Thinking · Global · 5 min read
The most expensive mistake in international expansion
A good market entered through the wrong structure is more damaging than a difficult market entered well.
By Mark Eve
Two decisions, not one
Expansion is usually discussed as a single question — should we go into this market? — when it is two. Where to go is a demand question. How to enter is a structural one: direct, distributor, franchise, licence, joint venture, acquisition or marketplace.
The first question gets months of analysis. The second is often settled in a meeting because a plausible partner appeared.
Why structure decides the outcome
The entry model determines who owns the customer, who controls pricing, who carries inventory risk, how quickly you learn, and how expensive it is to change your mind. A distributor who is excellent at logistics and indifferent about your brand will deliver revenue in year one and no market position in year three.
Reversing an entry model is slow, contractual and public. Reversing a market choice is comparatively simple.
The test worth applying
Before signing anything, write down what the market must look like in three years for the expansion to have been worth it. Then ask whether the chosen structure can produce that picture, or only the first year of it.
In the GCC and much of Asia the answer depends heavily on the partner's incentives rather than the contract's wording. That is a judgement question, and it is the one worth taking outside advice on.
TAIU advises founders, boards and investors on growth, business model, international expansion and turnaround — from London and Dubai. See the advisory services.
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