Entrepreneurs understand the various challenges associated with their line of work: long work hours, uncertain business models, volatile market conditions, the list goes on. But when you add an international market or clientele on top of that list, entrepreneurship becomes a lot more complex.
International entrepreneurship introduces a few new factors, including travel, remote teams, localization, international regulations, and foreign competitors. Balancing each responsibility while addressing the unique markets and challenges for each country can take its toll on anyone.
In this tips guide, we’ll cover the various considerations to make, the obstacles to navigate, and a few strategies for ensuring success, no matter which country the business may operate in.
Types of Entrepreneurship
Entrepreneurship generally refers to ownership of a business that involves a grand idea with significant risk. But it’s more than just owning a small business, entrepreneurship can be further broken down into more specific types, focusing on certain industries or approaches to business. For example:
Social entrepreneurship – Social entrepreneurs pursue ideas, products, and services that have the potential to address social or community-based issues. For example, Catchafire is a for-profit organization that matches skilled volunteers with non-profit organizations, similar to a matchmaking website but for philanthropy and volunteerism.
Scalable startup entrepreneurship – a business model where an entrepreneur takes an idea or concept and experiments with a repeatable business model that will return high growth and profit. A great example of this would be Instagram or Snapchat, which thrives on the growth of its user base. That’s why there are features that encourage and even reward users for referring their friends to the platform.
Innovative entrepreneurship – a type of entrepreneurship that introduces a completely new product, service, or process with the intention of disrupting an existing market or creating a completely new market. When Uber was first introduced, there was no such thing as ridesharing. Overnight, Uber had developed a new way for people to get from point A to B using a single app.
Keep in mind that there are many other types of entrepreneurship, such as researcher entrepreneurship, opportunistic entrepreneurship, and even intrapreneurship, which is an entrepreneur within an established organization.
Learn Cultural Differences
If you leave with only one takeaway, let it be this: each country has its own unique culture that must be acknowledged and respected if a business hopes to succeed there. Many businesses have opened shop in another country, only to fail miserably after failing to properly understand the local market and culture.
One way to better understand or measure the various cultural differences between each country is through Hofstede’s cultural dimensions theory. Developed by Geert Hofstede, founder of the personnel research department of IBM Europe, the framework analyzes cultures based on six different values:
– Power Distance (PDI) – Measures a country’s acceptance of power inequality. A high power distance indicates a culture that embraces hierarchy, while a low power distance indicates a more egalitarian society.
– Collectivism vs. Individualism (IDV) – Measures whether a culture tends to celebrate the accomplishments of a single person or the entire team.
– Uncertainty Avoidance Index (UAI) – Measures how comfortable a country is with uncertainty. Higher UAI suggests the country is more uncomfortable with uncertainty.
– Femininity vs. Masculinity (MAS) – Measures whether a country embraces power, achievement and success or whether it prefers growth, cooperation, and quality of life.
– Long-term orientation vs. Short-term orientation (LTO) – Measures a country’s connection to the past and how it addresses present or future challenges. Low index (short-term orientation) suggests that a country values its traditions, while a high index (long-term orientation) suggests that a country values adaptation and innovation more.
– Indulgence vs. Restraint (IND) – Measures the degree of freedom afforded to citizens with regards to their wants and needs. Indulgence refers to a society that is generally free as it relates to human desire, while restraint refers to a society that controls its citizens choices and desires.
While it remains an imperfect and incomplete way to view a culture, it can help illustrate the vast differences in values between countries. For example, the United States tends to favor individualism (with an estimated rating of 91), whereas Japan prioritizes collectivism (estimated rating of 46). This single insight can have profound implications on a business’s marketing, production, sales, and more.
International business etiquette
No matter which country one may conduct business in, there are a few common expectations to uphold out of respect. These may include:
– Proper introductions – First impressions make all the difference, so it’s crucial for entrepreneurs to speak clearly and directly to whomever they meet.
– Being on time – Although some countries are less strict about punctuality, lateness is generally seen as disrespectful of another person’s time.
– Gifting – Businesses tend to show appreciation for another person with a modest gift, such as a local treat or souvenir.
– Participating in traditions – One ideal way to show respect for another culture is to show curiosity and appreciation for traditions, such as trying new food, learning about their history, or speaking the local language.
