Global trade reached about $35 trillion in 2025 for the first time, according to the UN Conference on Trade and Development (UNCTAD). This scale of opportunity makes learning how to expand a business internationally increasingly important for growing companies. For some businesses, relying solely on the domestic market can increase exposure to country-specific economic or demand risks.
This guide covers how to assess your readiness to expand your business globally, which market-entry strategy fits your size and risk tolerance, including several options that don’t require setting up a foreign legal subsidiary, the common challenges of operating abroad, and real examples of companies that got it right and wrong.
Whether you’re entering your first overseas market or looking to expand existing business internationally into new territory, the fundamentals below apply.
Key takeaways
- Global trade reached about $35 trillion in 2025, and 77% of businesses surveyed by HSBC plan to expand into new overseas markets within the next two years.
- Not every entry strategy requires a foreign subsidiary; exporting, franchising, e-commerce, alliances, foreign direct investment, and M&A can all be structured differently depending on the transaction and jurisdiction.
- Readiness means evaluating internal factors (objectives, finances, leadership, legal, IP) and external factors (demand, competition, entry costs) before committing resources.
- The guide compares seven common strategies for entering a new market, each with different trade-offs in speed, control, and subsidiary requirements, compared side by side in the table below.
- Even well-resourced companies get this wrong: Walmart, Tesco, and Airbnb all exited or scaled back major overseas operations after struggling with local market conditions, competition, or execution.
Reasons to expand business internationally
Why expand business internationally in the first place? The short answer: access to customers, talent, and cost efficiencies that a purely domestic footprint can’t match. For U.S. companies in particular, most potential consumers are outside the domestic market.
According to the International Trade Administration, American businesses have access to more than 95% of the world’s consumer base outside the United States. With this vast global audience in mind, the advantages of global market entry are undeniable:
- Global talent. International expansion allows access to a large talent pool. Hiring employees with diverse skills and cultural backgrounds helps a business engage more effectively with a global customer base, and multilingual staff are especially valuable in this regard.
- Cost reduction. International expansion is often more cost-efficient than local expansion. Lower labor and material costs in some countries make it beneficial to move core operational functions or outsource back-office work abroad.
- Risk diversification. Relying solely on one market makes a business vulnerable to economic downturns. Expanding internationally can diversify revenue across markets, potentially reducing reliance on economic conditions in any one country.
- Global branding and positioning. Overseas expansion enhances a brand’s recognition and reputation on a global scale. This matters commercially, too: 60% of global online shoppers say they value trustworthiness and transparency in brands, although international presence alone does not establish either.
- Competitive advantage. Being first or among the early entrants in a new market can provide advantages, but early entry does not, by itself, guarantee market share or long-term leadership.
- Tax considerations. Countries such as Ireland, Hungary, and Cyprus have comparatively low statutory corporate tax rates in some circumstances, although the effective tax position depends on the company and applicable international tax rules. Navigating international tax obligations is complex, though, so professional advice is worth the cost to ensure compliance.
The HSBC study of more than 2,700 financial decision-makers from businesses with annual turnover between $50 million and $2 billion across 18 markets found that 77% plan to expand into new overseas markets within the next two years, even amid tariff uncertainty – a clear signal that expanding business internationally remains a priority regardless of short-term headwinds.
Assessing your international expansion readiness
Assessing whether your company is ready matters as much as picking the right strategy; skipping this step is one of the more common reasons business growth goes wrong.
The process involves evaluating both internal factors within an organization and external factors related to the target market.
Internal assessment
Internal assessment is crucial during global expansion because it lets a company evaluate its current capabilities, financial resources, and strategic goals. It also helps identify gaps that need to be addressed before entering new markets.
In the case of Skin Authority, this evaluation process led to a critical realization: expanding domestically first, leveraging existing success, and only then venturing abroad was the more cost-effective approach.
Here’s what to consider when expanding a business internationally, starting with what’s inside your own company
- Company objectives and strategy
Define your global expansion goals clearly and make sure they align with your overall business strategy.
- Financial readiness
Assess your financial health and the budget available for expansion, including market-entry costs, operating expenses, and currency exchange risk.
