Barriers and Challenges to internationalization (Service Marketing 07.06.2021)

Barriers and Challenges to internationalization

Potential Barrier #1: Funding Internationalization

It’s easy to make the mistake of underestimating or even failing to consider the amount of capital required to finance Internationalization ventures. Furthermore, it can be difficult for organisations to acquire capital from traditional sources, due to investor concern over political risks, regulatory environments, cultural differences, and currency exchange rates.

Before you get too far into plans to internationalize your business then, the potential costs should be analysed as far as possible. It will also be worth exploring what alternative funding and financing options may be available, such as grants, private or peer-to-peer loans, venture capitalists, and angel investors.

Potential Barrier #2: Choosing a Suitable Market

It is one thing to have a great product that sells well in the domestic market, but quite another to find the same demand overseas. Many organisations executive has assumed that enough is known about a potential market to succeed, only to find that the anticipated demand is simply not there. It is a mistake to underestimate the effect of cultural factors on the demand for specific offerings. Incorrect assumptions about demand can soon lead to a stalled internationalization project, leaving your company with unrecoverable costs and/or excessive levels of inventory.

Potential Barrier #3: Language Difficulties

Before you decide to market your products in a foreign country, you should ensure your business is equipped to get over the language barrier. Of course, if your business is based in an English-speaking country, you might choose to target other English-speaking markets. On the other hand, if you choose markets that use a different language or if your country is not primarily English speaking, your success will depend on foreign language proficiency.

Potential Barrier #4: Cultural Differences

We already touched on the way different cultures view products, and why that can influence demand, but other culture-related barriers can also arise when entering new, international markets. This will certainly be something to prepare for if yours is a Western company entering a market in Asia or vice versa.

 

Regardless of the geography though, your company should take time to learn about the culture in your target market. Remember to focus on the broader cultural differences and not just business protocols. For instance, if you are exporting, the more you know about the social and consumer cultures of your target country, the more effective you can be in marketing your products / services and shaping demand.

Potential Barrier #5: Regulations, Rules, and Laws

While concerns about international legal compliance are more prevalent among businesses operating from emerging markets, regardless of location, say laws, rules, and regulations present challenging barriers to internationalization.

 

Depending on the nature of your overseas trading ventures, there are sure to be laws, rules, and codes in your target market and perhaps even at home that must be considered, in addition to international trade laws. It is therefore essential to understand the legal landscape that you must navigate and to ensure your business has the resources and expertise to comply with requirements.

 

Examples of international trade laws and regulations to investigate include:

·                  Border control and customs laws

·                  International maritime laws

·                  Ethical codes and expectations

·                  Taxation laws

·                  Labour standards

·                  Intellectual-property protection laws

·                  World Trade Organization rules

Potential Barrier #6: Distance and Time

Digital technology has done an awful lot to break down the barriers to internationalization, but it cannot change the physical distance between your home country and your chosen overseas market, nor can it erase time zones. Of course, if your international market is relatively close to home, these issues may not apply, but you may still need to consider the resources necessary to build international relationships.

 

It can be tempting to think that everything can be dealt with online, but in reality, serious efforts to internationalize can involve the need for your representatives to visit target markets to strengthen business relationships. It may instead be possible to engage external agents in the target country to act on your behalf but again, this costs money and requires other considerations, such as trust, to be taken into account.