International Expansion Strategy - How to Choose a New Market Entry Model?

Key information:

• International expansion is an investment of PLN 400,000 to PLN 1.5 million, and 70-80% of Polish SMEs do not go beyond the EU due to underestimating costs and risks.
• The choice of entry mode defines the company's risk profile more than the choice of market; export, joint venture, and subsidiary represent different trade-offs between control, cost, and risk.
• Hidden operational costs outweigh planned ones, with companies losing 20-30% of margin in the first year, and regulatory delays reaching 6-12 months.
• Brak lokalnego know-how odpowiada za nawet 40% nieudanych wejść na rynki zagraniczne.
• EU subsidies reduce the cost of entry but do not replace strategy and act only as a supplement to a previously defined plan.
• An organization's readiness requires a minimum of PLN 5 million in revenue, an experienced team, and a marketing budget of at least 10% of planned revenue%.
• The most common mistake is tailoring a strategy to a grant competition, rather than selecting funding for a previously prepared plan.

Details below!

Strategic challenges of foreign expansion and investment risk assessment

International expansion is no longer an optional direction for development; for many companies, it is now the only way to continue growing in a saturated domestic market. At the same time, the scale of risk and operational complexity mean that most businesses do not move from ambition to actual action.

It's no coincidence that 70-80% polskich MŚP nie wychodzi poza Unię Europejską. The main barrier is not a lack of potential, but an underestimation of costs and risks, which only emerge during the implementation phase. In practice, a full expansion project means an investment of around PLN 400,000 to even PLN 1.5 million – and a wrong decision at the entry model level can directly impact the company's financial liquidity.

It is crucial to understand that the choice of entry model is not solely about geography. It is a decision about what level of control over sales you are willing to maintain and what operational risk you are able to accept.

The level of investment risk is realistically influenced by:

• entry costs – certification, marketing, logistics, product adaptation,
• Entry time - 3 to 12 months to the first sale,
• Level of control - own channels vs. external partners,
• dependency on partners – loss of direct access to the customer and data.

For management, this means one thing: the entry model defines the company's risk profile for the coming years – far more than the market choice itself.

The most common barriers in the internationalization process for SMEs

Most problems related to expansion do not stem from the target market itself, but from the organization's mismatch with its specifics.

The most significant barriers are financial. In the first year of operation In new markets, companies often lose 20-30% of margin – mainly due to logistics costs, customs duties, and certification. Additionally, many companies do not allocate a marketing budget, which should be at least 10% of planned revenue.

The second group includes regulatory barriers. In the USA, the certification process (e.g., FDA) can extend market entry by 6–12 months. In Asia, additional challenges include opaque licensing procedures and the necessity of collaborating with local partners in a joint venture model.

At the operational level, the problem is the lack of sales infrastructure and experience in international logistics. Companies are losing orders not due to a lack of demand, but due to delays and errors in order fulfillment.

Cultural barriers are no less important. Differences in negotiation styles – from the direct approach in the USA to collaborative relational models in Asia – mean that even a good product may not find an audience. It is estimated that a lack of local know-how accounts for as much as 40% of failed foreign market entries.

In practice, companies most often make the same mistakes:

• choosing a market based on its size, not availability,
• they copy offers from the Polish market without adaptation,
• they are not building a local sales strategy,
• they scale operations too quickly instead of testing demand.

It is the sequence of decisions, not their individual correctness, that determines the success of an expansion.

Comparison of Entry Models: Export, Joint Venture, and Subsidiary

In practice, choosing an entry model is a trade-off between control, cost, and risk. There is no one-size-fits-all solution – each model solves one problem while simultaneously creating new limitations.

Export is the most common model to start with, as it allows for limited capital investment and quick demand verification. However, its limitation is the lack of control over sales and customer experience.

A joint venture enables entry into regulatorily challenging markets and shortens sales network development time. At the same time, it introduces dependence on the partner and the risk of conflicts of interest, which often only emerge after cooperation begins.

A subsidiary gives full operational and strategic control but requires the largest investment, from 1 to even 5 million PLN. This model is only appropriate after the market potential has been confirmed.

In practice, you don't choose the „best” model, but rather one that best suits your organization's constraints.

Hidden costs and operational risks in international expansion

The biggest mistake companies make is assuming that the risk of expansion can be fully assessed during the planning stage. In reality, many costs only become apparent during operational activities.

