International expansion sounds like rapid growth but more often results in losses, failures, and millions lost. Why do some brands burn out trying to go abroad while others build global empires? In this article — real figures, cost structure, payback periods, working models, and the key question: is your brand ready for expansion or do you just want to “try”?
95% of brands fail in new markets. Why yours could be the exception
Entering a foreign market: when expansion yields profit and when it burns the business
Introduction: The Illusion of Rapid Growth
“We’ll just open sales in another country — and double revenue.”
Dozens of business strategies start with this phrase, and hundreds of projects end in failure. International expansion is a word that sounds like growth but in practice often means expenses, mistakes, and the reinvention of everything you knew about your brand.
According to a Boston Consulting Group study, over 60% of companies entering new markets do not reach planned profitability even after two years. Reasons range from cultural barriers to logistics errors and overestimating brand recognition. And while for giants like Walmart this means millions, for a mid-sized brand it can be fatal.
Nevertheless, expansion remains the main growth driver for FMCG, tech, and fashion companies amid stagnant domestic demand. But scale is not always the solution. Sometimes it only intensifies chaos if the foundation isn’t ready.
In this article, we break down:
- what “entering a market” really means,
- how much expansion costs (in money and time),
- when to expect returns and how to accelerate them,
- and why expansion is not just horizontal growth but deep growth.
II. Entry formats: what does “entering a market” mean in practice?
- Full control over brand and profit
- Ability to flexibly manage product and marketing
- Laying a long-term infrastructure foundation
- High CAPEX and OPEX
- Slow launch
- Risk of misunderstanding the local market
2. Local Distributor / Importer
- Quick launch
- Savings on infrastructure
- First-hand market knowledge
- Loss of control (especially over pricing and marketing)
- Conflicts due to differing priorities
- High risks if the partner is chosen poorly
3. Franchise / Master Franchise
- Scaling without capital expenditures
- Rapid coverage growth
- Local operators adapt better
- Loss of quality control
- Difficulty in maintaining standards
- Lengthy selection and training process
4. Turnkey Operational Partner (Market Enabler / Expansion Operator)
- Fast launch — from 2–3 months
- Minimal risk and internal costs
- Access to local expertise and existing network
- Payment for services and management
- Participation in turnover (royalty or % of sales)
- Scalable, repeatable model
- Higher startup cost than a classic distributor
- Limited control over internal operations
- Requires trust in the partner and transparent KPI system
III. Where the money goes: anatomy of expansion costs
1. Product localization: more than just translating the label
- Translation of labels, instructions, warnings
- Review of composition according to local standards (BPOM in Indonesia, FDA in the USA, EU certification)
- Approval/restriction of ingredients
- Packaging redesign
2. Marketing: recognition ≠ trust
- Advertising campaigns (digital, OOH, point-of-sale)
- Working with local influencers
- Offline events
- SEO, marketplaces, content
3. Regulation, financial infrastructure, and legal base
Legal side:
- Company registration
- Licenses, certification, trademark registration
- Contracts with distributors, agents, platforms
Financial side:
- Payment agents with multi-bank accounts
- Taxes (VAT, excise, duties)
- Currency control
- Profit repatriation, royalty structure
4. Team and HR
- Project manager
- Sales team / merchandisers
- Logistics controller
- Local marketing and support
5. Logistics, warehouse, certification, returns
- Customs, clearance, excise
- Internal distribution and storage
- Returns, expirations, quality control
🔚 Conclusion
Expansion expenses are not “entry costs” but investments in building infrastructure. Mistakes in these calculations are the main reason even strong brands fail.
Expansion expenses are not “entry costs” but investments in building infrastructure. Mistakes in these calculations are the main reason even strong brands fail.
IV. Financial anatomy of expansion: how much to realistically reinvest and when to expect profit
📉 Why does reality not match the plan?
- Advertising expenses paid “upfront”
- Support fees (licenses, consulting, logistics)
- One-time investments (registration, certification, packaging)
- Currency fees
- Excise taxes
- Marketing allocation by channels
- Losses from returns and defects
💸 How much margin goes into growth?
- promotion (30–50%)
- logistics and storage (10–15%)
- localization and documentation (5–10%)
- agency support (5–15%)
📈 When does break-even occur?
📊 Financial formula for sustainable expansion:
Unit Profitability = Revenue – COGS – Local OpEx – Agent Fees – Tax – Logistics – Marketing – Currency Spread
- Test batch + focus group before large-scale launch
- Segmented marketing structure: digital, targeted retail, marketplaces
- Phased financial model: launch → retention → scale
- Transparent partner economics: fixed + % of turnover
- Control reinvested share: no more than 80% in the first year, with strict breakdown
Key thought:
Expansion is not a one-time project but a financial system with a delayed effect. The earlier you embed profit logic into the model, the higher the chance it will occur.
V. When expansion works: signs of a correct strategy
Sign 1. Unit economics built for the new market, not copied from the old
- local taxes and excises
- customer acquisition cost
- conversion rate to sale
- share of returns and write-offs
Sign 2. Flexibility in product, packaging, and message
- taste, ingredients, strength
- visual packaging style
- language of description
- SKU assortment
Sign 3. Partner or team on the ground — with skin in the game
- motivation (share in revenue, KPIs)
- resources (warehouse, staff, logistics)
- market expertise (understanding local channels, working with regulators)
Sign 4. Tight analytics: reporting by market and partner
- sales funnel by stages
- separate accounting of online/offline channels
- CPA, LTV, ROMI metrics
- control of receivables and ROI
Sign 5. Formula: expansion = product × channel × process
- product — adapted and legalized
- channel — clear path to the customer
- process — who, how, and for how much will deliver, sell, get money
VI. How to build a “living” expansion system: a scalable approach
🔄 What is a “living system”?
- There are processes and templates (contracts, design, marketing)
- There are roles and areas of responsibility
- There is an internal market entry funnel
- There is feedback and digital analytics
⚙️ Components of the living expansion system:
1. Platform / partner network
2. Documentation and protocols
- Brandbook with localization capability
- Contract and commercial terms templates
- Financial model for different channels (distribution, e-com, HoReCa)
3. Control panel (dashboard)
- Markets open / in progress / paused
- Financial indicators by country
- Problem areas and growth hypotheses
4. Learning cycle
- Knowledge base (online onboarding for new partners)
- Feedback from local channels
- Continuous marketing and SKU adjustments
5. Financial architecture
- Payment agents, multi-currency accounts
- Commission and royalty structures
- Mechanisms for controlling incoming payments
🧭 When the system works:
- Your company can enter a new market every 3–6 months
- Time from signing to first sale — 60–90 days
- Each expansion requires refinement, not invention
VII. Conclusion: scale is acceleration, not salvation
Expansion is not a cure for a weak product. It’s a way to accelerate growth of a strong brand. Without operational strength inside, marketing with unit economics, and a partner model — scale will only speed up failure.
- know who your customer is in the new market,
- understand how to reach and retain them,
- are ready to invest in trust and a local team,
- think in cycles, not impulses,
— then expansion becomes not a game of luck but a mathematically calculated leap.
Next time someone on the board says: “We need to enter a new country,” ask back: “Are we sure we have built a system that can withstand this growth?”
Next time someone on the board says: “We need to enter a new country,” ask back: “Are we sure we have built a system that can withstand this growth?”
Learn More
Market Potential Assessment Plan.
This plan will help determine whether to launch the product in the Indonesian market, what risks and opportunities exist, and which strategies are best to use.
This plan will help determine whether to launch the product in the Indonesian market, what risks and opportunities exist, and which strategies are best to use.
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