Data-driven decision-making is important. But, companies are usually swimming in data, and looking at data across many markets can be tricky. Figuring out which data is most likely to lead you to the best decisions for your transnational strategy is critical. Here are some of the most important external data sources you can use to help with your planning efforts.
1. Language Proficiency
One of the lowest-friction paths to international expansion is to start off in the markets where you have a solid chance of success, and use some of the resulting revenue to fuel investments in more difficult markets later on. Unless your business is multilingual from day one (which is common for digital companies in Nordic markets and Benelux), you’ll likely want to expand first in countries that speak the same language.
For example, if your company is headquartered in an English-speaking country like the US, you’ll want to consider making investments initially in countries that speak English. Many American companies leap to the United Kingdom initially and forget all about Canada, thinking that it’s part of North America and does not truly qualify as “international,” but in reality, Canada is often a key source of international revenue for US-based companies expanding internationally, so it’s an important market to focus on.
After you’ve started to gain a foothold in other English-speaking countries, the next “easiest” countries to expand into will usually be the ones with high degrees of English proficiency. For this purpose, you can use the EF English proficiency index, which conveniently buckets countries based on their levels of English proficiency.
2. Gross Domestic Product
You’ll no doubt want to consider the size of an economy to understand how much market opportunity there is for your business. But remember, while market opportunity is important, you should never just go after countries in order of their size, because not all opportunity within a given market is equally easy for your company to access.
You can sell to any part of the world with a digital business model, but not all visitors to your website or users who sign up for your product will require the same things of your company. Some markets require more investments than others do. For that reason, use GDP rankings to get a general sense of which markets offer the most opportunity. Ideally, after you’ve already considered language proficiency. And never tackle them in order of GDP ranking alone.
There are numerous GDP rankings, and they are usually fairly the same in terms of how they rank countries, albeit different in methodology. My favorite is this one from the International Monetary Fund, because it usually provides a separate GDP for the European Union, which enables a handy comparison for internal data from EU countries, but you can calculate this easily using the other GDP options as well. Wikipedia shows all three options in case you wish to compare.
Another favorite resource of mine on the GDP front is Common Sense Advisory’s eGDP ranking, which tells you the online GDP for a given language. This model is powerful because it helps facilitate decisions around which languages a company should consider adding to unlock more market potential. This is especially relevant for companies with a digital business model.
3. Internet Penetration Rate
Different countries have different levels of internet access, and thus, different percentages of people online. Even if a country has a high GDP, that doesn’t necessarily mean that a company can sell to all of the potential customers in a given market. For that reason, the Internet World Stats data is helpful, and updated frequently.
You can use this to determine not only what the penetration rates are, but also, to determine raw counts of potential users. For example, if you look at Afghanistan compared to Singapore, you’ll find that Afghanistan has 7.3 million internet users as of June 2019, while Singapore has only around 5 million. But does Afghanistan represent a better market for a digital company than Singapore? Depends on what you’re selling, but in most cases the answer will be no.
It’s better to look at the internet penetration rate, which clearly shows that Singapore (84.5% penetration) is a far better market than Afghanistan (19.7% penetration) for most digital companies. Unless you just want to add raw counts of users, you’ll want to consider how easy and common it is for people to be on the internet in general, to determine if the market is viable for you to expand into.
Generally, the higher the percentage of internet penetration within a country, the more likely it is for people to do things — and pay for things online.
4. Credit Card Availability
Another thing American companies often need to think about is the usage of, and acceptance rates for, different forms of payment that are common in the United States but perhaps not as common elsewhere. Either that, or you’ll need to add other forms of payment. If adding new forms of payment isn’t something you can do easily or immediately, you might want to consider which countries can pay you today as part of your international strategy, especially if you’re still pretty early.
Globaleconomy.com includes several data sources, including this World Bank data that shows the percentage of people who have a credit card in each country. It might surprise you to see that countries like Canada, Israel, Norway, Luxembourg and Japan have much higher credit card penetration than the United States does. If you already accept credit card transactions, you can also find data on typical decline dates by country for foreign transactions, since that will also apply to you if you’re accepting credit card payments.
5. Ease of Doing Business
This data source from the World Bank is an important resource, because it tells you, at a high level, how hard it will be for a business to operate in a given market. That’s important for you on several levels, and not only if you want to set up an office there.
This score gives you an indication of how hard doing business might be for your potential customers and partners too. The latter piece is important, because even if you don’t plan to open up an office in a given market, the index can help shed light on whether or not a market is likely to offer you many “good fit” customers or not.
For a Solid Transnational Strategy, Look at External Data First
Internal data is often what companies look at first, because it’s what you’re closest to. It’s familiar. You already look at it daily. It tells you there is interest for your product or service from another country, which can be exciting. However, while you can use your internal data to help inform your transnational strategy, it’s better to guide major investment decisions with external data, which is likely to be more reliable. After all, you’re only one company operating in a given industry, and you likely don’t know much about every local market just yet.
Avoid making decisions to expand in a given market based on internal data alone. For example, if a certain country is leading a disproportionate amount of traffic to your website, it likely isn’t because there is an untapped hunger for what you’re offering. It could be because:
- The country has an enormous population to begin with, and a high percentage of people speak the language of your website
- You have content that they can’t locate online from a native site in their own country
- You have content that is of special interest to people in a given country for reasons unrelated to your offering
- There is increased hacker activity from the country in question showing up in your analytics in the form of traffic increases
- Your SEO rankings are higher due to strong inbound links from websites in that country
- You recently garnered attention in local media or from local bloggers in a given country
There are many possible reasons why people might be hitting your website from different locales around the world that are not good signals of product-market fit, and certainly not good indicators that they should be prominent markets warranting investment.
As you think about how to keep the international growth engine firing, remember to take a step back to consider these important data sources, and make them a part of your regular rotation for expansion planning. There is no single source for data that will give you all the answers, but this core set of data sources, when used in careful combination with your internal metrics, can help you develop a much clearer picture, and a better transnational strategy.