5 Reasons Why So Many Companies Fail at International Expansion

(Last Updated On: April 25, 2017)

With digitization influencing our lives in every possible way, companies in varied business domains are not exceptions. For companies, the world has become smaller and the barriers to cross borders have virtually melted down in today’s world. International expansion is the mantra for many companies, as it gives a sure way to scale up their businesses. Moreover, company growth is the most important drive that pushes all entrepreneurial efforts, whether it is the company promoters or investors backing them or the team working on execution.

But not many of them really succeed in their global ambitions when they try to get into the unknown territories abroad. There are some specific reasons as to why particular companies fail in their respective attempts in international expansion. However, there are some generic reasons as to why many companies appear to be failing repeatedly as mentioned below.

International Expansion Mistakes

Reason #1: Not knowing the users or customers enough

When you are building a new business, your success really depends on how fast you are able to find the critical problematic factors for customers and come up with offerings to resolve them. This really means you would put yourself into the shoes of the users or customers to know their situation and identify what will work best for them. An overseas market presents this big challenge when you are not much familiar with the need of the users and customers there and at times it becomes hard to establish some way to make right decisions.

Reason #2: Expecting the same business model would work everywhere

Each set of new customer segment would mean what product offering works for them and what key value the customers see in the offerings that could change significantly from one segment to another. And this applies to a segment in a faraway domicile too. Wrongly, many companies fail to understand this and continue to expect that the same product offering and the same business model would work everywhere they go.

Reason #3: Missing the local connection

An international market brings in lots of uncertainties for the company owners and in many times, they choose to put in their own trusted man or team. They expect that with a trusted man who has delivered in the domestic market, they can get a control over uncertainties in a new terrain. This strategy usually results in disastrous outcome.

Reason #4: Costs in serving international markets

When you are not too familiar with local regulations and culture, you may end up discovering that the costs just don’t add up for you to be in a profitable level. Unless you see rationally if there are any ways to work around reducing the costs, the plans would back-fire.

Reason #5: Ineffective execution

Many times, companies fail at international expansion because they’re not paying attention to details during execution and thus end up missing the big picture.

So, in short, your global ambition must be in line with the understanding that international business is not just an expansion of the domestic operations. It will be a new business with different requirements and considerations, unique to those new markets.