Internationalization, as the name implies, consists of “becoming international” . In this content you will understand why this has become a goal for Brazilian companies, and how to carry out an internationalization plan safely.
Faced with the various scenarios experienced by the world in recent years, among them the political-economic crises, and even the pandemic, the solution for many companies in the rhythm of growth was to look at the international market , aiming at expansion.
This happened due to the fact that the appreciation of currencies led businessmen to rethink their investments on national soil.
In addition, different realities increase the possibility of new business and new partnerships
Given this reality, some questions remain:
- What is the best way to internationalize?
- What is the best continent or country to open a branch or even a new company?
- What better city to locate and do new business with the rest of the world?
Keep reading because all this we will address here in this content.
Statistical data on the internationalization of Brazilian companies
According to data from FDC about Internationalization of Brazilian Companies (Fundação Dom Cabral), the expected growth in the number of Brazilian companies abroad was 1% per year, and in the last decade, the average level of companies reached the mark of 12.6%, leading Brazil to be present in 40.08% of the globe.
Despite being something increasingly common, it is necessary to observe some important points so that the process is not projected to failure.
Taking the risk of entering the international market without an internationalization plan can have negative impacts, and this is not always linked to financial factors alone.
The feasibility study of the product (Marketfit) itself is one of the main factors in the failure of companies trying to internationalize.
In this article we will cover all the steps, leaving you safe to understand the market and study new strategies for the internationalization of companies that aim for growth.
What is company internationalization?
It is the process of adapting a company to operate in a country that is not of its origin (international).
A company created in Brazilian territory, for example, is already born adequate to the legal aspects of Brazil.
However, to operate in another country, it is necessary to have an internationalization process , that is, integration of the company’s standards with the legal aspects of the destination country.
Examples of internationalization
In a hypothetical example of a technology startup that developed software for logistics management , let’s assume that this company is Brazilian.
Certainly in its origin, it adapted to the issuance of all legal and fiscal documents, as well as the licenses of the Brazilian transport sector (Invoice, Bill of Lading, Import Declaration, etc.)
When expanding this startup by migrating to Europe, the company will need to study all the tax documents required by each European country (or European Union) , and then adapt the software to be able to meet European transport demands.
Realize that internationalization is much more than just opening a physical location on European soil or online office to do business.
You need to carry out a market and marketfit study to assess the success of your product (see more on the Go To Market strategy).
Brazilian companies that have already gone through internationalization
There are Brazilian brands that have already conquered their space in the international market. These are companies in the technology sector that saw an opportunity for expansion and began aggressively in Latin America, North America and Europe.
Some examples of Brazilian companies that have already internationalized are:
- GYMPASS
- NUBANK
- STONE
- INSURANCE
Called “unicorns” for presenting a differentiated service and relationship system, these companies had their embryos in Brazil, and today they conquer the world.
What is the purpose of internationalization?
The objective of internationalization is to promote growth and expansion of the client portfolio for companies. Among the advantages of internationalization, we can mention:
- Expansion of the structure (physical or virtual) to serve a greater number of customers
- Possibility of new partnerships, as many companies have common business objectives
- Open branches to expand or just facilitate issues such as export and import
- Having access to new technologies
- Fosters employee creativity by interacting with different points of view and cultures
- Diversifies the market, reducing costs generated by economic fluctuations
- Expand new business ideas through new partners (customers and suppliers).
Which companies can internationalize?
There is no standard or requirement that prohibits a company from internationalizing.
However, it is not enough just to open a company, you need to have Know How and consistency for your product to be successful on international soil.
Singular Spark , a company specialized in internationalization consultancy for Brazilian companies that want to establish themselves in Europe, has a strong recommendation in this regard:
Internationalization is ideal for companies that have already passed the break-even stage, that is, that have already established themselves in the market, already have a consistent customer base, with revenue capable of generating profit.
It has been increasingly common for companies with Startup profiles, or technology companies that have already established themselves in the market, to take this initiative to expand their vision abroad.
Companies in the technology sector find it easier to adapt to the international reality, since their products are digital.
The other organizations that deal with goods or distribution of physical products face greater difficulty in internationalizing, due to the bureaucratic processes of each country.
Certainly in these cases, internationalization is possible, but it takes longer.
What are the forms of internationalization?
Making your company, product or service international can take on a different characteristic, according to your internationalization project.
Here we have prepared some of the most common approaches so that you can understand the ways to internationalize a company.
