Pitfalls of Offshoring Too Early
As important as growth is to your overall long-term business strategy, premature expansion into the global marketplace can be a real danger. Yes, your company needs to grow but scale too quickly, and the consequences could be catastrophic if not fatal. As with everything in life, timing is key. Unfortunately, the history of modern business is littered with the remains of companies that tried to grow too much, too fast. Here we list some of the dangers that your company could encounter by offshoring too early on.
Expanding your business across borders might seem like the obvious next step in your growth strategy, but this may not be the best action to take. Offshoring too early is a big risk to take if your company is not ready. Sure, you have a successful product that your domestic customers rave about on social media. But while customers in your home country may find your offerings appealing, there’s no guarantee of success outside of your nation’s borders. There’s a whole host of factors that could cause foreign markets to reject your brand and its products. For instance:
- You don’t meet the market’s price needs
- The offering doesn’t support their culture or beliefs
- The cost of attracting customers outweighs any potential benefits
To avoid eliminating any possible new markets with a failed launch, you need to do your homework. Don’t assume that success at home translates into success abroad. Consult with experts, test the market and consider every aspect of international expansion before you map out your plan and try to put it into effect. That initial research is crucial as it will help you avoid a wide range of potential problems later on.
Overburdened, overstressed and overloaded employees can represent another major pitfall. When you try to grow quickly, it’s all too easy to leave your employees vulnerable to burnout as they are forced to take on more than they can reasonably manage. Ensure that your execution plans for expansion take into account new projects and demands and how they fit into your existing team’s workload.
Trading in new markets often means new problems that your business may not have experienced before. You must be ready to adapt and resolve problems quickly by ensuring your team receives the appropriate training. Whether it’s dealing with customer support issues or software bugs and plugins, your employees must be prepared to resolve issues quickly and efficiently to guarantee your success. If you scale before you are prepared, not only will your brand’s reputation suffer but the future of your business too.
Foreign Market Instability
In many foreign markets, large economic swings are a fact of life as capital moves in and out of the area on a frequent basis. During growth phases, those quick shifts in fortune can provide unparalleled opportunities for small, well-managed companies. When things turn sour, however, those fortunes can shift at a speed that many firms struggle to match. You need to make sure that you understand the local economy which you are trying to enter so that you can make a proper risk assessment grounded in historical precedent and current realities.
Unexpected Local Costs
The last thing that you need is to launch a new market initiative too quickly and then discover that the local infrastructure and cost model doesn’t meet your needs. In reality, this should never be a concern since savvy companies should research these factors before expanding. Unfortunately, some smaller enterprises make the mistake of assuming their existing business model can migrate to any new jurisdiction. Local infrastructure issues like energy costs, technology access, transportation and other concerns can quickly dispel that assumption.
Issues can also occur when you haven’t yet secured your existing business. The globalisation trend has left many start-ups and even established small firms mistakenly thinking that they need to expand into foreign markets to avoid being left behind. As a result, many companies rush the process, with some scaling before they’ve had an opportunity to prove that their business foundations can withstand the test of time. The problem is that it’s risky to build anything of lasting value on a weak and uncertain foundation.
If your company is relatively new, or just getting ready to launch, there’s an easy way to avoid that pitfall. Just make globalised expansion a part of your business plan when you launch. No, that doesn’t mean that you need to launch your company with an instant global reach; although some high-tech companies and financial services are certainly capable of doing so. It simply means that global expansion should be part of your plan from the company’s first days of operation. Set tangible goals for achieving that growth and have at least a rough idea of what the expansion will look like.
The benefit of that approach is clear: when growth is factored into your strategy from the start, there is no need to reinvent yourself later. By laying a business foundation that can serve as a launch point for future scaling, you can create business systems that can be migrated to any new location. It’s a more holistic approach to expansion that views every phase of your business’ existence as a whole system of complex, interacting components and strategies.
Timing is everything in business; especially when it comes to international expansion as those scaling efforts can weaken your company and leave it vulnerable if you fail to consider all the potential risks. Your goal should be to identify those risks and develop strategies that can help you to minimise them as much as possible. This will take time, commitment and access to information about your target markets. Regardless of whether you opt for professional assistance from industry experts or go through it alone, the key is to minimise these potential pitfalls of offshoring too early and protect your company from the risk that global expansion can sometimes represent.