Expanding businesses overseas is a goal shared by many ambitious entrepreneurs and companies worldwide. After all, international growth is one of the key ways to expand horizons and tap into new markets — the same applies to businesses in Cambodia.
With increased connectivity to the global market, Cambodia is an attractive destination for businesses looking to tap into new opportunities. Add to that the "Digital Economy and Social Policy Framework of Cambodia 2021-2035" policy and expected exponential growth in sectors, such as retail and more, Cambodia is more of an appealing market than ever before.
And just like how international businesses are looking to step foot into the Cambodian market, it is only natural for businesses within Cambodia to do the same and aspire to expand beyond their own borders. But why and how can DHL Express empower businesses in Cambodia to unlock the full potential of international business expansion?
What is the meaning of overseas market expansion?
The concept of international market expansion refers to the strategic growth of a company beyond its domestic market, venturing into multiple locations across international borders. It is a natural progression for successful businesses that have experienced growth in their original location and have explored expansion within their own country.
It is crucial to note that true global expansion occurs when businesses transcend national boundaries and seize opportunities overseas, even if it begins with expanding into neighbouring markets. At this stage, it becomes a truly 'global' or 'international' expansion, marking an exciting milestone in the business journey.
Understanding internal and external growth of businesses
When it comes to business expansion, there are two fundamental paths to achieving growth: organic internal and external growth.
Internal growth, or organic growth, occurs when a business expands its operations internally. This type of growth can be achieved through various strategies. These include increasing production capacity, developing new products, exploring new international market opportunities, and expanding the customer base. For example, Samai Distillery, Cambodia's first and only rum-producing business, is now exporting its premium rum to new overseas markets like Spain despite already exporting to France and Singapore. This is one way of broadening its reach and establishing a stronger global presence.
On the other hand, external growth involves a business expanding through external means, typically through mergers or acquisitions. This approach offers several advantages, including faster access to new products or markets, increased market share and access to economies of scale. External growth can be exemplified through mergers, where two businesses combine to form a new, larger entity, or takeovers, where a business acquires a majority stake in another to gain control.
What are the advantages of expanding a business internationally?
Expanding a business internationally offers numerous advantages that can drive growth and success.
- Allows businesses to acquire global talent: Tapping into a diverse pool of skilled workers from various locations not only brings fresh perspectives and skill sets to the workforce but also provides valuable insights into different markets and cultural nuances.
Reduces costs by leveraging lower labour and material expenses overseas: International expansion is more cost-effective in this regard – businesses can even strategically relocate operational functions or outsource back-office tasks to optimise their resources.
- Enhances resilience of a business: By operating in multiple countries, companies can mitigate the risks associated with localised economic or political events. For example, with the next Cambodian general elections set to take place in July 2023, there is a possibility that political tensions could pose hurdles for local businesses to operate optimally. Therefore, it is clear that such downturns in one market can be balanced by growth in another, ensuring a more stable and resilient business overall.
- Opens new overseas expansion opportunities: Market research may uncover untapped demand for products or services in specific countries, allowing businesses to seize the first-mover advantage or cater to unique customer preferences. This can be a pivotal part of a growth strategy, expanding the reach and market share of the business.
- Enjoy tax and compliance benefits: Certain countries may offer more favourable tax regimes, including lower corporate tax rates or specific incentives, such as research and development (R&D) tax credits. By strategically setting up entities in jurisdictions with tax advantages, businesses can optimise their tax position when expanding internationally.
When should a company expand internationally?
To determine the right time for international expansion, companies should consider several key factors.
For one, thorough market research is essential to understand the demand, competition, and trends in potential target markets. Achieving financial stability and having attained sustainable growth are also crucial prerequisites for expansion.
Beyond that, assessing the company's competitive advantage and unique value proposition will help gauge its suitability for a new environment. And before expanding internationally, businesses must evaluate their scalability and operational capacity while simultaneously navigating legal and regulatory considerations.
Proactive risk assessment and mitigation strategies must also be in place to navigate potential challenges. Lastly, access to skilled talent and human resources plays a pivotal role in successful international expansion.
