Expanding across different time zones, cultures and geographies profitably
More countries, more opportunities? Growing internationally is an essential highlight of reference in the development of any company, but there are times when attempts to enter economic hotspots around the world prove to be a failure. Expanding into a new market can be a challenge, but it can also strengthen the company’s positions, increase client network and sales.
Toms Jurjevs, founder and CEO, Sun Finance
As the founder of the second fastest-growing company in Europe, Sun Finance, I’ve chosen a matrix strategy to diversify our business and achieve global growth as efficiently as possible. Here are a few important steps that are worth considering while looking to expand internationally irrespective of the country which is involved.
Decentralised centralisation
According to the Pareto Principle, roughly 80% of results are typically achieved by 20% of work. To a certain extent, this rule can be adapted to our approach of centralised decentralisation in fintech.
What is the point of trying to be competitive in a market where there are already established local players and they have market knowledge? It is important to understand that any market can basically be broken down into two categories, because 80% of all activities are centralised. This means that specific services will be one and the same across various markets. This approach is used across most of the businesses regardless of where their headquarters are located.
The other 20% relate to the decentralised aspects – local knowledge, habits and business practices. My experience suggests that the larger a company becomes, the more it forgets specifically about this aspect of decentralisation.
Company founders and CEOs feel that they will teach people in new markets to act in a specific way and adapt, but that is a sure way to achieve failure. The 20% is the essential criterion for companies which stop listening to local people and ignore their habits and cultural specifics. Improved operations require local management teams with know-how about traditions and mentality. These differences are based on where people are in the world, as well as on cultural and other local specifics.
Red and bluish oceans
What is the right way to launch? How to find a new country where to launch your business? It seems that every specific country in which a company decides to offer services represents a strategic choice that is based on scrupulous analysis and there is no one size fits all when it comes to entering new markets.
If you have clearly defined goals and experience identifying the most appropriate country, knowledge about a market offers significant advantages in red ocean markets. This means that if the market is not particularly growing but is nevertheless competitive and has established players in it, then a company with the relevant experience should not necessarily avoid an attempt to launch business operations there.
Don’t be afraid but acquire business confidence within different regions and local prospects for success before making the decision. In a new market, there is always a way to be smarter than local players by applying the international group-wide know-how and to take away a substantial market share from the competitors.
An examination of potential in Vietnam or Mexico, where the culture is different than that in Europe, led us to recruit business development managers. Their job was to travel around the world and look for different business opportunities. These experts examined what could be achieved in each specific market, including looking at the legal and political environment and the existing level of competition in the country. This allowed us to pinpoint bluish oceans – countries in which there is a certain level of competition, but also market development and growth so that the matrix strategy can be implemented. This means Sun Finance expands both geographically and product-wise.
If you spot such low-hanging fruit, take advantage of it as quickly as possible.
Be smart when investing in technologies
Companies with key focus on digital solutions ensure added value to internal processes. The same applies to consumers, because people are continuing to improve their skills in living a distanced life.
Since we are a fintech, technology plays a crucial role and gives companies a competitive edge. Investments in state-of-the-art solutions offer advantages in online lending. All of our software has been built top-notch in-house, and that makes it possible to adapt and scale it for various platforms in geographic locations and in relation to products.
Major investments that are not focused appropriately on the latest technologies mean simply burning money.
Another backbone for microfinancing companies and online lending operators, moreover, is the presence of internal risk analysis tools. Every new market means a new culture with special consumer behaviour, and that means that data science is a key component in our business. During the first three or four months, it is crucially important to gather as much data as possible to form a foundation for risk models. The more data, the more precise the evaluation.
We have developed complex risk assessment models that take into account consumer behaviour and other local characteristics. Our local teams monitor these issues. So, information technologies and internal risk evaluation models that are based on data science play a major role in a company’s ability to conquer new markets and ensure global growth.
