Why do companies internationalize?

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In a world that is moving faster and faster thanks to global digitalisation, companies have an easier internationalisation process and can benefit from it economically.

Today there are different types of strategies that can be applied to reach an optimal internationalization, for this reason, below we will explain more in depth the most used strategies that work best for companies.

The first thing you must understand before applying strategies of internationalization of companies, is its meaning, if not, nothing of what we explain later will make sense.

So, to explain in a simple way what is the internationalization of a company we will use as an example the biggest company in the world, Apple. This company has applied different strategies to be able to have a presence in the most economically strongest countries in the world, the internationalization of a company is precisely that presence of which we speak, is the ability to expand its product to different markets beyond borders.

A very important point to highlight is that the internationalization of companies cannot be confused with travel or temporary business plans. When we talk about internationalization, we refer to a permanent establishment in foreign markets, therefore, internationalization strategies are aimed at expanding the company’s market permanently to other countries.

Also, when we talk about the internationalization of a company, it is important to know that there is no exact time to start the expansion process, but everything will depend on the economic resources, decisions and objectives set by the company’s management to start, or not, this process.

1. To Find New Talent or Fill Talent Gaps

Companies no longer have to limit themselves to local talent when hiring. Communications technology unlocks collaboration across borders, often instantaneously and in real time. Document-sharing software and project-management suites keep international teams aligned and on task. IT security and network protection bolster end-to-end connections, so employees can work securely from anywhere.

All together, these tools expand the available hiring pool past your backyard. There are also a few situations where a company finds itself in need of specifically hiring international employees:

  • When launching physical products into a new market, therefore requiring a local presence
  • When launching services into a new market, thus requiring a local presence
  • When restructuring the organization based on overall corporate strategy objectives
  • When leveraging today’s broad global professional networks, and the more globally-savvy talent pool they offer at all employee levels

2. To Extend the Sales Life of Products

Every product or service follows a lifecycle. While details differ depending on industry, a product generally experiences inception and launch, market maturity, stabilization, and — in most cases — decline and eventual phase-out.

An overseas expansion strategy hits the reset button on that lifecycle. Companies get to reinvent the wheel on strategic products or services they think will excel in a new market, and even correct for past errors. That foreign country, in turn, revitalizes products that may be nearing maturity in other markets. The result is a brand-new revenue branch for the parent company.

3. To Diversify Market Presence

Successfully expanding a business into international markets provides organizations with long-term risk mitigation.

While there are cost benefits to weigh and an inevitable layer of new obstacles businesses will face, successful international expansion reduces one’s dependency on the strength of a single domestic market. Diversified market presences allow organizations to better ride global market waves, with highs in one country balancing the lows in another.

4. Unique Circumstances Present a Rare Moment to Expand

Company mergers, acquisitions, branch spinoffs, or new sales office locations present potential inflection points for a business, and launching onto the international stage is no different. Change management scenarios have an intrinsic momentum to them, and international expansion strategies give structure to that momentum.

Capitalizing on change momentum, company branches, spinoffs, or newly acquired subsidiaries expand the parent company’s reach. They simultaneously accomplish many of the expansion goals listed earlier, such as diversifying market share, extending product lifecycles, and embracing global talent acquisition.

5. Because It’s Time

Perhaps the most common reason to expand is simply because there is measurable demand. If you are seeing international interest in your goods and services, it may be time to take the leap. Test the waters with a small operation, that you can quickly scaling up to launch your company into its next phase.

Sounds exciting, right? It is. However, excitement is no substitute for proper business planning. You’ll need a foreign expansion plan that applies many similar principles of corporate planning and strategy — just in a new market. From market segmentation research and infrastructure development to budgeting, branding, and product or service distribution — your key business strategy needs outlining ahead of time, in writing.