World has become one small village with the advent of globalization. And, naturally, companies expanding globally get access to vast market opportunities.
Why do companies expand globally?
The business outcome focused on global expansion ranges from increasing revenue to acquiring more customers. The ease of doing business has gone up, ongoing competition to widen the customer base, availability of skilled professionals and infrastructure, and favorable labor laws for business growth, all prompted the industry leaders to go ahead with the global expansion of companies beyond their borders.
Factors to consider when choosing industries for global expansion
According to Mckinsey’s recent discussion paper, ‘Global flows: The ties that bind in an interconnected world,’ two-thirds of the global export is accounted to multinational corporations. The report strongly supports the companies choosing global expansion.
When choosing industries for global expansion, there are several factors to consider.
These include:
- Market size: Size is essential when choosing industries for global expansion. Companies expanding globally have to focus on markets that are large enough to support their business.
- Growth potential of the market: The market’s growth potential is another critical factor to consider. Target markets that are snowballing give companies an incredible boost to efficiently achieve their preferred business outcomes.
- Competitive landscape: Competitiveness is a crucial factor to consider before expansion. Companies expanding globally need to target markets where they can compete effectively. This can be easily achieved through market research and effective marketing strategy.
- Regulatory environment: The regulatory environment is another essential factor to consider. Companies expanding globally should target markets where the labor laws are favorable.
- The cultural environment: Companies should target markets where the cultural environment is compatible with their own culture.
- Infrastructure and Logistics: Assessing the availability and efficiency of infrastructure, transportation networks, and supply chain capabilities is vital for smooth operations in new markets. Adequate logistical planning and local partnerships can help mitigate risks and ensure timely delivery of products and services.
- Risk Assessment and Mitigation: Expanding globally involves inherent risks such as political instability, currency fluctuations, and cultural barriers. Conducting comprehensive risk assessments and implementing risk mitigation strategies, such as insurance coverage and contingency plans, safeguard companies from potential setbacks.
US companies turning to global expansion
A large number of US companies are increasingly turning to global expansion. There are several reasons why US companies are expanding overseas. Those include:
Market Saturation:
Many US companies operate in industries that have reached saturation or intense competition within the domestic market. To sustain growth and profitability, expanding globally offers new avenues for revenue and market expansion. Launching beyond borders offers a tremendous potential market for US products and services.
Lower costs and availability of infrastructure:
Labor costs are comparatively lower in many emerging markets, which can help US companies cut costs. The action can substantially impact the company’s revenue with reduced spending and increased profitability.
Access to Resources and Talent:
The global expansion allows US companies to access diverse resources, such as raw materials, manufacturing capabilities, and skilled labor, at competitive prices. Additionally, going international enables them to find a sustainable solution to the talent crunch faced regionally and to tap into global talent pools to gain a competitive edge in innovation and technological advancements.
Emerging Market Potential:
The emerging markets, particularly China, India, Brazil, and Southeast Asia, present vast untapped consumer bases and growing middle-class populations. US companies recognize the potential of these markets and are keen to establish their presence to capture these opportunities.
Some popular US companies which moved into global markets include:
Now you know why US companies are turning to global markets. But which industries are the top ones looking to expand globally? Well, here are the answers.
Top industries for global expansion
Let’s get to know five key industries with promising opportunities to expand globally.
Information technology (IT)
With the flourishing of the digital age, the IT sector stands as a frontrunner for global expansion. From artificial intelligence to the diversity of the Internet of Things, the industry is amazingly bringing so much technological revolution. The increasing demand for innovative technology solutions and software services worldwide has made these companies eager to onboard an increased number of innovative minds and expand beyond their initial tech abodes.
Healthcare and biotechnology
The healthcare and biotechnology sectors are witnessing remarkable growth worldwide, driven by advances in medical research, increasing healthcare expenditure, and an aging population. Companies expanding globally in these industries can tap into new markets, collaborate with international partners, and introduce groundbreaking healthcare solutions.
Alongside all these potentials, healthcare and the related pharmaceutical sector has enormous difficulty to expand due to different healthcare standards and requirements existing in various countries. It is important for the industry to have expert help to sort out the compliance nuances and thus brighten the possibilities of hassle-free operations.
Renewable energy
Energy crisis is a new age threat world countries face. With the urgent need for sustainable energy solutions, the renewable energy sector presents an excellent opportunity for global expansion. Companies specializing in solar, wind, hydro, and other clean energy technologies can leverage their expertise to penetrate emerging markets and contribute to the global shift towards a greener future.
E-commerce and retail:
The rise of e-commerce has revolutionized how people shop and opened up immense possibilities for companies expanding globally. Companies can enter new markets and reach a diverse customer base by establishing online platforms, partnering with local distributors, opening warehouses, implementing efficient logistics measures, ensuring last mile delivery, and tailoring their offerings to regional preferences.
Working on the regional customer pain points can be an excellent way to establish a presence in a new territory, which means one thing – more trust from customers, more sales, and thus more revenue.
Financial services:
The financial services industry, comprising banks, insurance, and investment firms, has long been getting a tailwind for quite some time in global expansion. With a globalized economy and increasing financial interconnectedness, companies in this sector can leverage their expertise and expand their operations into new territories.
Manufacturing:
The manufacturing industry is also a major player in the global economy. It is because many companies are outsourcing their manufacturing operations to countries with lower labor charges. In addition, the manufacturing industry is constantly innovating, which indicates there is always a demand for new products and services.
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