Opinions expressed by Entrepreneur contributors are their own.
Global expansion is a goal for most startups, as it provides access to larger markets and a more diverse customer base. In fact, 60% of startups aim to expand internationally within their first three years of operation; however, only 4.6% successfully transition to scaleups.
Achieving scaleup status enhances your chances of success in international markets, but this is a challenge in itself. Only 2.5% of startups formed in the activation-phase ecosystem reach this milestone.
The choice of market will determine whether your expansion becomes a success or a costly misstep. This is especially true for startups, where resources are often limited, and early failures can have lasting consequences. But how can you ensure you’re making the right decision? Here are seven crucial steps that can guide you through the process of choosing the most promising market for international expansion.
Related: How Small Businesses Are Teaming Up to Boost Local Economies
1. Assess the market’s readiness for the product
How well has the market been informed? Consider factors like internet penetration, the maturity of your industry, and consumer buying habits that will help you gain a comprehensive insight into the local landscape. For example, if your business is e-commerce, seek out markets where people have already begun ordering online.
An alternative strategy involves entering less developed markets that are not as accustomed to your field and are, therefore, less competitive. However, in this case, it is a long-term play as you need to invest time in cultivating new habits among customers and targeting early adopters. Your business may also alternate strategies based on the location: we currently operate in both mature and emerging markets, each with different levels of e-commerce and e-gifting adoption.
2. Analyse the competitive landscape
If three or more competitors share the market, it is a highly competitive environment that will require significant investment to achieve meaningful results. However, if there is one dominant competitor whose ways are relatively rigid, you can attempt to secure the second position in the market by leveraging your agility, modernity, and a different approach to customer engagement.
At this stage, it’s important to evaluate the overall market size and its distribution among competitors in monetary terms. The key metrics include:
Total addressable market (TAM): This indicates the total revenue potential available in the market. In our case, it reflects the overall flower sales across the country.
Serviceable addressable market (SAM): For Flowwow, this reflects the current online sales figures and the revenue generated by our competitors.
Serviceable Obtainable market (SOM): This metric estimates the share that you can realistically capture, representing the portion of the market revenue that you can control.
3. Utilise scoring models
Once you have assessed the product’s market readiness and analyzed the competition, you will have identified several priority countries that can be considered potential markets for scaling. Scoring models can be very helpful in selecting the one or two best options.
For instance, Amazon used a scoring model to evaluate key success factors when expanding into Asian markets. The focus was on India and Japan, where the company made significant investments in infrastructure, local partnerships, and the adaptation of payment systems. In both countries, Amazon became one of the market leaders, overcoming a complex and diverse environment.
4. Conduct field research
Field research is one of the key steps in the business scaling process, helping to understand the real situation in the target market. This method reveals customers’ actual pain points, which may not be evident from general data. Customer development interviews provide a deeper understanding of cultural nuances, local habits, and the specifics of interacting with the product or service. If in-person meetings aren’t possible, conduct online interviews with customers (you can find them on LinkedIn or in interest-based communities).
For instance, our startup is a gifting marketplace primarily relying on online payment methods. Through market research, we discovered that online payments are a customer favorite, but method preferences can vary significantly. When entering a new market, we must integrate local payment systems, a process requiring legal and technical work and thorough research. If the preparations aren’t complete, the marketplace simply won’t be able to accept new orders.
Related: Why Research Is Key to Startup Growth and Customer Centricity
5. Test the loading speed of your website and app
In the era of high-speed Internet, user experience is critical to e-commerce success. Slow-loading pages frustrate users, leading to high bounce rates, reduced conversions, and a negative impact on brand perception.
According to Amazon, a 100-millisecond delay in page load time could lead to a 1% loss in sales, while another survey suggests that 53% of site visitors will leave the page if it takes longer than three seconds to load. In contrast, satisfied customers can spend up to 140% more and will recommend companies to others when they feel valued.
6. Find a product market fit
Start by developing a Minimum Viable Product (MVP) that directly addresses the core issues of your target audience. Launch this MVP and gather detailed feedback from users, analyzing their behavior and preferences. The key is to refine your product based on these insights, tweaking its features to better align with market demands. Regularly track performance indicators such as user satisfaction and engagement to confirm whether your product solves the market’s problem. Continuously iterate and improve until you reach a steady stream of sales from the local audience, signaling that you’ve achieved PMF.
A well-known example is Airbnb, which began during a conference in San Francisco when its founders rented out their own property to address a shortage of accommodation. By collecting user feedback, they refined their offering, highlighting the value of unique stays and ease of booking. This iterative process, combined with a focus on user needs, helped Airbnb grow into the global leader in short-term rentals today.
Related: Product-Market Fit: How to Measure If Your Business Is Filling a Need
7. Hire a country manager
Once you’ve achieved a product-market fit — that is, gained a steady stream of sales from the local audience — consider hiring a country manager. They provide deep insights into the local market, adapt the company’s strategy to the country’s cultural and regulatory specifics, and establish important business connections, facilitating business development in the new market.
Choosing the right market for international expansion is a critical decision that can determine the success or failure of a startup’s global journey. Following these seven steps can significantly improve your chances of making strategic decisions. Careful market selection and adaptation to local needs and conditions will lay a solid foundation for sustainable international growth.
The post originally appeared on following source : Source link