By Globalization PartnersJanuary 2020
Reading Time: 9 minutes
Hire anyone, anywhere, quickly and easily. Use our AI-driven, automated, fully compliant global Employer of Record platform powered by our in-house worldwide HR experts. Leave the complexities of global employment to the named industry leader that consistently attains 97% customer satisfaction ratings.
International expansion decisions don’t happen overnight. They’re the result of extensive research and planning inspired by market events promising a new revenue pathway for your products or services.
In other words, they start with spotting an opportunity but take significant time, talent, coordination, and oversight to execute.
Understand global expansion prerogatives and challenges to improve your growth goals, plus pick the best place to expand when that opportunity does arrive and the planning pieces are in place.
Why Companies Expand Globally
There are many reasons an organization may find its attention turning abroad.
1. Because There’s Objective Demand
Most businesses consider international expansion when there’s an opportunity to make money. Not just any shiny new opportunity, either, but a prospect backed by market research and qualified data. Remember, not all that glitters is gold. Using objective market data helps test expansion waters before making an existential investment, as well as focuses your operational structures, informs how to diversify your product portfolio and abroad and/or disrupt what’s currently there.
2. To Reduce Dependency on a Single Market
A diversified global presence improves your risk-mitigation strategies, especially over the long-term. Instability in one market is buffered by your presence in the others, whose strength and reliability will help offset losses during downswings.
While it takes time to stabilize those newly expanded branches themselves, the investment will be worth it due to the ROI on your diversified market portfolio.
3. To Reinvigorate a Product or Service Cycle
New countries allow products or services near their maturity phase to see a second life. Not only that, but those same products or services are revitalized when tailored to their new markets, often presenting ways for your organization to make product improvements. The result is a reset on a product’s overall lifecycle — and a new branch of revenue and level of innovation for you.
4. To Reduce Costs
Many countries offer unique tax and legal incentives to attract foreign companies. For example, organizations may look abroad for lower corporate tax rates, “super deduction” programs, awarded cash grants, and generous tax credits negotiated with local governments.
5. To Find New Talent and Customers
Choosing international expansion doesn’t just open the floodgates on new customer pools. It also reveals a new employee network, one with a fresh array of technical and soft skills. Local employees living and working for you in their home countries present unique advantages, from cultural and native-language fluency to representing your brand on-the-ground, in real-time.
How to Develop an International Expansion Strategy
While no two international expansion templates are the same, successful business launches nearly always include the following planning and implementation stages.
1. Conduct Market Research
Brands have no shortage of market research methods laying the groundwork for international market entry. Before devising a formal international business plan, decision-makers must immerse themselves in real data regarding their new country’s actual commercial ecosystem. There are dozens of ways to understand that commercial environment, including:
- Competitive industry analysis
- Market segmentation
- Product usability testing
- Market channel and communications research
- State of the economy reports
- Pricing research
- Product concept, optimization testing
- Voice-of-customer insights
- Brand positioning studies
- General awareness, attitudes, and usage research
- Company or brand PR surveys
2. Prepare an Internal Audit
In addition to surveying external global markets, organizations expanding abroad must additionally take a long, detailed look internally. Specifically, companies entering international markets must temperature-check key performance indicators to asses operational and management strengths and weaknesses. These current benchmarks will only be put to the test in the upcoming months (and years) as business goes abroad.
- SWOT analysis
- Gap analysis
- Current market segmentation
- Domestic voice-of-customer research
- International wargaming or business intelligence analysis
- And more
3. Plan Operational Logistics
Localized infrastructure must be in place to launch your expansion on the right path. Relevant logistics must cover the front and back-office operations you have in place at your home office plus introduce new physical equipment, facilities, software, service contracts, administrative assistance, and subject-matter expertise on-site, across expanded locations. Planning for these expanded operations and infrastructure will include, at a minimum:
- Proper business licenses and certificates
- Business accounts and on-record financial institutions
- Tax registration and filing
- New physical facilities
- Local and regional distributors
- Procurement and material sourcing contracts
- Local legal counsel for miscellaneous regulations and statutes
- Shipping and delivery partners
- Talent or hiring agencies and international workforce-management assistance
- IT infrastructure, especially enterprise resource planning (ERP) software and similar business-management systems
4. Get Your Name Out There
Even the most successful name brands must find a way to connect with new audiences. Guided by differing cultural norms and expectations, you must communicate with customers in your selected marketplace in focused, researched, and intentional ways.
