The Time for Global Has Come! Entrepreneurs: Go Forth and Internationalize

Elhadji Koumama has a silver jewelry-making business in Agadez, Niger (Africa). He is a 26th generation Tuareg tribe metalworker. Elhadji has a 3rd grade formal education, but has learned to speak 5 languages and sells jewelry in Africa, Europe, the U.S., and everywhere using e-commerce on his website (www.tuaregjewelry.com). His business has many challenges – civil war, poor infrastructure, corruption, and lack of capital. Yet despite obstacles, the business grows and sustains his extended family and many neighbors in one of the poorest countries in the world.

I met Elhadji in 2007 when he came to Denver for a trade show. He is intelligent and introspective, with tremendous presence. Whenever I think of opportunity for entrepreneurs in global markets, I think of Elhadji. Global markets used to be only for large companies with deep financial reserves. With the advent of (1) the Internet, (2) lower communications costs, (3) lower transportation costs and (4) fewer trade barriers, the time has come for more entrepreneurs to reap the rewards of international trade.

I know. You’re an entrepreneur focused on developing products, closing deals and paying bills. Why spend resources expanding globally early in your company’s timeline?

Externally-Derived Competitive Advantages

The old-school-large-corporation approach to internationalization is to wait until you’ve saturated the domestic market, then use domestic earnings to expand overseas. The company increases market capacity by leveraging internally-derived competitive advantages (product differentiation, etc.).

Entrepreneurs: expanded market capacity is only a small bite of the internationalization cake! We know most entrepreneurs take innovative approaches to business and solve problems creatively. When these traits are applied to international markets, entrepreneurial companies can create multiplier effects.

Some examples:

New Funding Sources. As funding sources including small business loans dried up in economies hit by the recent financial crisis, capital can flow more readily in other countries. Colorado-based Wheelabrator Group went with a Polish private equity firm in their last round of funding.

Market Access and Add-On Product Sales through Partnerships. The right overseas partnership can create competitive advantages. Not only can you gain access to a partner’s clients, but a compatible offering can enhance your own product line in your home market. A Swiss machining firm could partner with a North American machining firm with compatible abilities. Each refers work to the other when the client has an order fitting the partner’s capabilities. Since machining companies rarely have overseas operations, this partnership would be a competitive advantage in serving large manufacturing companies that operate in both Europe and North America.

Reduced Business Risk. Wait a minute – isn’t going global going to increase my company’s risk? If you set up your operations right, then risk can actually decrease. Here are some reasons why: (1) Economic conditions affect different parts of the world at different times. The current financial crisis that bankrupted Iceland left Latin America virtually untouched. It’s like having a balanced financial portfolio. (2) Take a larger share of markets where competition is less. New York City chocolatier, Alison Nelson just expanded her Chocolate Bar stores into the Middle East. In Arab countries she faces very little competition and a growing market. (3) Many international business risks can be mitigated through insurance and locking in currency rates.

If you’d like to learn more about how international expansion could help your growing company become globally competitive, please contact me at intl.entrepreneur@gmail.com and follow my blog at http://intlentreprenr.blogspot.com.

Becky DeStigter
International Entrepreneur