Sometimes the best way to expand your fledgling business is by tapping into demands in foreign markets. A product that meets with only moderate success in the U.S. may have a stronger appeal in a foreign country, where there's still a lot of opportunities for small brands to find their footholds without being pushed out by larger competitors. But what's the best way to go about breaking into a foreign market?
Do your research to find out if the demand is there.
Research shows that domestic businesses that expand into international markets enjoy the fastest growth rates—but you have to be sure that your target country has a demand for your product. If hiring a market analyst to do the research for you isn't an option, do the research yourself by pouring through industry-related publications. Get involved in trade shows and open yourself up to contact by foreign companies, including buyers and distributors. If possible, take a trip to the country that you're considering using as your toehold on the international market. You can do a little one-on-one consumer research and further develop potential business contacts while you try to get a sense of how well your product would be received.
Find a partner in the target country.
There are several different ways that you can partner up with a foreign company in order to minimize the problems that come with trying to navigate an unfamiliar business system:
- You can export your product under a white label. Exporting and allowing the foreign company on the receiving end to rebrand the product under its own label may one of the lowest-risk, lowest-cost options you have. While you won't create a brand identity with consumers, you can establish yourself as a significant player in the wholesale market. If the product fails to take off, you won't be out the marketing and development costs that would come along with selling the product yourself.
- Open satellite companies through licensing agreements. Licensing allows your foreign partner to set up business under your brand name—while your partner will usually take a large share of the profits, they also take a large share of the time and expense that goes into operation off your plate as well. You can still retain control of the brand, however, which means that you'll likely have to commit to a lot of travel between your home base and satellite companies.
- Begin a joint venture. International joint ventures allow you and your partnering company to split the costs and rewards, pool your resources (including personnel with valued skill sets), and share risks. Keep in mind that international joint ventures are very popular, but they also quite often fail. It's estimated that about 70% of international joint ventures fall through.
Get legal help to reduce the potential for failure.
No matter which method you ultimately choose, you want to get an attorney involved early on. An attorney can often point out flaws in the deals between well-meaning parties that can lead to big problems down the line. International joint ventures often fail, for example, due to unclear leadership issues and poor integration processes.
An attorney's critical eye toward potential problems can help you identify areas of any agreement that need more detail in order to avoid confusion or conflict. For example, an attorney can help you negotiate clear operating policies, methods of dispute resolution, and the division or control of any intellectual property. If you're thinking about licensing, an attorney can help you establish clear protocols for manufacturing and marketing that will protect your brand. If you intend to focus on exporting, make sure that you discuss any possible problems you could face under product liability laws in that country.
For more information on how to handle a move into the international market for your product, talk to a law firm, such as Caldwell Kennedy & Porter.