Beata Drzazga – business mentor, founder and president of BetaMed SA, the largest Polish company providing medical services at the client’s premises, talks about the benefits of the international expansion of Polish companies.
Why should Polish entrepreneurs look for clients abroad?
Because Poland is still a small market. Thanks to international expansion, we can increase revenues and improve sales profitability. New opportunities and market opportunities will emerge, and perhaps new products can be introduced. The effect of increasing the total level of production and sales is likely to be a reduction in unit costs. This means that thanks to sales abroad, we will also gain an additional competitive advantage in Poland.
Entering new markets means that the owners of the company and its staff acquire additional experience and competences. The company begins to develop multidimensionally – not only in terms of sales volume. The expansion becomes a source of product and marketing innovation. In every respect, we are promoted to a higher business league.
The European Union alone has a GDP of $ 19.5 trillion and nearly 450 million inhabitants with a fairly high level of income. Expansion towards developing countries is also a huge opportunity. These regions of the world are developing dynamically in economic and demographic terms. The lower intensity of competition means that it may be easier to build a significant market position there.
So where do entrepreneurs’ fears of international expansion come from?
The reasons for these concerns may be individual. Everyone has their own vision of business, but there is no doubt that language and formal and legal issues still play a key role. We are afraid of contacts with clients and contractors in foreign languages, we are also afraid of contacts with foreign offices. In general, this topic is very interesting. An important part of my work as a business advisor is trying to understand the motivations that drive the client. There I often see a simple, unfounded fear of the unknown. Entrepreneurs cannot justify why they do not want to look for clients abroad.
International expansion may also impose quite high capital requirements on enterprises. We are talking about working capital, but also about investments and marketing budgets. When operating in foreign markets, we have to accept the increased level of risk. Abroad, the probability is always increasing that we will underestimate the risks. The higher level of risk must be compensated by building a greater advantage over local producers. The consumer must have some reason to buy a product from Poland instead of a Chinese or local product to which he has been used to for years.
What to do with this risk? What tools can be used to manage it?
Business is not about avoiding risk, but about understanding it better than your competitors. As a result, failures in certain projects are compensated for by profits from successful ventures. Failed projects are very much needed precisely because you don’t know they will fail before they start. Risk management is about increasing the likelihood of success through knowledge, market knowledge or solid analytical work.
Polish companies in Western Europe are still willing to build their competitive advantage on lower production costs. Lower wages, lower real estate prices, and in some cases lower tax burdens make it easier for Polish producers to meet the expectations of demanding Western European customers.
To what extent are concerns about expansion justified?
We must remember that the markets of the most developed countries are characterized by a very high degree of competition. Even if we have a clear cost advantage, it will not be easy for us. Consumers can afford to buy more expensive local products if they think there is a need. Our competitors will be entities with a stable market position that has been built over decades. In such cases, it is usually impossible to be successful thanks to a frontal attack. We should test our capabilities and increase commitment only when we see that we have an advantage.
The first phase of expansion may be the listing of products on international sales platforms. If we sell our products in the European Union, we do not have to worry about formalities, duties or concessions. The risk associated with this phase of international expansion is minimal. The next step may be to establish contacts with your local distributor. If we are successful in this phase, we may decide to increase the risk and build a local representative office. This will increase our own costs, but also allow us to take over the margin of local distributors.
So we have a huge amount of tools at our disposal and the strong position of global and local players on the international market should not be an excuse for us. We have to look for opportunities and market niches all the time. The role of the mentor or business advisor is to assess whether the entrepreneur’s fears related to international expansion are justified, as well as to determine what the real level of risk is and whether it can be reduced or dispersed.
So let’s talk about tools. There are some of them.
That’s true. We need to master the operation of several or even a dozen or so services. You have to acquire a lot of knowledge, but thanks to this, even by running a one-person company, we will be able to become a global player.
As I said before, we should start with the international sales platform. Services such as eBay, Alibaba and Amazon are designed to enable small and medium-sized enterprises to operate on international markets. We will also need tools for handling payments and logistics processes. Here, we will most often be able to use tools integrated with sales platforms. If the knowledge of foreign languages is not our strength, remember that online tools for content translation have more and more possibilities. They may turn out to be indispensable in the customer service process. We will also need tools for remote work, such as instant messaging and conference software.
And finally, one of the most important things. The development of online business must be based on analytical tools. Many of them are available for free, such as Google Trends and Google Global Market Finder.
We talked about risk before. Please note that the tools we are talking about are designed to reduce them. Payment models from services such as Amazon are commission-based. If we fail to sell our products, we will also not incur costs. We will be in a completely different situation when we decide to open traditional stores on international markets. Then we will have to pay the rent, regardless of the sales volume.
So Polish entrepreneurs should decide on international expansion also because it has become much easier in recent years.
In the 1990s, the standard strategy of international expansion assumed the establishment of an office abroad, the creation of a logistics infrastructure and a separate marketing strategy for each market. The individual markets were most often separate business units, they were separate companies running their own financial, marketing and personnel strategies. International expansion meant dealing with local bureaucracy, the regulatory environment, customs and tax laws.
Today, we can achieve similar effects without moving from behind a desk in Warsaw. This does not mean that conquering global markets has become easy. But it’s certainly easier to try.