Navigating Growth: Routes to International Expansion

When considering expansion to international markets, it can be challenging to  the appropriate route to market at different growth stages. Some business may benefit from sales directly to international customers, whilst others can expand via working with local partners or through intermediaries such as agents or distributors. The appropriate option at each stage of growth will depend on the business and its international strategy at the time. We consider some traditional routes to growth in this article.

• Direct export: selling directly to customers provides a business with complete control over pricing, branding, customer relationships and management of its supply chain. It can lead to deeper market insight and may yield better profit margins, depending on the nature of the growth industry within the chosen market. The main challenges relate to  significant levels of investment, return on investment in marketing, logistics, and compliance with local laws. International Trade Week touches on some of these common themes, including sessions focused on specific markets and key growth areas.

• Agency or distribution model: working with local intermediaries can offer a faster, lower-risk entry route to an unknown market. An expanding business can benefit from local market knowledge, expanding through existing networks and logistics, assistance with local laws and compliance requirements on-the-ground. However, the business will necessarily have less control over sales activities and profit margins, potential restrictions in terms of market regions, less control over brand reputation  as well as managing the relationship with its intermediary to ensure that sales targets are consistently attained.

• Joint ventures, licensing or franchising model: as with the agency and distribution models, joint ventures, licensing or franchising provide alternative ways to expand into international markets with varying levels of control over the business, brand and managing customer relationships. Joint ventures can offer shared investment and risk, although may not be accessible for all business stages or industries. Licensing and franchising can readily generate income with lower start up costs, and more control over the business brand, whilst introducing a business to a new market and customers.

Ultimately, the right expansion model will depend on business objectives, risk appetite, financial resources, and the scope of opportunity within the target market. With increasing trade deals, shifting regulatory requirements and changing customer habits, the market is developing for businesses that are willing to consider international opportunities.

Forbes Solicitors can assist businesses at different stages with determining appropriate growth strategies, providing advice and preparing associated commercial documents.