For that reason, international expansion strategies are remiss without complementary sets of marketing campaigns geared toward its B2B or B2C audience, including:
- Segmented lifestyle and demographic research for target buyers/clients
- Relevant brand positioning
- Most popular marketing platforms, channels to reach target buyers/clients
- Appealing product packaging
- Country-specific product or service value propositions
- Valuable customer service offerings, regional customer service expectations
- Pricing evaluations
- And more
5. Consider Influential Contacts
As the maxim goes, it’s not what you know, it’s who you know. In few situations is this truer than selecting an expansion location for your organization.
Seek out country-specific subject matter experts across executive business functions. These individuals can be located domestically or work abroad themselves but should be ready to assist in the particularly thorny pain points of expanding abroad, namely business registration, tax filings, employment labor laws, vendor, contractor, and subcontractor contracts, and more. These experts can also curate critical market research and even recommend or personally introduce you to important business associates in your new market.
6. Prioritize Cultural Competency
Let Gerber be a warning. In the early 2000s, the Nestle subsidiary launched a baby food line across select countries in sub-Saharan Africa. As it does in so many other markets, Gerber’s food jars displayed the signature picture of its cute baby logo. However, given that one out of every three people in sub-Sahara Africa cannot read, many brands use package pictures to represent what’s inside the product. African consumers were horrified when they perceived this new food product to contain actual baby — a snafu Gerber/Nestle could have avoided had they done proper market research.
History is rife with other examples of brands expanding into new countries without doing adequate research. Marketing messages are missed, images misconstrued, language offensive — and suddenly, the entire product or service launch is overshadowed by a PR mess.
Avoid these branding faux pas altogether by conducting thorough research into the local traditions, associations, values, social hierarchies, holidays, slang, and histories of the micro-regions where you’ll be.
7. Outsource Strategically
Choosing an international expansion location is a long, laborious, and resource-intensive process. Strategic outsourcing alleviates some of those most complicated processes. For example, companies speed up international recruitment and onboarding timelines by using global PEOs rather than taking on hiring alone. Research also reveals global PEOs give clients and their employees access to broader, more holistic benefits packages at a lower administrative cost per client.
Other advantages of outsourcing global expansion tasks to PEOs and similar organizations include:
- No need to set up a subsidiary
- Simplified business licensing and registration, often managed by the PEO
- Compliant country-specific tax filings
- Country-specific legal counsel
- Turnkey international payroll and bookkeeping system
- And more
How to Expand Your Company Internationally
Tackle some of today’s top challenges of expanding globally with these tips and processes.
1. Create Your International Business Plan
Use the steps and guidelines above to structure your core international business plan. While the depth of steps will vary by business type and industry, the majority of international business plans contain these components:
- Business situation analysis: The economic, civil, legal, and political atmosphere of the target country
- Cultural market research analysis: Customs, traditions, shopping habits, customer segments, and demographic data
- Unique value proposition/competitive advantage: How your products or services make a compelling mark in their new market
- Marketing channels: How you intend to reach B2B or B2C target customers
- Capital and infrastructure needs: As well as the funding or source for each
- Cost analysis: Cost structures versus new revenue streams and models broken down into detailed finance and budget plans
- Key performance indicators: The metrics measuring the activities and success of your expansion
2. Manage New Laws, Standards, and Regulations
International expansion introduces new governing bodies and legal agencies for your business to answer to. Every country maintains its own set of regulatory standards, technicalities, and procedures, including:
- Registering the business/opening a subsidiary
- Setting up local bank accounts
- Filing with relevant tax agencies
- Managing compliant corporate documentation and certificates
- Filing trademarks or patents
- Overseeing legal payroll and benefits administration
By working with a PEO employer of record, organizations reduce the compliance risks associated with their expansion functions. PEOs directly manage many of these procedures for your organization. Best of all, partnering with a PEO often eliminates the need for registering a subsidiary altogether, saving you significant time and money.
