When companies develop an international growth strategy, the output is often a simple grouping of countries, mapped primarily to market size or current customer base. That’s a great starting point, and can give your teams a better sense of where to focus, within the range of possibilities the world has to offer. However, that’s usually just where an international strategy begins, not where it ends. Sustainable growth in new markets requires going deeper. In this post, I’ll share five common mistakes businesses make when developing an international growth strategy, so that you can avoid these pitfalls when taking your company global.
Mistake #1: Focusing on market share instead of business goals
Often, when companies shape their international strategy, they look primarily at things that only loosely line up with their exact target segment, like market size or total addressable market (TAM). Usually, they hope to achieve a certain “share” or “penetration” of the available market in each of their focus countries. But that’s not the best way to think about it. Market share is not a great goal. Rather, it’s a trailing indicator. It’s simply the outcome of solving the needs of a particular customer segment (or segments) within a given market. If your goal is to achieve a certain “share” of the entire market, that’s too broad to inform a viable international strategy. Hitting a particular % of market penetration or share of the market is not a strategy, but rather, a desired outcome that a strategy enables.
To clarify this point, your goal with an international strategy should not be in the vein of, “We want to own 10% of the market share in Germany.” Instead, you’ll need to pick a goal that represents a clear dollar figure that your entire company can easily understand and rally around, for each market you want to target as part of your overall strategy. Here’s an example: “The market for what we’re selling in Germany is worth $1B. We aim to increase our revenue there from $60M today to $100M in the next two years. (Outcome: We’ll own approximately 10% market share in Germany).”
Put the emphasis on an actual business goal for each local market. That will keep you one step closer to creating value for your customers, and far more within your control than something a bit more distant from your customers, like overall market share. Market share can obscure the segments you actually are targeting, and depends on many factors outside your control, including what your competitors are doing, how the overall market is behaving, technology adoption changes, economic factors, and so on.
Mistake #2: Prioritizing “expansion” without making internal operating changes
International expansion and globalization are the yin and the yang of taking a company global. “Expansion” is a more visible and outward process, measured quite easily in sales figures and customer count. As a result, it’s the most easily understood, as it sits on the surface. “Globalization” is the accompanying internal process, one that is frequently overlooked, due to being less visible within any organization. The two depend directly on each other, but so often, companies focus just on the expansion piece, and fail to really grasp how the internal work that has to happen can actually make or break their global growth.
For example, let’s say your business is performing well in Korea, in spite of zero efforts on your company’s part to really do anything differently in that market. Let’s assume you do not localize your product or offer any services in Korean. Your early success there might be largely due to a gap in the market for what you’re selling, limited competition, and a high number of early adopters. This can mislead you to believe your company is doing really well in Korea. But can you sustain your growth there? If you don’t focus on making the internal changes needed deep within the many layers of your organization, your company will eventually hit a major plateau. If you don’t also globalize, you can risk burning your brand in many countries. Instead, you’ll need to adapt the company’s operational models to ensure your customers in this new local market are truly supported.
Often, people believe that they simply need to “localize” their product into another language, but localization is so much more complex than this. To do localization right, you should first understand what your customers actually value and need first, and only then, adapt your product and service offering, to meet those needs. That may or may not mean offering your product in Korean, in the example above. Usually, there are language adaptations that must take place for sustained growth in any market that doesn’t speak your home market language, but that’s often the easier part of localization. The deeper challenges are beneath the surface, and stem from how a company actually operates internally. That’s what business globalization is all about! It’s a complex, multi-year process, that requires adept cross-functional coordination, and change management from within.
Mistake #3: Trying to do way more than is actually necessary
A very common mistake companies make with their international strategy is thinking that they need to offer *everything* they offer in their home market, in every new market they enter. They try to check every box on a long list of things they currently do, which built up over many years. They seemingly forget that not only are these different markets, but that they are at a completely different phase in each new market. When I see companies trying to “copy / paste” an entire process designed for their home market into a brand new market, the first thing I ask is, “Could this possibly be overkill?” In almost every case, it’s not only overkill, it’s way too expensive and slow to be a viable model for a totally different, newer market where a company has a much smaller and less mature presence.
Often, I encourage companies to look back at where they were a few years earlier in their home market: “OK, so you have 500 customers in France today but 10,000 in the United States. What did your go-to-market motion look like when you had only 500 customers in the US? Did you have this many roles? Was your process this complex? Were you selling all the same products you do today, or a smaller subset to start with?” Usually, you can simplify and make your go-to-market motion much lighter in new markets than where you are in your home market, especially if your home market is one that has more active competitors and a more mature customer base. But you’ll have to make strategic choices about what to keep and what to remove.
Whatever you do, don’t assume you need to do everything you already do in your “oldest” or most established market in your next or newest ones. Often, companies are afraid of “changing” or “adapting” the current model out of fear of doing things that are “net new” that will overcomplicate their models globally. In reality, I find that most companies need reminders that they have permission to simplify. They get so immersed in the current complexity, that it becomes hard to see what really matters. Remove pieces where you can; don’t add them unnecessarily!
I would much rather see most businesses reduce their model to a bare bones approach and do a smaller, more targeted set of things for new markets, versus taking something older that was built up over many years (or even decades) and trying to do it all at once. What you’re doing today in a more mature market might not even be locally relevant in a brand new one. Don’t try to copy/paste all of it into a new market when something that evolved (and expensive!) likely won’t even be needed.
