Internationalizing a company: What it is, phases and advantages

What is internationalizing a company?

Internationalizing a company is the process by which an organization extends its operations beyond national borders to access foreign markets and offer its products or services. This process involves not only the export of goods and services, but also the adaptation of business strategies to new international realities, which encompasses both changes in marketing models and in distribution, production and sales methods.

Internationalization also includes the possibility of making strategic alliances, opening subsidiaries or acquiring local companies. This process is driven by several factors, including the search for new business opportunities, risk diversification and the response to the growing demand for products or services in international markets.

Companies undertaking this process must adapt to a completely different cultural, economic and legal environment, which means that the internationalization strategy must be carefully structured by an international consultancy to avoid potential legal or financial risks.

How to internationalize a company?

The internationalization process is not simple or uniform for all companies. Each case requires specific planning, if you want to take your business to Portugal you have to take into account factors such as the type of product, the target market, the available resources and the long-term goals. To carry out this process successfully, companies must follow a series of key steps, including thorough research and analysis of international markets, as well as the creation of an entry strategy.

The fundamental steps to internationalize a company are the following:

1. International market research: Before launching into international expansion, it is crucial to conduct a thorough analysis of potential markets. This involves studying demand, consumption trends, competition, barriers to entry, and local regulations, among other factors. This analysis will make it possible to identify the markets with the greatest potential and those that present the least risks.
2. Define the entry strategy: There are several ways to enter a foreign market, each of which requires different levels of investment and commitment. Options include direct export, establecimiento de joint ventures, alianzas estratégicas, franquicias or the creation of subsidiaries in the country of destination. The choice of the most appropriate strategy will depend on the resources available and the nature of the target market.
3. Adaptation of the product or service: Internationalization implies the need to adapt products or services to the particularities of the new market. This can include modifying products to comply with local regulations, adjusting packaging, adapting pricing strategy, and considering consumer habits and preferences in the target market.
   As an example of a customer that failed to expand to Portugal, a strong group in the photocopier sector in their home country decided to open a copy center in Portugal. He created a branch, rented a space, adapted the website, acquired machinery and equipment, hired personnel. But when he started receiving requests for copying and binding, he realized that the type of binding they practiced in his home country was not what Portuguese consumers wanted. At that time, the business plan was compromised and it was not possible to move forward with the business.
4. Compliance with regulations and standards: Each country has its own trade, tax and customs legislation. It is essential to know and comply with local regulations to avoid penalties or legal barriers that may hinder expansion. This can include regulations on product labeling, quality standards, intellectual property rights, among others.
   A previous meeting with the entity with which the company is going to be involved (example: General Directorate of Agriculture and Veterinary) or the study of the requirements to obtain a license (example, a construction permit) allows the viability of the business in the country to be studied from the outset and to promote adequate preparation and adjustment of times and documents.
5. Design of the international marketing strategy: Effective communication is key to successfully penetrate a new market. The marketing strategy must be adapted to the customs and preferences of the local public, as well as to the most effective communication channels in each region.
6. Logistics and supply chain management: The correct distribution of products in the foreign market is one of the most critical aspects. Companies must decide whether to use local distributors, open warehouses, or produce locally. Efficient supply chain management is critical to maintaining competitiveness and minimizing operational costs.
7. Financing and investment assessment: Internationalization often requires significant investment. Companies should assess their financial capabilities and explore sources of financing, such as investment funds, bank credit or strategic alliances, to ensure that expansion is viable in the long term.

Advantages of internationalizing a company

Internationalization offers numerous strategic benefits that can have a positive impact on the company’s growth and profitability. Among the main advantages of internationalizing a company are:

• Risk diversification: By operating in multiple markets, the company does not rely exclusively on a single country or region, reducing vulnerability to economic or political fluctuations in its home market.
• Increased revenue and profitability: Accessing international markets allows you to increase sales and generate higher profit margins. In addition, expanding into new markets can help the company take advantage of economies of scale.
• Improved competitiveness: International competition drives innovation, leading companies to continuously improve their products and processes. Facing global competitors helps strengthen the company’s competitive position.
• Access to new sources of talent and technology: Expansion into international markets opens the door to new opportunities for collaboration with professionals, technology companies and suppliers that can bring innovation to the company.
• Brand reinforcement: An international presence strengthens brand recognition at a global level, which improves the company’s image and gives it greater prestige in the market.

Phases in the internationalization of a company

The internationalization process does not occur instantaneously, but must be implemented in strategic phases that ensure controlled and successful growth. The main phases in the internationalization of a company are the following:

1. Internal analysis and capability diagnosis: Before tackling international expansion, the company should assess its internal capabilities, including financial resources, operating structure, technology, and international expertise.
2. Research and selection of target markets: The most attractive markets for expansion must be identified, based on studies of demand, economic and political stability, among other factors.
3. Definition of the entry strategy: Once the markets have been selected, the company must define the most appropriate strategy to penetrate them, choosing between the different entry modalities such as exports, alliances or subsidiaries.
4. Business model adaptation: Adjustments must be made to the product, marketing strategy, and operational processes to meet the demands of the new market.
5. Implementation and operational management: In this phase, the company carries out the execution of the entry strategy, establishing the necessary infrastructure and ensuring regulatory compliance. At CE Consulting Portugal, we can advise you on the most appropriate legal form and the necessary procedures to establish a presence in Portugal. But, beyond that, we provide a company maintenance service in the tax, accounting and labor fields, ensuring that the company adapts to Portuguese rules and regulations.
6. Evaluation and continuous improvement: After the initial implementation, the company must monitor and evaluate its performance in the new market, adjusting strategies to improve the profitability and sustainability of the operation.

Conclusion

Internationalization is a powerful strategic tool that can provide companies with broader access to global markets and new opportunities for growth.

However, it requires detailed planning and careful execution, with expert teams in every section of the process. And having a consultancy for companies in Portugal specialized in the commercial, accounting, tax and payroll will be a crucial part of guaranteeing success in international expansion.