May 22, 2023

Global Expansion Guide

The ambition to penetrate global markets isn’t exclusive to small or medium-sized startups but is also a pursuit of industry giants. Consider the DoDo pizza chain as an example. While the firm has a footprint in over ten countries, there are yet unexplored territories and opportunities to spread its wings further. However, does the pursuit of additional profit wholly explain why large businesses persist in their global expansion?

Several factors motivate scaling. First, expansion fosters business diversification, mitigating risks tied to over-reliance on a single market. Second, it enables a company to grow its target audience, enhance brand visibility, make a global impression, and draw in new partners.

Experience suggests that companies typically consider scaling once they have made their mark in a specific market niche at a particular location. Companies also think about global expansion when geopolitical shifts or other macroeconomic changes arise. Such changes could be economic downturns, the imposition of new trade restrictions, or regulatory measures. In these situations, companies are compelled to reassess their circumstances and seek potential markets in other regions with more favorable operational conditions.

The Art of Balance

As a company scales, the challenge is to retain as many aspects of its business model as possible to keep costs low. This brings us to the first conundrum: deciding what to retain and what to alter. For instance, a firm might decide to uphold its brand’s core values and corporate identity to ensure recognition while tweaking and adapting the product to meet the demand in the new country.

While it might seem enticing, repurposing an existing local strategy is not a viable solution. Regardless of a company’s existing knowledge, entering international markets demands meticulous research for each specific region and a strategy adaptation to reflect cultural nuances and unique consumer experiences.

The Methodical Approach

For crafting an effective strategy, we always advocate a systematic plan to highlight areas needing changes and enhancements. The plan should outline clear steps, resources, timelines, and responsibilities.

Understanding the business objectives and the company’s circumstances is crucial. This involves clearly defining the anticipated outcome and primary tasks, assessing the team’s expertise, available resources, and potential limitations. Furthermore, an evaluation of the company’s current standing and an assessment of existing processes and structures, pinpointing strengths, and weaknesses, will be required. Openness, communication, and coordination among teams ensure the plan’s successful execution. Regularly evaluating progress and comparing results with set goals will enable prompt course corrections as needed.

Once the tasks are outlined, it’s time to move to the next phases: selecting the target market, defining product specifications, testing key hypotheses, and sales funnels. And there it is—the long-anticipated launch! But is it all as straightforward as it appears? Let’s examine this journey from the perspective of one of our clients—a CIS FMCG company venturing into the United Kingdom and Germany markets with new product categories (health supplements, confectionery).

Step 0. Identify the starting point

Before initiating work with the client, the UXSSR team compiled information about the company, from its profile and internal procedures to its strategy and potential limitations. It emerged that the established corporation operated akin to a startup (“Lean startup”). The company’s CEO aimed to cultivate a culture of experimentation within the team, even if it meant adopting a “trial and error” approach with minimal budgets. However, the company operates in the FMCG sector, where the research approach differs from that of nimble digital startups. Consequently, the ex-corporate teams managing this project sought UXSSR’s expertise to conduct research and provide recommendations for entering the targeted markets.

Step 1. Choose the target market

Identifying the target market commences with a traditional analysis of the product portfolio, preliminary scoring, and pinpointing the top one and top three markets. Yet, it’s vital not to overlook other considerations such as the entry threshold, potential risks the company may encounter, and product refinement at this stage by creating a shortlist of potential modifications (Product Canvas).

Our journey with the client kicked off by studying the target audience, competitive products in the target categories and price brackets. Trendwatching was a key part too: we picked out the trends related to this topic in the UK and Germany. Besides desk research, we corroborated the data through comprehensive interviews with the client’s UK and Germany partners – residents with years of FMCG experience. The client initially also looked at other markets – France and Switzerland – but had to rule them out due to tight deadlines and a lack of expertise in conducting business in these countries. Nonetheless, they made it to the shortlist of promising countries for future expansion. Such a list is beneficial for every company during expansion, as it can be used if the initial locations prove successful.

Step 2. Formulate product hypotheses

To sharpen the product requirements and the company’s market ambitions, we crafted a preliminary Go-To-Market strategy for the client. We identified potential audience segments and analyzed industry benchmarks. Using this data, we formulated hypotheses regarding the motivations, pain points, and needs of the target audience. We proposed models for how consumers make decisions and where they purchase products in the desired category. It was crucial for us to understand how to position the product considering local nuances and existing trends. For instance, one of the research hypotheses was that health supplements in the UK should be marketed through their positive impact on the consumer’s appearance, while in Germany, the correlation between vitamin intake and health improvement should be underscored.

Step 3. Test Product and Market Hypotheses

We examined the hypotheses and the client’s experience in conducting qualitative research and chose the most suitable format: in-depth interviews with elements of concept testing. We presented respondents with various product packaging options and collected feedback to assess all the hypotheses. Interestingly, following the COVID-19 pandemic, many respondents began participating in online research. However, our project strictly required an offline format. Why? Due to potential risks: there could have been design leaks during online sessions! Nevertheless, this didn’t hinder us, and we successfully conducted in-person sessions in four cities simultaneously: London, Manchester, Birmingham (in the United Kingdom), and Berlin (in Germany).

Step 4. Launch in the New Market

So, we examined decision-making models, tested variations in naming, designs, and key packaging messages. What’s next? Hypotheses analysis! As a result of our project, some hypotheses were confirmed. For instance, we found differences in product perception between the UK and German markets. In addition, we discovered other insights: respondents from the British sample were concerned about whether the product packaging was recyclable, while German respondents didn’t give it much thought but showed more interest in the product being vegan-friendly based on its ingredients.

A Customer-focused Product

Based on the collaboration with the client, the UXSSR team created a go-to-market plan and product strategy, which received approval from the company’s top management. And now, along with residents of the United Kingdom and Germany, we are excitedly awaiting the arrival of the revamped product on store shelves.

In reality, many companies still hesitate to venture into new markets, and that’s completely understandable given the myriad of unknown factors. The unseen benefit, however, is that most of these unknowns can be discerned beforehand, enabling companies to enter new markets well-prepared and reducing the probability of failure and/or additional expenses.

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