Internationalisation of a company: types and advantages

For a long time, there has been the idea that to internationalise a company many resources were necessary. The reality in today’s world is very different. With the use of the internet and social networks, it is easier to sell in international markets for certain companies, especially those dedicated to selling digital products or services. In today’s article, we will tell you what the internationalisation of a company consists of, what advantages it brings, and how it can be done.

What is the internationalisation of a company?

The internationalisation of a company involves marketing products or services in foreign countries, thus attracting new customers and can increase sales. Companies consider internationalisation for many reasons:

• Technological innovation.
• The globalisation of competitors.
• Legal or other changes in the national market.
• The need to search for new market niches and new clients.

Any company that wants to start an internationalisation process must consider that it is not only about selling the product or service in a foreign market but that the way in which it is going to be used must be studied in depth.

In what ways can the internationalisation of a company be done?

In general, the internationalisation of a company is usually carried out in different phases, and in each of these phases, another form is used. Let’s take a closer look at the steps and forms:

• Export of products and services. Exporting means selling products or services in foreign countries, and it is one of the easiest ways to enter a foreign market and one of the least expensive.
• Licensing. In this case, a license is granted, through a contract, to another company so that it can sell or produce your company’s products in another country.
• Establishment of a franchise. Through the franchise, what is done is to transfer the know-how of the business to a third party, which is the franchisee, in exchange for a price.
• Creation of a joint venture. A joint venture is an association between two or more companies in which the risks and benefits are shared according to the percentages that have been agreed. This figure can be used, for example, to form a business association with a company from another country and thus enter the market of that country.
• Opening of a branch. Another option to internationalise a company is to open a branch. It is an entity that depends on the parent company from a legal and economic point of view. The branch usually assumes functions concerning production, purchases and sales; But all general services, such as human resources, accounting, or marketing, are performed by the parent company.
• Opening of a subsidiary. In this case, the entity created abroad is independent of the parent company, although it retains economic control over the subsidiary. In this case, therefore, a higher investment must be made, and the business risk increases.
• The merger or acquisition of a local company. It is another way of internationalising a business and, although it has obvious advantages, such as the need for less time to carry out the operation, it also has some disadvantages such as the taxes that have to be paid in the destination market and the limitations that they establish governments in this type of operation.

What benefits does the internationalisation of a company bring?

The internationalisation of a company brings benefits such as the following:

• Business growth. The company that chooses to internationalise its business will grow and attract new clients in other markets.
• Increased resilience. We are experiencing a pandemic, and it is a time when companies must adapt to difficult circumstances. Expanding the business to other markets can help companies better adapt to times of economic crisis.
• Meeting of new market niches. Internationalisation makes it easier for companies to enter emerging markets and find new niches.
• Creation of a good brand image. Companies that are committed to internationalising their business generate a brand image that transmits strength and diversity, which changes the way in which customers, suppliers, workers and investors see the company.

Steps to take to internationalise a company

As we said at the beginning of the article, the internationalisation of a company is not done the same now as it was a few years ago, due to the spread of the internet and social networks. Currently, there are a series of steps that businesses that want to internationalise can take. They are as follows:

• Internal analysis of the company. In this analysis, the obstacles that prevent the company from growing must be seen, and it must be analysed whether internationalisation can be a solution to those obstacles.
• Study of the target market. Another quite important aspect when internationalising a company is to study the market in which you want to sell the product or service; there are real possibilities that this product or service will be successful. The actions carried out by competing companies that have already entered that market can be analysed to carry out this study.
• Creation of a value proposition. Suppose there are competitors with similar products or services in the market you are going to enter. In that case, it is essential to create a value proposition that differentiates your company from its competitors. To qualify the proposal is essential to know in depth the competitors in the target market.
• Preparation of an internationalisation plan. This is perhaps the most complicated part of the internationalisation process of the company since the objectives to be achieved will have to be defined, the way in which the internationalisation will be carried out, the marketing strategies that will be used, etc.
• Results measurement. Once the company has internationalised, the results should be measured to compare them with the objectives set in the internationalisation plan and see if they are being met or if modifications have to be made.

In short, internationalising a company is a complex process that requires the advice of experts who can indicate the options that exist from a legal point of view to enter foreign markets.