Short Description:
In this article, Stephen Teasdale, founder of All You Are (AYA), discusses the power of international business and how various strategies can help companies tap into different markets and achieve growth. He explores the pros and cons of different entry modes and emphasizes the importance of establishing a strategy. With his vast experience in the industry, Stephen emphasizes cultural differences and how companies can navigate them when expanding internationally. Stephen concludes by stating that informed decisions are based on respect for the impact a business could have on the world.
International Business and Investment Strategies
The Power of International Business
Knowledge is power, as they say. While knowing certain information is important in itself, knowing people can often be more advantageous. In the context of business, foreign territory is often an opportunity that businesses can explore to expand their markets. To do this, they must establish mutually beneficial relationships abroad, which mostly rely on building and maintaining rapport with people from different backgrounds and cultures. In pursuing global opportunities, companies can tap into different markets and achieve growth and success.
That said, companies must remember a fundamental rule in business: never run out of cash. It sounds comical, but commercial success requires more than a steady cash flow. This is where investment meets business expansion, a coexistent relationship in which one does not work without the other. So, if a business is looking to expand internationally, it should keep these objectives in mind:
It requires time and effort to research and gain familiarity with markets overseas. Being adaptive and recognizing the importance of mutually beneficial relationships will contribute to a business’s success in the long run. Entrepreneurs should build these relationships with like-minded and economical people who share similar goals and interests. Lastly, utilizing different approaches and strategies will help businesses to learn and grow. What works well in one country may fare completely differently in another. With this information in mind, any business has the potential for growth, expansion, and long-term success.
Business Expansion Internationally
Strategies should be best friends for all businesses, large-scale or small. They will support your cause (investment), help you to meet other people (networking), advise you (research), and stand by your side (commitment) if plans, ideas, or pursuits fall through. Employing a variety of business strategies will cover all of your bases, preparing you for the highest breakthroughs or the lowest downfalls. What matters most is that you make informed decisions in your company’s best interest. Say, unfortunately, that your business has peaked locally and has outgrown its respective market. What can it possibly do to revive itself?
Thinking local and acting global is the short answer. This is where international business, a strategy involving foreign relations with other businesses and the priority of individual growth, comes into play. If this seems to be the only option at a certain point, or if this strategy seems to be beneficial regardless, it is worth exploring.
Target Markets
Whether your business is homegrown or looking to take matters abroad, target markets are practical in allowing for direct insight into how a business functions. Ask yourself two basic questions: for whom is my business intended? and do I have enough information about these markets to even invest?
While it requires some study time to learn about foreign markets, we must remember that time is an investment in itself, especially when one major idea behind the expansion is forming alliances. Researching particular markets provides foresight into other companies’ demographics, trends, and statistics. With this information, a business can cater their respective products or services to the needs and desires of these researched markets.
Legal Logistics
Additionally, not all countries have the same rules. Currency, as well as the laws surrounding it, is different almost everywhere. This means taxes are likely distinctive to the country, and foreign exchange (forex), or converting one country’s currency into another’s, is a must. Laws regarding intellectual property (IP) may also be different, which is critical to a business considering its nature is to share IP. It is important to understand the concepts of IP, forex, and their relationship to each other, especially when expanding internationally.
Differences in Culture and Language
Unfamiliarity and language barriers are inevitable when it comes to working abroad. Take, for example, the process of investing in Indonesia. It is broken into multiple steps that all serve as an indicator of the need for translators and cross-cultural interventions. Firstly, establishing a local subsidiary company and representative office must be done within a business that is looking or attempting to invest. This subsidiary will already know the language and be familiar with the culture, legislation, and foreign exchange, making it more convenient to proceed with business strategy. It will also address the components of investment amount, shareholders, and licensing.
Establishment, Operation, and Exit
After the initial process of establishment, the operational phase begins, which necessitates employment, production of goods, and their sale and delivery to supporting customers. Typically, this phase is completed once the customers have received the product or services, which is then followed by the management of business-related items such as shareholding, investing, and earning profit. This is formally known as the exit phase in which an owner likely finds stability in their company and has confidence that success will continue.
Stability
Ensuring stability is the driving force behind the decision to work with other businesses internationally. If there exists any kind of obscurity in terms of your company’s future success, it begs the question: can we do business together? This question, while innocent and wary, is equally as terrifying and non-negotiable because the stability of your business will always be at stake. This is precisely the reason why companies should determine how they would collaborate with other companies or at least consider how it would prove to be beneficial.
Entry Modes
Deciding an entry mode determines what kind of working relationship your business will have with another. Perhaps the interprofessional goals are equitable in that both businesses may benefit from collaboration, otherwise known as joint ventures. Or maybe the approach to doing business is non-equitable and will rely on the process of sales. Either way, the task at hand is to establish a means of expansion, which succeeds a mode of entry first and foremost.
Collaboration
Collaborating with others, whether in your own company or with those in another, is vital and sometimes overly necessary, which will always be a productive science. Without collaboration, a business will likely face limitations and never reach its utmost potential. Thus, collaboration in international business is mandatory.
One strategy that is common with respect to mutual interprofessional benefits is partnership, or cooperation among two or more businesses to enhance and progress their shared interests. Partnering with another business functions as a way to share resources and expertise, and it typically requires long-term collaboration.
