Using data retrieved from over 2,500 business leaders in 36 countries, the Grant Thornton International Business Report (IBR) has conducted a survey that revealed that many business decisions to expand abroad are made due to a “fear of missing out” rather than expectations of growth.
When given a scenario negatively framed, such as a possible missed opportunity, respondents were 20% more likely to expand than they were when given the same scenario positively framed, focusing on a possible gain of market share.
Specifically in the U.S., participants responding to the negatively framed scenario were 29 percent more likely to expand, while those responding to the positively framed scenario were only 24 percent more likely to expand.
Negatively framed option: “Your business has the option of entering a foreign market which will require a substantial investment. If you DON’T enter there is a 50 percent chance of missing the opportunity to increase total profits by 10 percent. On the other hand, by not entering this market, you avoid the risk of losing all your investment.”
Positively framed option: “Your business has the option to enter a foreign market which will require a substantial investment. If you GO AHEAD there is a 50 percent chance that you will increase your total profits by 10 percent. On the other hand by entering this market there is a risk of losing all your investment.”
“The fact that business leaders respond better to negative framing suggests that corporate -fear of missing out’ can be a key influence on business decisions,” said Stephen Chipman, senior vice chair at Grant Thornton LLP. “However, it’s critical for businesses to remember that it should be just one of a number of variables that must be taken into account when making major investments related to future growth.”
The survey data also revealed that this “fear of missing out” is most prevalent in more developed markets like the US and Western Europe, having over five times the impact on business decisions in comparison to less developed areas including China and Brazil. Oddly, when these developed markets do decide to invest overseas, a large majority (74 percent) admits that instinct and gut feelings play a role in their choice of foreign market. Only half of the respondents based their decision on key client locations, while 54 percent chose based on key market access.
Overall, international expansion seems to be the most popular option to preserve growth and relevance. About 30 percent of US business leaders admit that the need to maintain competitiveness also played a role in their decision to expand. In fact, every response from businesses with no plans on expanding explained that business only chose not to expand when legislative and regulatory requirements or financial risks wouldn’t allow it.
