Businesses should be looking beyond Africa and consider global expansion as part of their long-term growth plan. This is as positive case studies from companies that have been able to diversify and take advantage of emerging markets encourage more businesses to go international.
“Local businesses are no longer just interested in exploring Africa only, but China and India as well, as these countries continue to strengthen trade ties with South Africa through investment and joint business ventures,” says Zak Sivalingum, head of global business banking for FNB Business.
Despite the vast opportunities presented by global expansion through access to new markets, increased sales and a competitive edge, global expansion continues to be risky.
“Entrepreneurs should avoid aggressively venturing into foreign destinations without adequate knowledge of the markets and its challenges,” says Sivalingum.
For those who are looking to take the leap Sivalingum shares important factors to consider.
1. Risk management planning – before companies expand into foreign markets a thorough risk management plan with practical guidelines of how risks will be addressed should be developed. This plan should be updated regularly as business conditions change. For example, China currently presents investors and businesses with a completely new set of challenges compared to five years ago when the economy was performing well.
2. Lack of knowledge – knowledge sharing and understanding local market conditions is essential for businesses to succeed. Universal knowledge sharing platforms where banking experts, entrepreneurs, corporate advisory firms, professional legal and audit firms, as well as private equity firms share and discuss global business strategies and opportunities, can add value to any business.
3. Partnerships and joint ventures – this is the most comprehensive way of entering into new and unknown markets. Collaborating with local stakeholders that have experience, insights and links on the ground is a less riskier approach.
4. Regulation – keeping abreast of changing legislation, getting the best advice and fully complying with in-country laws and requirements can give businesses peace of mind. Litigation issues can have a severe impact of the reputation and bottom line of businesses.
5. Understanding the target market – failing to understand the target market and tailoring business’ products and services accordingly is one of the biggest mistakes that entrepreneurs can make. Replicating a business model will not guarantee success as each country is unique.
6. Limited infrastructure – although significant investment in infrastructure has been made in Africa, this remains one of the biggest hurdles for businesses expanding into the continent. Therefore, businesses considering expanding into the rest of the continent should make provision for infrastructure challenges in their business plans.
7. Skills shortages – depending on the sector in which the business operates, it may be difficult to source the right skills in certain countries. In this instance, businesses may be required to bring their own employees or up skill locally.
8. Long-term investment – companies expanding globally will only succeed if entrepreneurs make a long-term commitment to the country, local markets and communities in which the business operates.