The challenges of company expansions to different countries
Introduction
The difficulties of global expansion must be overcome. Any ambitions of growth within a new market will be unattainable without the proper preparation. Companies must identify their business case, choose a target consumer segment, investigate the applicable laws, and develop a strategy.
1. Complying with laws and regulations
The most challenging aspect of international expansion is adhering to the local legal requirements. Perhaps one of the difficulties of global expansion that you should begin preparing for right now is compliance.
This particular issue is related to taxation, employment laws, trade restrictions, and a number of other factors. Before trading, you must analyze the market's general trading scenario.
Some companies can also require local accreditation or trading approval from the other country's government. Failure to comply could result in fines and potentially a trading ban.
You must therefore possess the necessary knowledge of local regulatory systems in order to successfully navigate the difficulty of worldwide expansion.
2. Take into account cultural variances
You must take into account the tremendous cultural diversity present throughout the world while considering global expansion. While globalization creates new opportunities, there is always a chance of misunderstandings owing to cultural differences.
For instance, supposing your US-based business wants to expand to Japan. Understanding their cultures is essential. Understanding verbal and non-verbal indications of communication, welcoming clients, beliefs, values, and other factors is necessary for company success. Learning a whole other culture from your own would be the biggest difficulty of expanding to a foreign country in this case.
On the other hand, you also need to be well-versed in the markets. It might not work if you employ the same approach as on the domestic market.
3. Being aware of political risks
Political environments occasionally change. Therefore, while considering global expansion, taking political concerns into account is essential. Should you factor in the dangers of international trade, such as Brexit? Can these threats obstruct a company's success?
It's crucial to find the answers to these questions.
Make sure you are up to date on the political landscape in order to overcome this difficulty of global expansion. Recognize the important issues, such as the complexity and levels of corruption in the international market. You can reduce your exposure to political risk by doing this.
4. Controlling internal communications
The success of a business in a new market is determined by how you manage your international expansion.
You must make sure that team communication is carefully thought out. The effectiveness of a firm in a foreign market is impacted by how you communicate with, track, and report on your team's work.
Therefore, creating a few leadership guidelines, norms, and a successful system can assist you in overcoming this issue of globalization.
5. Comprehending the marketing plan
How well do you understand how things are bought in the market where you want to grow?
The only way to successfully offer your goods or services in the new market is to get to know your new customers. You can position and market your brand more effectively after you understand what works in the new market.
Transcreation is a crucial component of effective global marketing. You will be able to modify your marketing approach and content to meet the demands of the new market through this transcreation process.
This will improve your ability to adapt and raise your chances of success on the international market.
6. Taking care of HR operations
Having a sufficient workforce is necessary to expand your company internationally. Recruiting and managing your human resources is one of the difficulties of expanding to a foreign country.
You could need to form a new team, decide whether to send current workers, and hire new ones. Assessing and attracting the global talent pool is necessary if you choose to hire local talent, which is advantageous.
Planning the entire recruitment process can ensure that you hire the correct person. You must choose the positions that local recruits must fill. Ensure that you utilize the local talent in a way that will enable you to gain knowledge and navigate the new market.
7. Regional opposition
The local competition is one of the major obstacles that businesses have while trying to penetrate international markets.
Consider that you are a US-based fast-food chain with plans to expand to Australia. You can have an expansion strategy in place and be well prepared to enter the new market.
However, what about the various regional fast-food names that are currently present on the Australian market? Are you familiar with the brands? Can you get people to buy your product?
Before entering new markets, thorough research must be done on the local competition. You need to be aware of the products your rivals are selling as well as their positioning within the market and other factors. Additionally, in order to defeat the local competitors, you must create your competitive advantage.
8.Supply-chain-related dangers
Large corporations typically manage shipping, storage, logistics, imports, and exports through a separate department. This is due to the amount of work involved.
