Viewpoint






2021-03-01

EXPAND ABROAD?

Why should a tech company pursue international expansion?


Some of the most common answers to this question is realizing growth in untapped markets, establishing and building a global market position, and gaining a first-mover advantage in new markets. So how important is International Business (as defined as revenue from other countries than your own home country)? Let's look at how much of total sales is international for a few selected tech companies, software and hardware oriented.


Looking at the revenue sources from some of the tech world's leaders, we see that the majority of the companies gain a large, or even majority share, of their revenue from other countries than their own. This holds true for tech giants (Amazon, Apple, Google, Facebook), digital disruptors (Airbnb, Netflix, Paypal, etc.), as well as for digital enablers and technology hardware companies such as GoPro, Logitech, and 3D Systems.



When looking at companies and their opportunities to expand and operate across various markets, it is important to take into consideration factors such as (a) growth stage of the business, (b) maturity of their market and product-market-fit in their home country, (c) regulatory environment in which they operate in and to what extent they can adapt their technology to comply with the laws and regulations of other countries (DocuSign). There are many other factors as well, but for now, these will do for the companies we are looking at in our graphs.


Emerging Market Tech Companies


When looking at tech companies originating in Emerging Market countries (China, Russia, etc.) we see in our selection of companies that the extent of international business varies. While e-commerce platforms such as Mercado Libre (Argentina) and Jumia Group (Nigeria) pursuing market shares in their region of the world; Yandex, the Russian equivalent of Google, is primarily focused on its home market. If the company's home market is small, and the business easily lends itself to cover more geographic areas, then it makes sense to actively pursue new geographic markets; but this could also depend on a range of other factors such as who the owners and investors are of a business, the conditions and opportunities in adjacent countries, etc.


Conclusion


One thing is for certain, looking at the companies listed above, international expansion and presence is important as this provides the opportunity to significantly boost a company's revenue and market position. This holds true for both small and large businesses, as well as for both software and hardware oriented companies.


My recommendation to tech companies is that once they have defined, matured and are able to leverage their Product-Market Fit, they should consider international expansion and growth. The question is not if, but where and how.


For more information about how I assist Entrepreneurs, growth companies and investors to research, plan and realize international growth and investment opportunities, please reach out to me. This is an area in which I have significant experience, both in developed and emerging markets and countries.


/ Philip


For access to the data file with the graphs and figures, please click here.