Open a company on international soil and adapt a product or service
This is one of the most common ways, as it requires only the investment and strategic vision from the entrepreneur to take his product or ideas, and only adapt it to a specific market abroad.
It is very common for companies that launch themselves on the market, sell their ideas, from which they receive millionaire contributions from investors who adopt the business ideas.
For this, the company first needs to do a market study to see if it is feasible to open its business, taking into account:
- Competition
- Public preference for the product or service offered
- Selling price of the product, in relation to its manufacturing cost
- Cultural viability of the product
joint venture
This technique is more linked to the partnership issue. It is also common for companies to connect with another company that already does business in the destination country in order to “join forces”.
Through this partnership, both companies add investments, share costs, and thus fulfill their objectives.
This modality is highly sought after by companies that want security in the process of installing their product in the target country, because when connecting with someone who is already in the country, the impact of adaptation is smaller.
franchising
This modality is already widespread around the world. First of all, your company needs to go through a process of internationalization of companies with standardization of its stages , transforming the business into something replicable.
Once your business has stages so crystallized that it can be opened by anyone with investment power, it becomes easier to expand the idea to other countries.
Inject investment in companies already installed
Another way to turn a brand into an international asset is to buy factories in the destination country.
From there, you don’t need to adapt your process, or even start from scratch, having to absorb all the bureaucracy in the country.
Just invest in an existing factory, store, or distribution center that already complies with the country’s legal obligations.
From there you have a more fluid process to grow your brand on solid ground.
How to do the internationalization process?
As self-taught as we may be, in certain areas of the business we need partners to provide consultancy in some processes, that is, doing everything alone would become unfeasible, or at least very complex.
Internationalization is one of those areas that require partnerships with consultancies capable of leading the entire process.
Consultancy in the internationalization process is essential to facilitate all stages, as usually the company that provides this service is already installed in the target country .
This is essential, because nothing better than being immersed in the country’s culture to be able to help those who are still outside it.
A consultancy has a direct “interference” in reducing risks in the internationalization process. And all this you will see in the topics that follow.
Here, we will address crucial points that you need to consider when planning your company’s internationalization .
Internationalization plan: what is it?
The internationalization plan is a document that aims to guide the actions and steps necessary for the success of a company in the destination country.
Through the plan, the company studies the risks, understands the market and creates action schedules to meet the objective of settling in the destination territory .
Certainly no one would like to make a risky investment , being totally in the dark, that is, without having a predictability of the consequences of each action.
Therefore, before hiring any consultancy , keep in mind that this company is responsible for researching all the items of a good plan.
The following sections will show you research points that are crucial to making your plan work. Be sure to check each one out.
MarketFit: is your business salable or not?
This term brings a very simple concept: does your business fit in the target country?
Can you imagine having the intention of opening a Food Service company in a country where people are not in the habit of buying ready-to-eat food?
Or even open a hotel management company where someone already has a deep-rooted monopoly, due to the length of service provided?
All of these competitive insights are born out of a period of much research, particularly with regard to competition, which is the next topic.
Singular Spark (Internationalization Consultancy in Europe) performs a MABA Analysis (Market Attractiveness Business Position Assessment), which helps the entrepreneur choose the most suitable countries (MarketFit).
It is the marketfit that has the purpose of showing if your business is viable or not.
We recommend starting your research with this item, otherwise you run the risk of carrying out long studies for a product that is not fit for the market.
Market research
Market research is nothing more than understanding the following items:
- Who is the target audience?
- What are your anxieties and pains?
- Which competitors are already healing this pain?
- What are the strengths and weaknesses of this competitor?
- What sets your company apart from the established competition?
Faced with new competitors doesn’t have to be a deterrent for you to open your business.
However, the saturation of competitors in a given country can be harmful, generating the need to plan the opening of your company in another country.
Bureaucracy: what is the feasibility of adapting my product/service?
Suppose your company develops a management system or a service focused on the bureaucratic reality of Brazil, you will certainly need to adapt this system to the bureaucracy of the target country.
For example, here in Brazil, we have e-commerces that deal with logistics. To fulfill this purpose, they need to issue a series of tax documents and different taxes.
What mandatory tax and tax documents does the target country require for the logistics chain to serve users?
This bureaucratic mapping process will require a detailed study of the product (or service) from the consultancy, and an action plan for its adequacy.
legal aspects
On the same hand as bureaucracy, legal aspects can also be crucial to prevent the expansion of a Brazilian company in European territory.
