Global expansion isn't only for the massive corporates anymore
International expansion can open up major opportunities for businesses, from cost-saving to talent retention to fostering new relationships. These benefits, once reserved for companies with significant financial clout, are starting to become a more accessible reality for small and medium-sized businesses, as the barriers to entering new markets are reduced or made more navigable.
In this article, Perchpeek investigates the ways in which international expansion is being made easier for newer companies, and why that can lead to major step-changes in their ability to win in local markets, as well as foreign ones.
Covid has not halted global expansion
With the high levels of uncertainty surrounding businesses during the Covid pandemic, you would be forgiven to expect that companies that were previously planning global expansion before the Coronavirus lockdowns would hit the breaks. Not only did social distancing measures mean drastic changes in operations, they also had to reassess their top strategic priorities, with laser focus on cash preservation, whilst maintaining customer experience and employee engagement.
However, according to a recent studies businesses in general have not been deterred by the impact of the pandemic and they're still moving forward with international expansion. Only 37% of companies have shut down their international growth plans due to Covid.
Very interestingly, more than 80 per cent of the business leaders said they are looking into a remote, global workforce model as a solution to the changes brought about by the pandemic. With so many service-sector staff working from home, questions have been raised around whether everyone even needs to be in the same country as the HQ, or if they can be based further afield. Covid may even encourage the creation of entirely new workforces abroad.
The benefits of expansion
Market Share & Revenue Growth
The most common reason for global expansion is access to new markets and new customers. What better way to sell more products than to find whole extra nations to sell them to? However, increased revenue and market share are not the only reasons why companies choose to expand to another market. In a survey by Argyle Advisory, a significant portion of companies listed other factors that influenced their decision for business expansion including sales presence, cost reduction, ability to acquire top talent.
The access to the new country’s talent, as well as its customers, is a major draw, especially when international arbitrage means that such talent can come at a fraction of the price of your local workforce. The average compensation to an Indian employee is in the region of 1/155th that of the USA, while the employment rate of young adults is 1000 bps lower, meaning higher access and far lower costs of talent. On the flip side – highly skilled USA talent also becomes accessible to the developing countries.
Reduction of costs
The reduction of labour costs is not the only way that savings can be made by operating in a foreign market. The cost of overheads, from everything ranging from power and adherence to local taxation and regulation, significantly vary across different countries. For example, Denmark has one of the highest national electricity prices as compared to India and China.
Access to Business Ecosystems
In addition, being placed in certain markets can mean access to a highly supportive business ecosystem that is already in place. An example of this may be launching a workforce in an Asian factory hub such as China or Vietnam, where it might be very closely distanced to factories that produce component parts or raw materials of your product. A similar benefit would be felt by launching a facility well placed geographically for global trade connections, such as Hong Kong.
The barriers to international expansion
Global expansion comes with a set of complications and hurdles, especially for small-sized companies and startups that often lack major reserves of money and resources. Building an international customer base and multilingual brand awareness often requires a deep understanding of foreign markets can require major investment to obtain.
If targeting a new market is the number 1 motive behind engineering an international launch, being sensitive to the cultural standards and expectations is essential to act in a way that is deemed appropriate to the culture.
An example of getting this wrong was Microsoft’s initial obstacles when launching in China. The firm received a harsh negative reaction for hiring mostly young salespeople in their stores, which they later found out was not standard practice in a culture that expects more valued jobs such as salespersons to go to older more experienced staff, and had to backtrack aggressively on this policy to stop alienating consumers.
Regulation and Taxation
Another challenge is in understanding local tax and legal implications of the new country, and being able to operate within those. Businesses could face fines due to poor legal management of the move into a foreign country.
An example of missing the mark on regulation was the attempt of Walmart to enter the German market. Due to their long-standing strategy of dramatic discounting, they were accused by competitors of “predatory pricing”. The High Court of Germany agreed, and Walmart were ordered to raise their prices. They soon left the German market altogether.
Being within a single market such as the EU has a benefit of making expansion across borders relatively easy – this is reflected in European companies expand internationally 19x faster than their American counterparts.
Setting up for business in another country may also add new operational complexities for a company. For example operation within unstable nations often provides significant extra operational requirements – security and insurance infrastructure can make operation in South America or Africa more expensive than operating in London or Shanghai.
How smaller companies can get international expansion right
Over the past decade, the aforementioned barriers to global expansion have been significantly reduce, largely by improved information and better support being available to new companies trying to enter a market. Such factor’s have even made it possible for small global players to tackle new horizons. See below some of the options available to help international expansion for the smaller players.
Create a workforce in a new market
One of the key benefits previously mentioned of operating in a foreign market is the access to foreign talent. After experiencing significant challenges while trying to expand their own businesses internationally, Matthew Wilson and Guenther Eisinger founded Omnipresent, a company dedicated to helping businesses access and employ remote talent anywhere in the world. They make sure that companies have the necessary tools and support required to source and maintain international teams, regardless of that team’s location.
