An Internationalisation Expansion Model as well as some Hands-on Tips.
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Are you planning to expand internationally and enter with your business in Germany, but don't know where to start? You've probably heard the statement that there is no custom-made template to expand internationally, let alone to Germany. Well, to a certain extent that's true. In general, taking a business abroad depends on many factors like your business model, the timing, competition, local regulations, customer behavior and many more. These factors interact with each other making international business complex.
Still, there are lessons learned by those who went before that can be applied to everyone. At Reichweite, we have consulted dozens of startups and established businesses with their step into the German market. We do not only consult, we get our hands dirty when it comes to execution. Based on our experience and learnings, we developed and tested an internationalisation model that allows you to learn from the mistakes of others. This helps you to successfully prepare and execute your German Market Entry. Here we provide an Internationalisation Expansion Model as well as some hands-on practical tips.
Our quick framework to guide you through the first steps of your internationalisation, is divided into 4 key areas: Strategic Market Analysis, Product Market Fit Validation, Customer & Purchasing Behavior and Operations Differences.
Figure 1: Reichweite’s International Expansion Model
1. Strategic Market Analysis
The Strategy Market Analysis quadrant is about considering the overall Germam market dynamics. The important factors here are: the German Market Size (almost 83 million inhabitants and 344K Small and Medium sized businesses), Competition, Suppliers, and general geographical and political topics. Make sure to review and analyse all these factors in detail, just like you do for a marketing plan. Ask yourself what implication the German market dynamics have on your business.. As an example, in case your business generates lots of customers through Facebook in your home country, you want to analyse the use of Facebook. Use of Facebook is for instance significantly lower compared to many other EU countries, see fig. 2 below.
Figure 2, Percentage % of population registered at Facebook.
Tip, many country offices, ministries of foreign affairs or other governmental organisations can provide (often for free) country information. For instance the Small Business Act for Europe (SBA) of the EU provides quality information on Germany. See report.
2. Product Market Fit Validation
Once you have locked in the next country for your company, it's about considering the interplay between that market and your product offering. In your home country, you most likely have a good product-market fit and know what your customers value in your product (your value proposition). This value proposition could be different abroad, as the same target groups in a new market might value the same product in a different way. Therefore, it is important to analyse how your value proposition might differ when expanding into new regions or countries.
Next to that, a check of legal requirements is an absolute must do, even when expand inside the EU. Although much legislation is quite uniform in the European Union, it might differ a lot on a product or service level! Without a proper check beforehand, your market entry might be significantly delayed. Take a straightforward product like a bicycle. In Germany, bicycles need at least two independent brakes whereas in the Netherlands this is not the case. A small but essential addition is needed to have a roadworthy bicycle in Germany.
3. Customer & Purchasing Behavior
From your home market, you know (or should know) the ins and outs of your target segments and customers. You have one or multiple personas developed, you know what your CACs and CLVs are, and your pricing strategy is tested. Now, it's great to have all of this and be able to use it as a benchmark when entering a new market. But these parameters need to be validated for each market, as customers and personas might significantly differ!
Another aspect to consider when it comes to customer behaviour is the preferred payment method in a new market. Again, depending on your business, it might actually be a deal breaker if you do not comply with local standards, no matter if you are an online or an offline business. See the table below for some interesting differences in payment preferences throughout Europe.
Table 1, top 3 of ecommerce payment methods per country.
4. Operational Differences
Once you've taken into account the market, your product and the local customers, you now have to focus on the operational details. The main question here is: how far do you go with your localization? Will you set up a local office? Is there a need to translate your website, sales materials and product texts? Figure 4 shoon % of population with mastery of English). So translating your website to the local language is the minimum requirement before your expansion. Other operational topics to consider are: a local website domain, product names, local office, phone numbers and staff.
Figure 3. Percentage % of population that can hold a conversation in English (source: jakubmarian.com)
Some figures on Eureopean Expansion
85% of our customers provided increasing revenues as their number one reason to expand internationally.
The European top 6 largest countries measured by inhabitants hold 340 Million consumers (see Fig 1).
Germany takes more than 25% (83 million inhabitants
France has way more small and medium sized enterprises (SMEs), almost 3.1 million SMEs.
The more than 2.5 million registered (SMEs) in Germany, have an €880 Billion revenue.
Figure 4: Top 6 largest European countries measured by inhabitants, accumulate to 340 Million consumers.
About Orange Octopus & Reichweite
Reichweite is an international expansion growth service firm based in Berlin. We support both B2B as well as B2C companies on their international expansion journeys. With success, as we have served or serving over 50 companies with their growth. The management has German and Dutch roots with backgrounds in Marketing, Sales. Accounting, Strategic management and speak four languages fluently.
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