We take as an example the privacy law of the European Union – GDPR (General Data Protection Regulation) .
If a Brazilian digital product does not comply with the legislative aspects of the GDPR, it becomes unfeasible in Europe.
Dealing with legal matters is complex, and as there are several developments according to the different business areas, the ideal is to have a consultancy capable of carrying out this study, bringing a diagnosis of legal feasibility .
financial viability
To analyze the financial viability of a business , the consultancy will need to raise all costs (fixed and variable) for the implementation of the new company.
After that, the investment value that the company has to launch in the market is then analyzed.
Viability happens when the company’s working capital is sufficient for a long-term investment that is subject to risk.
Among the costs, the consultancy will need to list:
- Physical structure and legal aspects for opening a company
- Variable costs of maintaining the physical space as well as office materials
- Monthly taxes related to the product or service
- Human resources, that is, people hired to be involved in the process
- Investment in marketing and business relationship (partnerships and new customers)
After that, the math is simple. It is enough to carry out a cash analysis to find out if the company is able to maintain itself in the face of the researched costs.
opportunity risks
This mapping is crucial for the decision to open the company (or not).
It is in the risk phase that you list everything that could be an impediment to the growth of your product on international soil.
On the other hand, it also lists the possible opportunities that you can reach as your business expands.
This balance of risk and opportunity will give you a realistic macro view of what lies ahead.
In this way, your plan provides the predictability of your investment , with enough information to decide whether or not to go international.
What is the best country to carry out internationalization?
It would be daring to say that there is the best country or city to start a business , but yes, we can say that there is the best market for your product.
However, some cities stand out for presenting a feasibility of costs for opening new businesses.
Although many Brazilian companies have the United States of America as a target country for internationalization, it is interesting to evaluate other scenarios.
Did you know that Europe has also been one of the most sought after places to start a business ?
Because of the geopolitical location that houses several countries and different cultures in a limited territory, opening your company in a European country makes it possible to do business with everyone.
If your product is physical, logistics are even easier given the proximity between countries.
In addition, there are cities in Europe that have numerous advantages for those who want to open a company.
Discover Valencia: the ideal Spanish city for business expansion
Let’s start with the honors! Valencia won the title of Healthiest City in the World .
The criteria analyzed were health care cost, air pollution level, hours of sunlight, obesity rate and public safety.
Valencia is one of the cities that receive the most Digital Nomads , that is, independent professionals who provide services completely online, without the need for a physical office.
To close the attractions, the city hosts a major event in the digital world, which has gained more visibility every year. Meet the Valencia Digital Summit .
Due to its relatively low cost of living compared to other cities, both in Spain and in other European countries, Valencia has stood out in several aspects:
- Mild climate, approaching 10ºC in winter and 30ºC in summer.
- Transport structure optimized for different audiences at a good cost
- Food cost lower than most other Spanish (and European in general) cities.
- Natural beauty, as the city is located in a coastal region.
- Public security
- Language close to Portuguese, facilitating linguistic adaptation.
Apart from the physical attractions of the city, Valencia opens doors for negotiations with other countries.
Once you have your headquarters in Europe, trading with European Union countries becomes more fluid.
Singular Spark: Internationalization consultancy is in Valencia/Spain
Focused on Brazilian companies that intend to seek internationalization, Singular Spark has positioned itself as a bridge between CEOs and company directors, and the dream of doing business in Europe.
Founded by Felipe Borges de Carvalho, a technology professional for over 20 years, the company has been driving technology startups on European soil.
Currently, Singular Spark carries out the internationalization process in two stages, namely:
- internationalization plan
- Execution plan of the company’s implementation stages.
Based on his business experience with several European countries, Felipe has compiled all his knowledge of the business sector as well as cultural knowledge in a consultancy specializing in pioneering the European market and guiding entrepreneurs in the internationalization process.
If you have the dream of taking your company to a new level through business with European Union countries, do not hesitate to bet on the Know How of someone who has been dealing with the market for years.
Conclusion
The dream of expanding the business is in the DNA of those who undertake. Growing then becomes a goal, not just an opportunity.
You may have landed on this article for information level only, however, we hope that our content has alerted you to important details that deprive your company of mistakes crucial to your investment.
Growing alone is not a reality when you aim at the international market.
It is absolutely necessary to establish partnerships with companies and reputable people who already dominate the culture and economic reality of the target country for internationalization.
If you are in the process and want to know more about how Singular Spark can be useful in your expansion plan, please visit our website and contact our team.