3 common reasons why startups fail internationally (and how to avoid them)

12/01/2021

Expanding SME internationally. How to avoid common mistakes. TradeReady blog.

Every entrepreneur faces challenges, but those who are looking to expand to international markets must be prepared to address additional obstacles. Failing to strategize properly for a regional or international approach can lead to disaster even for startups who have had tremendous success in their local markets. Bearing this in mind, we’ve compiled a list of the most common reasons why startups fail internationally in addition to some tips on how to successfully expand your startup to new economies.

Reason 1: they don’t build a strong local base.

Before businesses can grow in the international market, they need to grow a foothold in their local markets.

When businesses flourish in their base market, they build their brand and grow capital that can be used to fuel expansion and adjust their products and services before they reach out to a broader base of consumers.

Establishing this base within your local markets is usually easier than trying to build within a foreign market because you usually have a good understanding of your local market and consumers. Companies can leverage this knowledge to launch a product or business and grow momentum that propels their successful entry into international markets. It’s also important for businesses looking to expand internationally to know whether their local market shares a need with their prospective international market—as this crucial factor will determine the demand abroad.

Reason 2: they fail to connect with potential markets.

To move a product into a new market, the product has to be scalable. While a company benefits from having a strong localized base to bolster expansion efforts, products that are too localized can’t scale well to new markets. Many businesses assume that scaling their product is a matter of transferring the same product with a similar marketing plan into a new market. But gaining traction from new markets requires buy-in from local investors who can help businesses understand international market needs and make connections to international consumers. Every business needs to understand how their product will be perceived by their new potential market and how it may need to be changed to help it succeed. Small details like package colouring or phrasing can have huge consequences when entering a new market, so having a local investor to help you understand these critical nuances is foundational to success.

Reason 3: they don’t find the right markets for their products.

There’s more to connecting with a potential market than finding the right investors and beginning to connect with consumers. The market also must generate enough income to warrant investing there.

Many companies expand using overly simplistic qualifiers for new markets: They choose markets because of geographic convenience or cultural similarities to markets that have already seen success. In addition to meeting a need or solving a problem within the market, an expanding business must be sure that the market has enough consumers with enough income to support the product. On top of that, the product must be culturally relevant to the market.

Avoiding common mistakes made by international startups

Careful planning is the best way to avoid failure when expanding your business internationally. If a business launches with global expansion in mind, they should plan for both local and international business growth. That means developing an original localized market that can be focused on initially. As the business strengthens with localized growth, the focus can turn to exploring potential markets and then onto how the product or marketing plan may need to be tweaked to appeal to the new market. Smart businesses also use the lessons they learn with their initial launch to create a more effective plan for the new markets they enter. By balancing a local base with the possibilities created by new markets, businesses can seek international growth while having a solid foundation and understanding of markets that are likely to bring continued success.

Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Author: Jennifer Nesbitt

Jennifer Nesbitt is a New York-based freelance copywriter. A former journalist and graduate of Penn State University, Jennifer now writes about a variety of topics, including business, technology and marketing. She is passionate about helping companies develop their brands by providing compelling copy that adds value to their online presence.

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