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The importance of understanding cultural differences when expanding

by jcp

By Graham Smith, Managing Director of Volopa

There comes a time in the journey of many companies when expansion into new markets becomes desirable. You may feel that you’ve reached your full growth potential in your native country, or that your business model is perfectly suited to another territory or territories.

Where fintech is concerned, some parts of the world are already reaching saturation point. Of course, the cream generally rises to the top but think about it from a consumer’s perspective. The amount of choice is overwhelming, and in many cases, they face a multitude of different options which are, to all intents and purposes, pretty much the same. Is adding your service into the mix really going to have the impact you think it is?

On the flip side of this coin, however, is the tantalising possibility that your product would bring something revolutionary to another market. You could potentially have an edge over the competition – a unique selling point that puts you in a strong position to reap the rewards. It seems like too good an opportunity to resist.

However, while you obviously have complete belief in your product and the opportunity on offer, you will need to convince investors, shareholders and/or senior management that this is the right move at the right time. That being the case, you’ll have to ensure that you have done your research and done it well, because they are going to have a lot of questions for you. In this article I will explain not only how you can answer those questions, but give an outline of what financial service companies need in order to be successful in overseas expansions, as well as highlighting the pitfalls and hurdles you may encounter.

How to expand into a new market

The importance of research and planning cannot be overstated. This isn’t something that can be done behind the scenes – you have to be out there on the ground. You need to press the flesh and really immerse yourself in the new environment. Business travel has been off the agenda for a long time, but thanks to the gradual lifting of restrictions it’s now possible to physically go to your target market to find out what it is like first hand. This is a very useful way of understanding the enormity of what it is you are doing – expanding into new markets is tough, and you will have to push your capabilities as a business to their limits.

When organising meetings, ensure you have as wide a scope as possible. It isn’t just people operating in the same industry that you should be meeting – there is a lot you can learn from local marketers, advertisers, public relations professionals and market research firms too. After all, you can’t simply replicate the same marketing and advertising campaigns that you use in your home market. You will need to think about how you position your company in this new territory and without a deep understanding of the ecosystem and consumer behaviour you simply won’t be able to make an impact.

Regulatory differences between the UK and overseas

You will also need to have a similarly deep understanding of the local regulatory framework to give yourself a chance of success. Will you need to get some kind of licence? If so, how long will this process take and what steps will you need to take in order to satisfy the regulator? Alternatively, it may be possible to operate under a third-party licence, in which case you will need to think about how you select and integrate with a suitable partner. In either case, don’t underestimate the time and effort these things will require. You will have to be very patient – and ask that your investors and other stakeholders do the same.

Speaking of partnerships, there will be a number of other agreements needed. Digital services such as AWS and its ilk have made it much easier to build the necessary infrastructure required for moving into a new market. But you’ll also need to consider other technology partners, such as those who can help you localise your front end – you can’t simply use Google Translate. Think also about local customer support, and who can provide this for you. You will need a provider that can provide support in the right language and that can scale with you as you grow, so think not just about your immediate needs but what these needs might be in one, two or five years’ time.

Structure your business to expand and to scale

Other considerations are more inward-looking. Does your business have the structure to support overseas expansion? Of course, you will need to hire someone who has the right local knowledge and experience to take the lead, if you don’t already have this person. But how many more people will you need, and how do you ensure that you can instill your company’s culture and values in these new hires? Your entire organisation must retain the feel of being a single team, but geographical distance makes this difficult to achieve. Think about how to truly integrate your new hires, give them the chance to travel to your headquarters and offer the same opportunity to your native staff so they can expand their horizons too.

At the same time, you can’t ask too much of your existing team. You must understand what the effect of expansion will be on workloads and workflows, and if any tweaks will be necessary before the move can be made. Are there going to be late night or early morning conference calls, for example? Will these impact particular people more than others? Think about how you can mitigate any pain points for individuals and teams. Again, it’s all about careful planning.

Use local knowledge to develop your expansion plan

Aside from the regulatory and technological challenges, businesses moving into new markets need to have a degree of local knowledge. Without an understanding of the cultural norms and dynamics of the local market, cross-culture difference that exist in the way they do business, financial services companies could find themselves in a sticky situation.

You need to have the right people in place. People who understand the market, speak the language, and understand the cultural norms. But most of all, you need to have a clear plan that everyone in your organisation believes in. Only then can you give yourself a fighting chance of realising your potential and truly breaking into your target market.

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