Alternatively, partnering has what we might consider a “close cousin”, formally known as joint venturing, or a collaboration among multiple businesses through shared interest, ownership, and authority. This shared business endeavor comes with the same innovations and downfalls commercially. The collaborating businesses rise together with the profits they earn, or they fall together by the risks taken that did not pan out as expected. The working relationship is analogous to any sports team and the mindset of winning together and losing together. In general, both partnerships and joint ventures help to create business alliances that foster the growth and expansion of like-minded companies.
Sales
Regarded by many as the most common and simplistic form of doing business, direct exporting plays a role in every company’s generation of revenue by selling commodities in exchange for currency. Let us take this moment as a reminder about forex and conversion scales that vary from country to country, specifically in international business. It will come in handy when pursuing the course of direct exporting when working with other businesses. Due to the nature of international sole proprietorships, direct exporting abroad is the primary reason these businesses can stay afloat. Direct exporting equates to direct income, and if this process becomes more successful over time, a sole proprietorship then has the chance to become incorporated.
Comparable to direct exporting, a company’s product is sold in exchange for currency, but the cash flow takes the form of royalties, a method otherwise known as licensing. This means that the company with which you collaborate will sell your product and, in turn, earn a share of your product’s revenue, whereas you will receive the fees in return from your partner or collaborating business. As long as the other company uses your brand for sales, you will earn a percentage of the revenue because you hold ownership over the brand name.
Franchising
With regards to branding, the concept of franchising is a powerful one, capitalizing on the present success of one’s business by allowing other businesses, or franchises, to generate a share of revenue for you while using the company’s respective brand name. The model of McDonald’s and it’s rise in global prominence in the restaurant industry can be taken as an example
What started as a small, homegrown barbeque joint back in 1940 soon became the iconic fast-food chain owned by Ray Kroc, a business partner of the McDonald brothers. With the local success of their small restaurant in San Bernardino, California, Richard and Maurice McDonald had gained Kroc’s interest. Kroc saw vast potential in the McDonald’s brand, soon becoming its franchise agent and taking it to the next level by expanding across the United States.
Kroc seized the opportunity and ran with it, never once looking back. McDonald’s rise to prominence began with franchising and now resides in 120 different countries, spanning 37,855 restaurants worldwide and over 20,000 outside of the United States.
Investment
Eventually, Ray Kroc agreed to a franchising deal that would use the McDonald’s brand name to sell its savory burgers and tasty milkshakes under his own McDonald’s franchise. In other words, Kroc invested out of the strategy: if you can’t beat them, buy them. Interestingly, this deal would go on to work out more beneficially for Kroc, who bought the company and the rights to all generated revenue in perpetuity, essentially making it his own company. That is business for you.
As proven by Kroc, buying a company, while a major investment at first, often leads to long-term success, largely because of the chance that was taken on what a franchisee, partner, or investor believes to be a worthwhile company with a strong business model.
Internationally, McDonald’s has bought chains and restaurants all over the world and still aims to expand. Through their strategy of catering to culturally different food markets around the globe, their menu has adapted effectively and created a food experience that Japan, France, and the Philippines can enjoy as much as America itself. While McDonald’s is just a model, other companies including healthy meal brands in today’s age have used similar strategies to expand and achieve growth across borders.
Referring back to Indonesia’s business model, we examine another investment strategy that similarly capitalizes on establishing a subsidiary and then building the business from the ground up in its current market. This strategy is called a greenfield project, which feasts its investment’s eyes on gaining success with a minimal starting base while taking greater risks financially. Sometimes, the greater the risk, the greater the reward. At this point, as a witness to the greenfield project’s success, business owners may decide to continue investing, either by sharing their company with other investors or selling it altogether, which may be the onset of a business’s exit stage.
All You Are (AYA) is an example of a business that has embraced the greenfield strategy. The company took the bold step of starting anew, building its team from scratch, and immersing itself in unfamiliar business customs. Despite the additional time and effort required, this approach can ultimately be both financially and personally rewarding. It also provides an opportunity to learn a new culture and shape the culture of the venture that is created
Making the Call
At the end of a long, arduous workday, the ball is ultimately in the CEO’s court, along with their board of directors and other leadership executives. Making the call to engage in business internationally has the potential to be endlessly valuable if the proper actions are taken in doing research, exploring target markets in other countries, and working with businesses abroad that will contribute productively to the success of one’s own. It is important to recognize the potential a business has to establish a strong entry mode, maintain operations once collaboration has transpired, and allocate roles, finances, and strategies to the appropriate employees and franchises as an exit phase. These decisions will need to be made out of respect for the impact that your business could have on the world, endorsing the very soul of international business in the first place.
Stephen Teasdale is an investor, entrepreneur, and Founder and Director of All You Are (AYA) in Bali, Indonesia. With expertise in real estate development and investment, he has successfully led numerous multi-million projects in the UK, developing companies that have been recognized in the “1000 Companies to Inspire Britain” list. With AYA, he aims to revolutionize urban living by creating exceptional, sustainable communities that prioritize inclusivity and environmental responsibility.