- Management team
Evaluate your leadership team’s experience managing international operations, and address any expertise gaps through hiring or training.
- Legal and regulatory compliance
Confirm your business complies with all relevant local laws, and identify any legal barriers to entering specific markets.
- Intellectual property protection
Determine how your existing IP rights (patents, trademarks) apply internationally, and plan protection accordingly.
A business valuation guide can help when assessing your company’s readiness for global expansion, particularly if a strategy under consideration involves acquiring a stake in a foreign business.
Market research
The Starbucks example in Australia illustrates how a successful global model may still struggle locally: in 2008, Starbucks announced the closure of 61 of its 85 stores in Australia as part of a restructuring of underperforming locations.
- Market selection. Choose target markets based on size, growth potential, competitive landscape, and regulatory environment.
- Market demand. Research consumer behavior, preferences, and trends to confirm real demand for your product or service.
- Competitive analysis. Identify key competitors, their strengths and weaknesses, and how your offering can stand out.
- Market entry strategy. Determine the most suitable entry route – exporting, franchising, joint ventures, or acquisition – as detailed below.
- Risk assessment. Identify risks specific to each target market, including political instability, currency fluctuations, and cultural or legal complexities.
- Cultural and consumer insights. Understand local customs, values, and behavior so that marketing and product strategy resonate with the local audience.
- Market entry costs. Estimate legal fees, licenses, permits, and marketing expenses, adjusting operations as needed. operations.
Choosing the right strategy for entering international markets
Below are seven strategies for expanding a business internationally and how they function in practice. Each way comes with a different balance of speed, control, cost, and, critically for many companies, whether it requires setting up a foreign legal subsidiary at all.
1. Exporting
- What it is
Exporting involves selling products or services to foreign markets from your home market. It can be done directly to customers or through intermediaries like distributors and agents. Begin by identifying target markets, adapting products or services to meet local needs, and establishing distribution channels.
- Best for
Both small businesses and established companies, particularly manufacturers, wholesalers, and businesses with tangible products. Subsidiary required? Not inherently. Exporting is one of the more accessible ways to expand internationally without setting up a subsidiary, since it operates through your existing home-market entity.
2. Franchising
- What it is
This strategy grants individuals or entities (franchisees) the right to operate under your brand and system in exchange for royalties, offering a rapid, relatively low-cost route to overseas expansion while leveraging local expertise.
- Best for
Businesses with established, replicable concepts, especially in retail, food, and service industries. Subsidiary required? Not inherently; the franchisee operates under their own local entity.
3. Joint ventures and partnerships
- What it is
Partnering with local companies provides access to their resources and an established customer base. Joint ventures may be structured as jointly owned entities or as contractual arrangements without a separate legal entity, while partnerships can be more flexible arrangements.
- Best for
Businesses seeking local expertise, distribution networks, or market knowledge, often in manufacturing and technology. Subsidiary required? A joint venture typically creates a new shared entity, whereas a looser partnership may not.
4. Direct investment
- What it is
Foreign direct investment involves acquiring a lasting interest and significant influence in an enterprise in another economy and may include greenfield investment, acquisitions, branches, subsidiaries, or qualifying minority stakes.
It’s often an option for expanding a company internationally at scale: it provides significant influence or control, depending on the investment structure, but requires substantial financial and managerial commitment and is best suited to a genuine long-term growth strategy.
- Best for
Companies with substantial resources, particularly in manufacturing, technology, and finance. Subsidiary required? Not necessarily. Foreign direct investment may involve a subsidiary, a branch, an acquisition, or a qualifying equity interest in an existing foreign enterprise.
5. E-commerce and online expansion
- What it is
E-commerce and online expansion involve leveraging digital platforms to reach new customers: optimizing websites for global audiences, addressing currency and language considerations, and establishing efficient logistics and shipping processes.
- Best for
Both established and smaller businesses in digital products, retail, and consumer goods are a strong fit for expanding internationally without heavy upfront investment. Subsidiary required? Not inherently. Companies may be able to sell abroad through their existing entity along with local logistics and payment partners.