The Omnipresent platform also helps companies overcome other challenges such as compliance and taxes, onboarding, managing payroll and benefits, whilst helping to minimize costs and improve employee retention. Their expertise has enabled companies to take advantage of talent all over the world, that they would otherwise have no access to.
Getting your best team to the new location
Where we can help? Sometimes relocating existing employees is the best solution for companies who want their experienced leaders on the ground in new global locations. However, this process can be extremely lengthy and costly, due to inflexible relocation agencies that can only cater to a small number of locations, and provide an extremely poor and expensive experience for those hires headed to new market – a terrible moving experience could mean losing your best talent!
However, with a new game-changer in the market, relocating employees became much easier. The Perchpeek app helps guide employees through every stage of their move from their sofa, and they control the whole process at a fraction of the cost of a relocation agent. Perchpeek also has 200 global experts available to give advice on the new locations – from neighbourhoods to electricity bills to visas. As well as massively reducing the stress and anxiety of international moves, moving your team into new markets Is far cheaper and quicker than it use to be.
Enter the US market
Businesses that want to expand to the US market often face a daunting task in terms of administrative setup, compliance laws and tax requirements. This has previously made entering the US market very challenging prospect, despite its major financial attraction, offering valuable business partners and well-paying customers.
Luckily, there are some companies now setup to help specifically with tough-to-crack markets like the US. For example, Firstbase.io helps startups with incorporation in the US, including venture capital, managing legal and regulatory strategy, and provides more knowledge on how to best utilise the startup “infrastructure” of the US.
International freelance talent
International talent databases allow businesses to access to top talent from lower-income markets, reducing costs especially for Western countries. For short and medium - term projects, hiring freelancers is extremely advantageous, removing all employee setup procedures, while dramatically reducing costs of permanently hiring someone.
For example, Upwork helps companies around the globe find top freelance talent regardless of their location. The reduced setup costs and complications when using contractors means that some companies employ their foreign talent full time through Upwork, even if that person wouldn’t usually consider themselves a free-lancer.
Set up your IT team in another country
One of the easiest functions to access and manage from another country is the IT team. Many companies operate their developers and internet support teams in East Asian markets like Taiwan and The Philippines, where there is strong connectivity but relatively low costs.
Companies like Proxify help businesses hire remote developers around the globe. They offer highly skilled tech talent for lower-than-usual rates, and will source their best suited talent based upon your requirements, which is especially helpful if your not too IT-savvy.
Connect with a foreign customer base
Social media may be a bit of a given, but worth bearing in mind. Due to the universality of online social platforms, it is possible to reach almost any person on the planet through social media. That means that advertising and selling to people in new markets has become 1000% easier than it used to be, with brick and mortar stores on high streets, road salesman or phone salesman etc.
Crucially, there is a major reduction in the cultural barriers to international expansion due to this as well. The internet is a fairly level playing field – making a mistake like hiring from the wrong demographic or pricing incorrectly is either not an issue, or is easily rectified online. In addition, marketing strategy can be updated rapidly and efficiently depending on what generates results, courtesy of the immediate numerical data available to marketers.
Sales strategy teams can optimise marketing plans from the other side of the world, and a relatively small, highly functional team can operate in the new market, backed up by the stronger resource from the parent country.
Are you ready for a global expansion?
Many businesses owners might feel frightened when thinking about expansion on a global market. Indeed, that's not a decision that should be made on a whim, however, finding reasons not to do it is not a good solution either. Here are some steps that will allow you to make a better decision.
- Do the research. Make sure to do proper research of the market you want to expand in, and have the numbers that confirm it is worth it (and the optimum place to be expanding to). Unlike some areas of business, a gut feeling and a lot of good endeavour will not be a major factor in whether you are successful.
- Plan the required infrastructure. Going global isn't a one-step process. It usually requires a deep understanding of the local needs and specific legal requirements. Seek help from companies that can help such as Omnipresent, do not go alone on your first transition.
- Think locally. Localise your strategy to fit the business climate and culture of the market. Don't assume that if your product works well on a home market it will be a success in another country as well. Educate yourself on local customers and prepare the launch meticulously.
Expansion to another market has always been a complicated, time-consuming, and budget-burdening challenge. However, with the new technology and businesses dedicated to solving the most common problems expanding companies face, this quest has become easier to achieve. Global expansion isn’t reserved for only the mega-corporates anymore. The information and and resources are now out there for everyone in 2021 – and the rewards can be exceptional.
Got big plans? We’d love to hear about them!
This article was written in collaboration with Perchpeek, the relocation app designed to let any person, move anywhere, at a fraction of usual relocation service costs. If you think your company might benefit from partnering with their end-to-end relocation service, book an intro at Perchpeek.com.