The first question when trying to decide whether or not to expand to another country is an obvious one: is it feasible? Common sense tells us that not every company can expand. This would simply not be a prudent decision. For example, let’s say a Mexican Restaurant named La Parilla has just opened its doors in Austin, Texas. It’s be a few months and they’re doing fairly well. They have a qualified, reliable staff and quality food that has resulted in loyal customers. In terms of growth, they have seen their profits rise 20% on average each month. Despite their success thus far, it would be an incredibly risky and most likely catastrophic decision to expand into another country for many reasons. First of all, La Parilla has very little money to their name. While taking out loans is a possibility, foreign expansion is a tremendous investment, and without the certainty of future success in either country, could result in difficulties paying the loans due to unexpected additional costs and high amounts of accumulated interest. Additionally, the logistics of establishing a restaurant in a foreign location would require a multitude of careful decisions and high expenses. La Parilla would need to (among other steps) perform market research in the suggested location to first see if there would be a sufficient interest, purchase or build an establishment, purchase utilities, renovate the restaurant, hire and train both office and restaurant staff, establish and purchase the necessary ingredients for their products from farmers and distributors, decide through research and strategy which meals would attract the local population, decide on a pricing strategy, and create and distribute marketing materials. Each of those steps previously mentioned require a significant amount of work, research, and funds. For an established and successful company, expansion to a foreign country can be a step to expand their customer base and increase future profits. McDonald’s is a wonderful example of successful foreign expansions, with more than 33,000 stores worldwide. They are infamous for their research into local populations and their subsequent alterations of meal options to best serve the needs of their clients. The Shogun burger, served in Hong Kong and not offered in other parts of the world, is a pork patty with Teriyaki sauce and cabbage. Another example would be The McArabia, which is made with grilled chicken or grilled kofta (beef with spices) and comes with lettuce, tomatoes, onions, and garlic mayonnaise, wrapped in an Arabic style pita bread. Simply looking at the sheer number of successful industries who have expanded shows that it can be a smart move for a company, but it is essential to first research whether this is truly a feasible option for your particular company–what works for one will not work for all.
If the answer is yes to the previous question, the next overarching question to ask yourself is “where?”. Once you have established that expansion is not only possible, but also a potentially rewarding venture, the next decision to ask is which location in the world would best serve your company’s interests. For this, extensive research is needed to delve into the environment, which includes social, political, technological, and economic considerations. In addition, defining your potential competition and completing in-depth analysis into those companies is essential for success. One interesting fact to point out is that sometimes competitors can be in outside industries, and different companies define their competitors in different ways. The way a company defines their competitors will also be another factor of their success–too broad a definition will result in an excess of data and too narrow a definition will result in an insufficient amount of information, both affecting the original company’s pricing strategies and product/service offerings. For example, Target sells a wide variety of products, one being furniture. If Target was opening a store in Brazil and there was a furniture store nearby that customers frequented, they would need to analyze the type of products sold, the target market being sought after, and the prices for those goods. If their furniture was priced too high, than their competition would attract customers away from their doors and into their own stores.
Deciding whether or not to expand, and if so, where, are important considerations every company should ask at some point. However, the real test of success is the quality and depth of that research.