3. Understand Physical Infrastructure
The physical infrastructure of your select location can be difficult to assess without first-hand visits. Each logistical decision, though, ultimately surrounds one question: How will you produce and/or distribute your products or services abroad, using existing infrastructure, building infrastructure, or subcontracting or leasing it? Your answers will affect your chosen:
- Ports of entry
- Road conditions, safety, and accessibility
- Local distribution networks and vendors (distributor firms, agents, etc.)
- Local shipping and delivery routes, including last-mile logistics
- Viable transportation vehicles and vendors
- Possible joint ventures
4. Understand Operational Infrastructure
Just as organizations scout their physical infrastructure realities, they must also address operational logistics in the country or countries of their choosing. Those operational logistics include:
- Human resource systems and documentation
- Streamlined and compliant payroll
- Streamlined and compliant benefits packages
- Accounting and bookkeeping solutions
- Local legal counsel
- Adaptable IT systems and software
PEOs again provide a turnkey solution for many of these administrative undertakings, notably with HR, bookkeeping, payroll, and benefits packages ready for compliant deployment to client organizations.
5. Localize Products or Services
Localizing your products or services improves their chances of adoption in the new market. It can also answer supply chain problems through localized procurement or material sourcing as well as ensure quality testing upholds your brand standards as well as the country’s legal ones.
Take a holistic approach to product localization. It doesn’t just mean translating packaging but extends over the entire product or service life cycle as well as marketing, advertising, and customer servicing operations.
Factors to Consider When Entering an International Market
Consider these international expansion tips and best practices to avoid the top challenges of expanding globally.
1. “Home-Base” Egocentricity
“Home-base” egocentricity refers to the assumption that if something works in your home country, it’ll work anywhere.
International marketing and demographic research continues to disprove that logic. Instead, brands need to pivot global expansion as a chance to repackage what they already do well for a novel audience. You don’t need to change those core offerings, but you do need to evolve how you communicate them, where you broadcast your brand and how you do so. Expanding abroad is not the time to repeat marketing and operational templates.
2. Inadequate Cultural Competency
Remember Gerber? They serve as only one example of what happens when brands try to break out abroad without enough preparation.
Be patient in studying cultural norms and behaviors, especially how they affect a country’s commercial activities. You may even consider taking courses and reaching out to subject matter experts or network contacts with connections to your new region to learn first-hand about:
- General business etiquette
- Sales and marketing customs
- Preferred shopping methods (online vs. in-store)
- Preferred payment method (cash, credit card, mobile pay, etc.)
- Important pop-culture motifs
- Religious or historical traditions, celebrations, and holidays
3. Stocking Versus Non-Stocking Distributors
Localized distribution is one of the most-cited challenges for B2B and B2C producers alike when expanding globally. Not only can it be difficult to find and vet reputable distributors, but you must also decide between a stocking or a non-stocking partner — each of which has its pros and cons.
In many countries, stocking distributors — i.e., those who buy and store your merchandise in bulk — tend to be larger organizations yet harder to commit contractually. Both types of overseas distributors will also help lighten certain logistics in your expansion plan and improve trade-related risks. Yet, you reduce control over the price and marketing of your products.
In either case, the best distributor(s) for your global product expansion plans will be those with direct experience serving your type of goods or your target audience.
4. Favorable Import/Export Conditions
If your business produces or sells physical goods, prioritize expansion locations with lower import and export duties. These favorable taxation plans translate to lower costs for you across the supply chain.
You may also consider connecting with trade representatives at specialized firms or relevant embassies, as well as networking at international and domestic trades exhibitions with vendors from your target location(s). These contacts can connect you with further business associates instrumental in overcoming the import/export challenges of expanding globally.
5. Political and Economic Stability
A volatile region complicates nearly every aspect of expanding your business abroad. From applying for licenses to hiring skilled local talent to building or using safe infrastructure, business functions cannot get off the ground when civil, political, or economic conditions themselves are shaky.
Find Your Expansion Location With Globalization Partners
Our Global Expansion Platform™ currently serves 170 countries. That’s 170 countries where you can grow your presence in a matter of days — not years — with turnkey international HR, payroll, accounting, and employee-management solutions.
See our 170-country network for yourself, then request a proposal to see how we can make international expansion realistic for your company.
For more information regarding global expansion, download our eBook 10 International Expansion Mistakes to Avoid: