooms as Americans use when they travel to the U.S. Any additional supply or demand on the platform from any country enhances the experience of Airbnb users in Japan.
International expansion is not just simply about translating your website into another language. A lot of reinventing and operational execution is required, which is capital hungry and time-consuming, so I suggest that you at least take the above factors into consideration before going forward.