Mistake #4: Ignoring what the local customer really values
If your company wants to apply the same pricing and packaging in each market, that’s understandable. After all, you’re likely trying to prevent things from getting overly complex. At the same time, if you fail to really understand what the customer values, you might miss major business opportunities that affect your bottom line and can harm your core KPIs globally.
For example, let’s say you’re a software company selling the same product in the United States and India. In the United States, a typical deal looks like this:
Average Contract Value (ACV) in the United States = $50K annually, of which $35K is software and $15K is professional services ($10K for implementation + $5K for strategy services)
In the US market, strategy services are not really a focus, but more of an add-on for the customers that want them. Most customers in the US market prefer to do most of the strategy work themselves internally or through a partner, so it usually makes up only 10% of your typical ACV.
Now, let’s assume you take your offering into India, but you plan to continue to deliver the pro services via teams based in high-cost countries, so you cannot discount it in any way. Let’s assume that your customers in India are not willing to pay as much for the software either due to the lower cost of living. As a result, you cannot achieve the same Average Contract Value there. You realize that tech talent is highly available and affordable enough in India that the typical customer can hire someone locally to do the implementation work themselves.
If you don’t understand what the customer values, and don’t take the time to figure this out, your typical deal in India may end up looking like this…
Average Contract Value = $30K annually, of which $25K is software and $5K is pro services
However, if you talk to the customer, you might learn that your customer cannot find people locally who can support with the strategy services your company offers. For this reason, they are eager to invest much more in strategy services, and over a longer time period. This may surprise you, since those services are rarely purchased for more than a short up-front period in the US market. Also, because your customers in India will hire more people to implement and use the software due to the lower cost of living, they may add more users. If you have a seat-based pricing model, your typical customer in India might also go up a tier or add more users than your typical customer in the United States who opts to outsource implementation, even if they negotiate a much bigger discount on your standard price.
As a result, if you take the time to figure out what the customer values in each local market and actively manage to this, instead of just “seeing what happens” in the market, you can craft a much better scenario that looks like this:
Average Contract Value = $50K annually, of which $25K is software and $15K is professional services (all $15K for strategy services, $0 in implementation)
To summarize, in this example, we kept the ACV high, and we didn’t actually change or customize the go-to-market, the cost of labor involved in delivering the services, or anything about the software pricing for the new market. All we did was customize the mix of things we already offer. This is important, because companies always want to minimize adaptations if they can, in an attempt to keep things simple. But often, very simple solutions, such as the one in this example, are possible, allowing a company to achieve success in a new market — but importantly, without it worsening the big picture of their overall customer acquisition cost (CAC) or throwing their average contract value (ACV) or average revenue per customer (ARPC) off balance.
The core question that this example should lead you to ask is this: “Why would we just accept that customers this market will pay us $30K for our standard offering (and how we position it), when we could ask the customer what they expect from us for $50K instead?” Especially when what they expect is something you might already offer! Slight changes in positioning can often lead you to succeed in a market with minimal changes. But, you’ll never know unless you ask local customers what parts of your offering are truly the most valuable to them. So few companies ever bother to ask! Customers are very happy to tell you the answers. Don’t waste your time “experimenting” when you can get direct feedback instead!
This is especially important when targeting large markets like India and other BRICS countries, because the size of your customer base in any such large market can rapidly snowball, even if you’re not delivering all the value you could (and charging accordingly). If you’re not careful with these mismatched situations, before you know it, the seemingly small choice of going into a new market with your standard offering like this can make a dent in some of your global business metrics. For this reason, it’s important to proactively manage with an eye on your core business metrics from the very beginning. Don’t just throw your standard offering out into new markets and hope for the best. Be proactive and intentional, and importantly, don’t try to sell things to local customers that don’t actually meet the needs of their reality!
Mistake #5: Targeting markets that require too much customization
There are many markets that have a lot of overlap in type of economy, language, culture, which usually means that your product offerings and go-to-market strategy will work there too. Then there are markets that are completely different from your home market, where you’ll need to make much bigger customizations to product + packaging + pricing, and often to your go-to-market approach too.
To maximize revenue growth as early as possible, my opinion is that those markets requiring extensive customization are usually ones to save for later on in the life of your business, or to target with a local mergers & acquisition (M&A) strategy instead. Most businesses simply cannot afford to take on the major costs and risks associated with markets that have a significant degree of difference, and can end up pouring far too much money into them with very little return on that investment.
Often, businesses bite off way more than they can chew, simply because they don’t know what they’re getting into when they launch in a new country. Conversely, many companies also fail to go “the easy route” and avoid targeting markets that are far more amenable to fueling their growth without as much investment on their part. For example, many businesses based in the United States fail to properly target markets such as Canada, the United Kingdom or the Nordics, which do not usually require extensive localization in order to intensify their presence, hit revenue targets, and make fast traction. They might even set up an office or launch a major presence in a non-English-speaking country before they go after the low-hanging fruit markets, even though the latter will be easier and faster to gain traction in than markets that might appear bigger, but are way more difficult to succeed in at scale.
In summary, international growth strategy is not limited to just having a clear list of countries to target. While that’s a great starting point, you’ll also want to avoid making these five very common mistakes along the way. Make sure to go the next layer or two deeper and factor in the flex that will be needed in order to hit your core business goals, by country. Doing so will ensure that you achieve not only your local targets in the short term, but that your international strategy catapults your company toward its global north star in the long term, achieving sustainable growth in many markets at once.