As someone who has started a business both nationally and internationally, I've found that it's like comparing apples to oranges. Adding a service or product line, starting a company or spinning off a company draw complicated issues by themselves — even more so if you're doing it in a developing country. Based on my personal experience and vantage point after opening and expanding a company and services into different countries, this article is going to list four things to consider when deciding to expand your business into an emerging market and, more specifically, into Latin America, where I've found success expanding my company.
Understand The Culture And Language
Some people underestimate the impact culture has on a business, both in terms of your company culture in the region as well as the culture of the region itself. Although I've found there to be a professional and extremely eager workforce abroad, capable of contributing incredible work, what motivates them varies by region. Learn how to motivate your team and you will forever be happy.
You also need to learn the culture and language of the specific country you are looking to expand into. Two illustrative examples come to mind:
• Weeks before, without knowing, I set a meeting in Argentina during a national soccer game. My local colleagues mentioned that it was very likely that the meeting would be canceled — and 72 hours before the meeting we received a call to reschedule. Culturally, soccer is more than a sport.
• Colloquially speaking, words have different meanings. Take, for example, "ahora" versus "ahorita." This subtle difference could cost you a contract. These two words are used interchangeably in most countries. But in Mexico and Colombia ahora means "right now" and ahorita means "soon," while they mean the exact opposite in Ecuador. You can see how this can be dangerous. Did they say I need the proposal right now or soon?
Tip: Learn the culture of the place and embrace it. Do not try to change it. Adapt your company's rules and practices to the country's reality and you will succeed.
Find A Local Partner
Do not try to do it yourself. Your local partner will know how to navigate through the culture, system, etc. Your local partner will also have the financial incentive to have this project succeed. Here's a quick example of how a local partner could benefit you:
I had a meeting with a very large and prominent hospital a few months ago that does not do business very easily in Lima, Peru. It was only thanks to one of our team members — who is very well respected within the community — that we were able to get the meeting and later work on a project together with this institution.
Although connections are important everywhere in the world, in an emerging market they’re priceless.
Tip: Obviously, it is important to choose a local partner wisely. How to find this local partner? Try to be introduced by someone you trust. Even if it’s a friend of a family member's friend, a line of connection is important.
Learn The Regulatory And Legal Processes
You are entering a different country, so do not expect it to regulate the same way your country does. Some laws will not make sense. Some will make you mad. They're not better or worse, they're just different. Learn how to adapt quickly.
For example, after operating in Ecuador now for almost half a decade, I can tell you that labor laws there are very pro-employee. The most impactful ones for me, specifically on my budget, are "décimo-tercero" and "décimo-cuarto," which literally translate to “thirteenth” and “fourteenth.” These commonly called “décimos” are two extra monthly salaries you must pay your employees every year, one in December and one at the beginning of the school year. You can quickly see how, if you didn't know this going into your expansion, this could be a setback on budgeting.
Know the rules of the game before playing, otherwise, you will be swimming against the current.
Tip: I've learned from experience that when forecasting your budget for expansion, aside from the margin you may already have for error, add a 15-20% margin of error for local nuances that you are just not privy to.
Conduct Proper Market Research
Though I've found there can be financial benefits to investing in emerging markets, one must consider these within a risk-and-reward framework. In some situations, you will have to pave your own path. In my experience, the first one to launch a new service or product gets to "own it" for a few years. During those few years you are sailing in an empty ocean, everyone is your client and even if you eventually have competition, it will be limited. Market size usually only allows for a few competitors. How do you identify these opportunities? Do a proper market research. The absence of a specific product or service in a country is not enough reason to enter that country.
For example, we analyzed entering Brazil but quickly realized that it required too large of an initial investment for our firm. This can be attributed to several items that made it too difficult of a task to take on at that time: the large market size, the seemingly endless geographical landscape and the added language barrier to neighboring countries. The return on investment was most certainly there, but we were not willing to take the risk. We decided to enter another country equally as risky, but with a lower initial investment.
Not all countries are great for everything. You may find a large emerging market, but it might not be a great fit for you. Do your research and the choice will be easier.
Tip: Try finding a local market research firm that has a strong grasp on the local laws to assist you. This report should include a legal section as well. Do not entirely depend on them though. Get your feet wet, validate the research and have your local partner validate it as well.