6. Mergers and acquisitions
- What it is
This strategy involves purchasing or merging with an existing business in the target market. When the target is based abroad, it falls specifically under cross-border M&A. This approach lets companies gain immediate market share, access a customer base, or acquire specific technologies.
However, M&A is complex, involving due diligence, legal and regulatory differences, and post-merger integration efforts. Weighing the M&A risks against the speed advantage is essential before committing to this route.
- Best for
Businesses looking for rapid market entry and expansion, common in pharmaceuticals, finance, and technology. Subsidiary required? Not necessarily. A cross-border acquisition may involve acquiring shares in an existing foreign entity, purchasing assets, or using another transaction structure. Interested in financing a business acquisition? Read our dedicated article for more.
7. Strategic alliances
- What it is
Forming partnerships or alliances with other businesses, domestically or internationally, lets companies pool resources, share expertise, and enter foreign markets collectively.
- Best for
Businesses looking to share resources, collaborate on projects, or access new markets across a range of industries. Subsidiary required? Usually not. Contractual strategic alliances can operate between existing companies without creating a new legal entity.
Which option should you use to expand internationally? The table below compares all seven strategies for expanding a business globally at a glance.
| Strategy | Requires a foreign subsidiary? | Speed to market | Control level |
|---|---|---|---|
| Exporting | No | Fast | Low |
| Franchising | No | Fast | Low |
| Joint ventures / partnerships | Sometimes | Medium | Medium |
| Direct investment | Yes | Slow | High |
| E-commerce / online expansion | No | Fast | Medium |
| Mergers and acquisitions | Usually | Medium–fast | High |
| Strategic alliances | No | Medium | Medium |
Adapting your products or services for international markets
Product adaptation is a critical strategy for businesses seeking to enter foreign markets successfully. It involves tailoring products or services to align with local regulations, cultural differences, and consumer preferences.
Tangible adaptation
This involves physical changes to the product, such as design, size, packaging, or ingredients, to align with local preferences and standards. McDonald’s is known for adapting its menu to local tastes: a range of vegetarian options in India, McSpaghetti in the Philippines, and macarons in France.
Intangible adaptation
This covers changes to non-physical attributes, such as translations, slogans, or brand positioning, so they’re culturally appropriate and resonate locally. Toyota has adapted car names for the European market, turning the Carina E into the Toyota Avensis; the Toyota Yaris is known in Japan as the Vitz
Promotional adaptation
Local culture shapes the platforms, imagery, and product representation used in marketing and advertising. Coca-Cola tailors its marketing to local cultures, featuring regional traditions, festivals, and celebrities to create a more culturally relevant message.
Price adaptation
Adjusting pricing to local market expectations may involve altering product sizes, packaging, or quantities to meet acceptable price points. Netflix varies its subscription pricing across countries, offering lower-priced plans in markets like Pakistan, India, and Egypt.
Overcoming common challenges of international expansion
Expanding internationally surfaces a common set of obstacles, but there are practical ways to mitigate many of them.
Language barriers and cultural considerations
Challenge: Diverse cultures and languages create room for misunderstanding, miscommunication, and friction in operations, marketing, and customer relations.
Solution: Provide cultural training for employees and hire local talent who understand the culture and language firsthand.
Global supply chain management
Challenge: Navigating global supply chains and cross-border trade is harder over longer distances, with customs procedures and potential disruptions from geopolitical events, natural disasters, or labor strikes.
Solution: Diversify suppliers, use international trade agreements, and monitor supply chains in real time. Evaluating geopolitical risk systematically, rather than reacting to headlines as they break, helps separate genuine threats from short-term noise.
Intellectual property risks
Challenge: Protecting intellectual property abroad can be complex and costly; IP theft and infringement threaten a company’s innovations, brands, and proprietary information.
Solution: Register and protect intellectual property locally and enforce strict confidentiality agreements with partners and employees.
Products and services adaptation
Challenge: Adapting offerings, marketing, and strategy to local preferences is time-consuming and may require product changes or added expense.