The most frequently overlooked include:

• regulatory delays (e.g., up to 12 months in the USA),
• rotation of sales teams without export experience,
• communication costs resulting from a mismatch in business culture,
• growing compliance and legal support requirements.

Equally problematic are the incorrect assumptions that often underlie decisions:

• exports are treated as low-risk, even though as much as half of failures result from a lack of product adaptation.,
• The EU market is perceived as homogeneous, despite significant differences in regulations and customer behavior,
• It is assumed that the product will „defend itself” without real marketing investment.

In practice, most failures do not result from choosing the wrong market, but from underestimating daily operations and their maintenance costs.

The role of EU subsidies in financing export development

EU grants can significantly reduce the cost of entering a new market, but they should not be the starting point for an expansion decision. Their real value only emerges when they support a previously defined strategy – market selection, entry model, and sales scaling method. Otherwise, they only increase the operational complexity of the project.

From the perspective of companies planning export development, two instruments are key today: Polish Technology Bridges (PMT) and Innovative SME Brand Promotion. Each of them responds to a different stage of expansion, so the decision to apply should be based on real business needs, not the availability of recruitment. In practice, this means combining strategy with correctly prepared documentation - which is one of Elpartners' main areas of support.

A well-planned expansion involves selecting a market, deciding on an entry model, and determining financing methods. At Elpartners, we help translate strategy into a concrete project and effectively secure the funds for its implementation.

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Polish Technological Bridges – support for companies that want to prepare for entry into non-EU markets

PMT is a program for SMEs planning to enter markets outside the EU, combining advisory and financial support. Its greatest value lies in streamlining the expansion process – from strategy development to its implementation.

Companies receive, among other things:

• support in preparing a market entry strategy,
• Access to workshops and expert consultations,
• cooperation with Foreign Trade Offices of PAIH,
• reimbursement of implementation costs (up to approx. PLN 180,000).

However, the program is selective – it requires export experience (min. 3% in revenue), a stable situation, and suitability for specific markets (e.g., USA, Canada, Japan, UAE). In practice, this means it's not for „finding direction” but supports companies that know where they want to enter but need structure and risk limitation.

Promotion of innovative SMEs – financing of promotional activities and presence in foreign markets

This program supports companies at a more advanced stage of expansion – when the market and product are already defined, and the goal is to increase visibility and sales.

The funding includes, but is not limited to:

• participation in international trade fairs,
• economic missions,
• marketing activities and promotional campaigns.

Support level reaches:

• do 85% for travel costs,
• do 50% for the remaining actions.

The program is aimed at companies that:

• they have a product brand,
• generate at least 20% export revenues or have real potential,
• investing in development (e.g., R&D).

However, the key is that the financing of promotion only works when it is linked to a real sales model. Participation in trade fairs or marketing campaigns without planned distribution and lead management rarely translates into lasting results.

The most common mistakes when using export grants

Decision-making process in preparation for international expansion

Companies that successfully scale international sales do not make one-time decisions – they treat expansion as an investment process spread over time.

It most often looks like this:

1. Market analysis (PESTEL, competition, barriers to entry),
2. Export test (short-term pilot),
3. Sales model validation and initial lead generation,
4. choosing the target input model,
5. scaling operations – often with the use of external financing.

In parallel, signals of organizational readiness are emerging:

• stable revenue (min. PLN 5 million),
• sales-experienced team,
• existing foreign client pipeline,
• secured marketing budget.

Without meeting these conditions, expansion most often ends in withdrawal after the first year.

Company Readiness Checklist for Entering Foreign Markets

Before making a decision, it's worth answering a few key questions:

1. Market Was the demand actually verified?
2. Model: Do you understand the consequences of the chosen approach?
3. Resources Do you have a budget for the first few months (minimum 400,000 PLN)?
4. Financing Does a subsidy support a strategy or replace it?
5. Risk: Do you have a contingency plan in case of failure?

The lack of one of these answers means it's necessary to go back to the planning stage.

Professional support in strategy development and fundraising

Effective international expansion requires a combination of two elements: a well-designed market entry strategy and precisely prepared documentation to secure financing.

At Elpartners, we support companies in both these areas – from analyzing entry models and identifying risks, to preparing funding applications for programs such as Polish Technology Bridges or Brand Promotion.

If you're considering entering a new market and want to limit the risk of wrong decisions, it's worth combining strategic analysis with appropriately selected financing. We support companies in preparing export projects and documentation for grants.

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