– Research – Nothing can prepare a person more for experiencing a new culture than to read or learn about the culture beforehand.
International businesses, particularly those from the United States, tend to wield considerable power and influence over the countries they operate in. They are able to take advantage of relaxed regulations, uneducated citizens, bountiful resources, and even cheap labor in different countries. This creates an imbalance in the power dynamics between the citizens and the corporations that set up shop nearby. Because of this phenomenon, international companies have a civic responsibility to give back to the country whenever they can.
Companies like Coca-Cola have donated more than $820 million since 1984 in developing more sustainable communities. This includes a $500,000 donation to Africa Against Ebola Solidarity Trust, $700,000 to Alternative Indigenous Development Foundation, Inc., and $800,000 to the China Women Development Foundation. Coca-Cola isn’t alone. Whole Foods, Starbucks, Disney, and other major corporations have begun similar initiatives to invest in local causes and communities.
As a company’s understanding of an international culture begins to take shape, the next question becomes: “what do we focus on?” For an entrepreneur, this question is something that comes up daily. Choosing which tasks require the most attention can make the difference between a focused company and one that may falter within a few years.
Former President Dwight D. Eisenhower once said, “I have two kinds of problems: the urgent and the important. The urgent are not important, and the important are never urgent.” This has slowly evolved to become the “Eisenhower Principle” or the “Eisenhower Matrix.” It breaks down workloads and projects into four categories”
– Important and Urgent
– Important but not Urgent
– Not Important but Urgent
– Not Important and not Urgent
Entrepreneurs can take advantage of this framework by starting with tasks at the top, everything that is essential to the business but is also time-sensitive. From there, importance takes precedence over time-sensitivity. Anything in the fourth category can be considered a distraction, and not worth doing.
The Eisenhower Matrix can be a useful tool for prioritizing day-to-day tasks, but it can also reveal personal, as well as business strengths and weaknesses. Over time, patterns will emerge that show the type of tasks and projects a person or business may excel at, such as marketing and sales, while highlighting the inefficiencies or distractions, such as research and development. Successful entrepreneurs would do well to pay careful attention to both.
International business plan
Similar to startups that pitch their idea to an investor, international entrepreneurs must have an international business plan that details their model for producing profit and growing the business.
There is no one standard template for forming an international business plan, but there are a few items that one should consider adding:
USPs or Unique Selling Points
Entrepreneurs must develop selling points that distinguish their brands from other competitors. This may be a unique feature, compelling price point, exceptional service, or competitive advantage. McDonald’s, for example, has the USP of convenience, as they are easily found around the world.
Companies that fail to conduct market research, particularly into an international market, are doomed to fail. Market research can inform everything from the design of a product to the intended audience and can determine the ideal time, place, quantity, and price point to sell something. Above all, market research clarifies who the product is for, and why the target customer would want to buy it.
Barriers to entry
Regulations, competitors, political climate, environmental dangers are all considered barriers to entry, something that makes it harder for a company to do business somewhere. Without a formal understanding of these barriers, a company may make a costly business decision, such as being sued for breaking a law or being cannibalized by much more established brands.
How will a product or service be moved and delivered to the customer? Consider a single phone, which must be designed, assembled, shipped, and delivered to the customer. That process alone may involve several companies spread out throughout the world. A clear understanding of logistics will ensure a smooth operation and distribution system.
A unique consideration for international entrepreneurs, localization is how a foreign product or service can become accepted as a local brand. Such an act requires market research, cultural education, experimentation, and tough conversations with various audiences. Ultimately, the more personalized a product is to a certain country, the more likely they will adopt the brand.
Finally, a business must consider the presence it intends to have in a foreign market. This largely depends on the nature of the work, the size of the team, the level of involvement, and other factors.
Companies may choose to have a limited presence, opting for something close to a virtual office, or they may opt for a new branch/satellite office and take advantage of a shared office space or private office. Virtual offices will undoubtedly save the company money, but a physical office can offer greater visibility and a more direct channel for local customers.
Navigating around the waters of international entrepreneurship can be overwhelming, to say the least. Not only do you have the same considerations of a traditional company, but you must also think about how to adapt the business to the local culture, no easy feat. The most successful entrepreneurs will understand that research and preparation is everything. If a business hopes to succeed in a foreign market, they must completely immerse themselves in the culture. Only then can they hope that customers will buy into their brand.