Solution: Conduct thorough local research and seek local partnerships to guide adaptation decisions.
Tax and regulatory compliance
Challenge: Every country has its own regulations, tax codes, and legal requirements, which are costly and complex to navigate without specialized help.
Solution: Hire local legal experts well-versed in local regulations, international trade law, and business licensing.
Examples of successful and unsuccessful global expansion
- Apple
Apple has built a substantial international presence; China surpassed the United States as the largest single iPhone market by shipments in Q2 2023, and its global supply chain spans more than 60 countries.
- Coca-Cola
The Coca-Cola Company sells its brands in more than 200 countries and territories, but it has had to adapt: a growing health-conscious trend pushed the company toward more low- and no-sugar options and smaller package sizes, and environmental concerns prompted investment in sustainable packaging and recycling.
- Walmart
Despite its global scale, Walmart’s big-store, low-price strategy clashed with local shopping habits in Germany and Japan, where consumers favored smaller shops. The result: losses of $1 billion in Germany and $1.6 billion in Japan.
- Tesco
Tesco’s expansion into the United States ran into problems, including a mismatch between its small Fresh & Easy format and some U.S. shopping habits, unfamiliar product choices, and intense local competition. The misalignment, combined with strategic missteps, led to losses of nearly $2 billion and Tesco’s exit from the US market.
Airbnb
A more recent case: Airbnb withdrew from China’s domestic market in 2022 after roughly six years of trying to gain traction there. Pandemic-era travel restrictions compounded the cost and complexity of operating its domestic business, while the company also faced strong competition from local platforms such as Tujia, Xiaozhu, and Meituan.
These examples of international business expansion – the wins and the losses alike – show that strategy alone doesn’t guarantee results. Execution and local fit can matter alongside the chosen entry mode.
Wrapping up
There’s no single best way to expand a business internationally — the right strategy depends on your resources, risk tolerance, and how much control and speed you need, from low-commitment routes like exporting and e-commerce to a full acquisition or direct investment. Getting the market-entry model right is only part of the equation, though: how a product, its pricing, and its marketing are adapted for each new market can matter just as much to whether the launch actually works. Apple and Coca-Cola show what a durable global presence can look like, but Walmart, Tesco, and Airbnb’s retreats are a reminder that scale and resources alone don’t guarantee success — execution and local fit matter too.
FAQ
How can a business expand internationally without setting up a subsidiary?
Exporting, franchising, e-commerce, strategic alliances, and some partnerships allow a business to expand internationally without setting up a subsidiary, since each can operate through an existing entity, a local partner’s entity, or a digital storefront rather than a newly established foreign legal presence. Direct investment and M&A do not necessarily require forming a new foreign subsidiary either. FDI can take the form of a branch or a qualifying minority investment, while M&A can involve asset purchases, minority stakes, or acquisitions of an existing entity.
What is the easiest way to expand a business internationally?
E-commerce and exporting are often among the fastest and lowest-cost routes for global expansion, particularly when the existing business model can serve customers across borders with limited local infrastructure. However, the best option depends on the product, consumer demand, shipping and customs requirements, and the market conditions in the target country.
What are the main risks of international expansion?
Key financial risks and operational risks include currency exposure, supply chain disruption, unexpected cost differences, intellectual property issues, and tax or regulatory non-compliance. Companies must also account for cultural nuances, political or economic stability, and differences in local expectations, as these factors can affect both market performance and brand reputation.
How do you choose a market entry strategy?
Choosing a market entry strategy is a strategic process that should consider available capital, risk tolerance, desired control, market size, and the resources required to support local operations. Companies should also assess the total addressable market, likely market penetration, regulatory barriers, and financial projections before deciding between exporting, franchising, partnerships, direct investment, or acquisition.
Is mergers and acquisitions a good way to expand internationally?
M&A can support a global expansion strategy when a company wants rapid access to customers, capabilities, technology, or established local teams in new countries. However, cross-border acquisitions involve additional due diligence, regulatory hurdles, integration challenges, and legal risks, so long-term success depends on a clear strategy for integrating the acquired business and managing the combined global operations.
