The What, Why and How of Expanding Internationally
By definition, a global company conducts business in at least one nation outside its country of origin. Unlike the British Empire of old, few companies cover the entire globe.
This requires more than simply exporting your products to foreign markets. To truly be global, you must introduce your company’s brand and products to international audiences. And, often, you need to establish a physical presence in those markets. Companies can enter the global economy the expensive way or the inexpensive way.
The expensive way involves opening headquarters, offices and hiring separate executive and operational teams in each country. That could risk millions of dollars, euros or English pounds in capital.
The inexpensive way involves connecting with the right 3PL network. That way might risk $50,000-$100,000 of inventory, depending upon your product.
Let’s examine why and how companies choose to go global. I’ll also detail how a European apparel company teamed with a 3PL partner to go global the inexpensive way.
The Why of Going Global
Company leaders often consider global expansion for compelling reasons. Here’s a concise summary:
- Gain competitive advantage: Businesses that enter international markets can outpace their current competitors. They gain a first-mover advantage and find new customers in developing regions. They face less competition than in saturated domestic markets.
- Increase revenue potential: A global market presence reduces reliance on a single market. Exploring emerging markets and expanding the customer base can significantly increase revenue potential.
- Access to global talent: Global corporations can tap into an international talent pool. Companies can recruit skilled professionals from diverse backgrounds, enhancing their workforce.
- Exposure to foreign investment opportunities: International expansion opens doors to foreign investment, partnerships and collaborations. Companies can tap into capital and resources beyond their home country.
- Economies of scale: Global income adds to your domestic market income. Spreading your fixed costs over higher sales volume creates economies of scale.
Leadership teams may select different reasons for their drive to become a global corporation. But the above benefits highlight why international expansion can be a valid strategic move for growth-minded businesses.
The How of Going Global
Where to go? After all, you have an entire globe to examine.
Still, some markets may not be worth the time, effort and risk. Leaders must consider several factors during due diligence for potential international expansion. We can divide those factors into economic, political, social factors and risk.
Economic factors
- Market size and growth rate: Countries with large, growing markets are more attractive.
- Infrastructure: Countries should have adequate transportation, communication and utility systems.
- Labor costs and skills: The availability and cost of skilled labor can influence decisions.
- Access to resources: Manufacturing companies need raw materials and other resources.
Political factors
- Stability: Countries with stable political environments are less risky investments.
- Regulations and laws: Business-friendly regulations and ease of compliance make some nations more attractive.
- Trade barriers: Companies must consider tariffs, quotas and trade agreements. All these affect the ease of doing business.
Social factors
- Cultural compatibility: Companies must understand local customs and consumer behavior.
- Education level: The general education level of the population can affect the labor market and consumer base.
- Social infrastructure: Healthcare, education and social services can support a quality workforce.
Risk assessment
- Country-specific risks: These include economic, political and social risks that create unexpected investment losses.
- Geopolitical risks: Tensions between countries can affect global operations and performance.
Global companies that operate in multiple countries must tailor their offerings for local tastes and preferences. This could involve creating new products or modifying existing ones.
A global company could exclude countries for numerous economic, political and social factors.
In general, avoid countries wracked by violence or war. Besides, our world of perpetual disruption has many companies looking to sell closer to home.
By 2026, 85% of companies plan to produce and sell most of their products from the same region. So, proximity can factor into global expansion.
The Right 3PL Means Less Risk, Less Expense
Of course, the way you choose to expand has a significant bearing on cost. Building a new headquarters and hiring an operational team could cost millions. As I alluded to above, that’s the expensive way.
Finding the right 3PL is less expensive and less risky.
Recently, a European apparel company wanted to expand into the United States. The U.S. is the world’s largest commercial retail market for consumer goods. Retail sales predictions for 2026 near $8 trillion.
U.S. consumers had discovered the company online. But drop shipping orders meant delivery times ranged from seven to nine days. Faced with lengthy shipping times, many potential buyers abandoned their online shopping carts.
Luckily, the apparel company discovered a Tompkins Ventures 3PL partner. As a small test, the company shipped an estimated four weeks’ worth of apparel to the company’s warehouses.
With shipping times dropped to two days, online cart abandonments plunged. The inventory sold out in one week. In the beginning, the company’s major problem was keeping enough apparel in stock.
Tailor Your Strategies to Become a Successful Global Corporation
Want an attractive growth strategy? Your answer could lie in expanding to international markets. To succeed, your leadership team must pursue the what, why and how of globally expanding your supply chain.
Depending upon your vertical, global expansion may require a huge physical presence in your new company. That’s the expensive way.
But if you’re selling goods and products, you would be wise to pilot test sales by partnering with a best-fit 3PL.
That European apparel maker? Sales continue to expand, and the company could grow sevenfold. What if their apparel had not sold? Well, the company basically tested a huge new market for marginal inventory costs.
Transforming into a global company can be that simple. Or it could require substantial customization of your end-to-end supply chains.
Want to find out the best way to go global? Then let’s chat. I would love to discuss how you are planning international expansion.
Related Reading
- 4 Ways 4PLs Cut Your Logistics Costs – No. 3 is Gold!
- Top 5 Reasons to Hire 3PLs
- Avoid 3 Common Mistakes When Creating a 3PL Relationship
- Free Trade Is Dead; Global Supply Chain Redesign Is Alive
Jim Tompkins, Chairman of Tompkins Ventures, is an international authority on designing and implementing end-to-end supply chains. Over five decades, he has designed countless industrial facilities and supply chain solutions, enhancing the growth of numerous companies. He previously built Tompkins International from a backyard startup into an international consulting and implementation firm. Jim earned his B.S., M.S. and Ph.D. in Industrial Engineering from Purdue University.
