Without a well-developed, strategic rationale for international expansion, companies risk under resourcing their foreign entry, under-committing executive time and focus, and struggling to scale operations abroad. Stress-testing your answers to these questions can help ensure your team and Board are fully committed to the success of the international expansion.
What is the potential in the home market?
• Is success in the home market sufficient for continued growth or an IPO?
• What are the limitations on the home market?
• Is it a team constraint? (Is it a product constraint? Is it a market constraint?)
Sustaining competitive advantage
• Is presence in a single geography detrimental to your competitiveness?
• Do customers demand global services?
• Must you look abroad in order to access specialized talent needed to grow the business that is otherwise not available in its home market?
• Do you need access to foreign capital that is not available in the home market?
• Expansion abroad is unlikely to solve a lack of product-market t (and might require new products), so watch out for expansion rationales that change the geography of an underlying problem.
“Our trigger to go to the US was competitor related; someone else was going to take the opportunity and it was quite unusual to be in a situation as a consumer business where, in the US at the outset, there weren’t any peer models.” – Ed Boyes, US CEO, Hello Fresh
Should you enter the US?
If you’ve decided the US is a critical market relative to other international expansion options (i.e. other European markets, Asian markets), it’s valuable to test its fit to your product.
Have you validated the US market?
• Do you have a deep understanding of product-market fit in the US?
• Do you have a good understanding of sales cycle differences in the US relative to your home market? Have you closed multiple reference customers in the US from Europe, or have you run representative consumer pilots?
• Do you have ROI / use cases from customers in the US?
• Do you have organic inbound leads from the US?
Do the financials work?
• Does the business model work under US constraints?
• Have you stress-tested your financial requirements against US costs?
• What is the competitive landscape in the US, and how does it affect your customer acquisition cost and positioning?
• Will the investment and growth required to make the US entry a success hurt the domestic business?
Most companies are drawn to the absolute size of the US, unaware of how it is fragmented and regional. Differences in consumer preferences, regulatory environments and regional costs can all pose challenges to achieving scale in the US.