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5 Reasons Company Expansions Fail Cross-Borders

Understanding why companies may fail in expansion efforts is the first way to ensure your business is prepared for the challenges international markets bring. Achieving success in foreign markets is dependent on many factors.

The first of which is Poor Leadership and Management Skills.

Leaders need to ensure a company is on the right track—creating realistic goals and ensuring the path to achieving those are done correctly. Lack of focus, knowledge, or preparation can lead to other factors in failed expansions such as a lack of planning and execution, poor market research, poor communication, lack of adaptability, and finally, failure to get expert advice.

Lack of Planning and Execution

One motive for companies to move into an international market is access to new customers.

However, what may not be understood is that, on its own, this is not a good enough cause to begin expansion. Companies must identify the reason behind their expansion and whether the move is suitable for them at that time. Companies must also balance the wants and needs of their product and their target market. There must be a solid plan in place to create a course to keep on par with competitors and those with more experience in foreign markets. A lack of planning leads to a lack of execution. Plans that fail to consider the cost of operating globally, that don’t assess the challenges of leading the necessary diverse teams, or that don’t complete suitable market research, among other factors, are not going to ensure the longevity of their business internationally.

Poor Market Research

Too often, a business will go into a new market assuming the interest in their product or service is just as in demand in the new market as what they are used to. They assume these markets are “under-served” and will foster great business if they can just be tapped into! They come with an already-made product that has been successful thus far and believe it will be successful elsewhere!

Without conducting the proper research, assumptions like these are perfect setups for failure. You must know that your product fits the market you seek to expand to and what they would be willing to pay for it before you invest a great deal into it. Knowing how likely your clientele is to purchase your product, what influences their purchase decisions (like price and quality), how they compare your products to a competitor’s, or even if the company's product and ideals will be welcomed by the target market is valuable information. Conducting this research upfront can save a business time and money. If customers and clients do not understand or like your brand or product, this will only offer a painful lesson.

Communication Barriers

Already a major challenge for businesses domestically, communication becomes more complicated when a company plans to expand to outside markets. Language barriers as well as differences in cultures are important factors that need to be paid attention to. Employing those who are local to the market is vital to succeeding in conducting business in those markets as they bring in the necessary insight into how customers and clients prefer to be served—in both the product they want and how they want to receive them. However, you must be culturally competent enough to be able to explain the product to your diverse team that way, your employees can best communicate it to the customers. If there is confusion in the communication, you will not get the results you want.

Failure to Obtain Expert Advice

Venturing into any foreign market is a risk. Many companies do not possess the necessary competence to lead their companies into global expansion. We must acknowledge that the global market is a vast ocean, and if you are unable to ride the waves, your business can easily drown. It is extremely important to have a team of skilled navigators to guide you to safe shores.

Mona Lou International (MLI) has a team dedicated to global expansions where they offer you all the strategies your business needs to succeed cross-borders.

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