Cross-border supply chain management can be quite difficult. You must take into account the following if you are transporting items from the US to the APAC region:
1.Distance in space
2.The price and duration of shipping
3.Trading laws Tax regulations
4.difficulties with customs, etc.
Several supply chain risks must be taken into account. What if the delivery is delayed? What if your products are seized by customs? What are your contingency measures for lost packages in transit?
Before engaging in international business, all of these dangers must be taken into account and carefully prepared. You can reduce the hazards by being aware of how things operate.
The only way to overcome this difficulty is through a carefully thought-out global expansion. Without a solid plan, it's possible to receive excess or insufficient supplies of products and even go over budget on expenses. Plan your expansion properly after doing your research on the other country.
9. Operational risks associated with hiring new employees
The strain that comes with expanding internationally is one obstacle. You will require more ground workers in the new nation as your company grows. Additionally, your specifications will differ depending on the type of firm and the new market.
Increased overhead costs and trusting new personnel are two hazards associated with expanding the workforce. Therefore, you must ensure that you are prepared to face the challenge of globalization.
Take into account how many additional employees are required for the expansion. Make sure you have the necessary infrastructure, funds, and resources for logistics.
Hire personnel only after evaluating their knowledge, abilities, potential, and attitudes in order to realize your expansionary objectives.
10. Geographical distance may be a problem
International growth frequently faces the problem of travel during COVID-19. At the moment, nations are entering and exiting lockdowns, and other nations have imposed travel restrictions. Therefore, testing and market research might be difficult for businesses.
Before starting a business in a new market, the boards of firms must also meet a number of specific standards. So, before crossing borders, be sure you are aware of the requirements.
The ideal answer to this problem involves strategic relationships or alliances in the foreign country. Being in the new market will help you establish the business rather than your native country.
11. Recognizing accounting in global business
The topic of legal and regulatory compliance has already been covered. However, as you are exposed to new foreign markets, accounting might get difficult. The accounting role of a multinational firm can be very difficult due to various tax systems, rates, currencies, and compliance requirements.
Knowing the accounting regulations of the country you are expanding to is the only way to solve this difficulty. Make sure you are knowledgeable about the regulatory framework and how it may affect your tax obligation.
Estimate your accounting costs as well, and make sure your staff members have experience doing business abroad. To some extent, the business can save money if you additionally think about focusing on tax efficiency.
12. Establishing a pricing plan
What will your product cost in the new market? Will the cost match that of the domestic market? How can you guarantee both profitable pricing and competition?
When determining the price of your items in a foreign country, there are a number of questions to be addressed. You must take into account the costs if you want to maintain profitability in the new market.
Investigate the costs in the local market to overcome the problem of global expansion. You can get a sense of the going rates by looking at the local competition. You can therefore establish a benchmark for your pricing strategy.
For instance, before choosing the pricing, take into account your labor costs, shipping costs, marketing costs, distribution costs, and your profit margin.
13. Exchange rates
Another difficult component of international expansion is the fluctuation of exchange rates.
To meet the challenge of global expansion, currency rates must be monitored and the risk of erratic fluctuation must be reduced.
Paying suppliers and manufacturing costs in the same currency is preferable because large changes might have an influence on your expenses and earnings. To balance costs and revenues, transitioning to local production may be necessary.
A forward contract can be established to determine a price in advance for future sales. It may shield your sales from the dangers of currency fluctuations.
Conclusion
International business expansion can be challenging but beneficial for any corporation wanting to spur on its progress. Setting up or expanding companies abroad successfully calls for careful preparation, patience, and resources. The process can be made easier by having a plan of action and taking the preceding five important factors into account. Having the direction and assistance of a seasoned, dependable international partner, such as Hawksford, can give you the local know-how to handle your day-to-day demands in-country while assisting your company as it expands abroad.
We are able to provide you with advice on all facets of business setup and management, from business formation to management, through a combination of offices in major financial centres and a vast network of partners in established and new APAC locations.