International business expansion can be like an obstacle race that needs to be completed blindfolded while you are wearing someone else’s clothes that are too small for you: it’s difficult, you often don’t know where to go, and the whole process is uncomfortable.
Perhaps you have already expanded with some success, or perhaps you are just starting to wonder whether you are ready to expand overseas. Regardless of where you are on your journey, here are nine tips—based on successful companies’ past experiences—that will help your international business expansion strategy.
1. Exploit opportunity
If you haven't already expanded, your first concern will be to know when to make the move. There is no universally accepted definition of the 'right moment'. However, most companies feel that the ripest time is when they have expanded optimally in their domestic market: any further expansion would require more resources than are economically viable. At this point, extending abroad and expanding into lucrative, untapped overseas markets makes financial sense.
A solid foundation in your home market will put you in an excellent position to expand. Potential overseas employees and customers will see that your company has a positive reputation and a history of success.
Exploiting opportunity means you need to be ready when the time is right. As an international business expansion strategy can take up to a year to prepare, start working on it before you want to expand. It can then be implemented in stages.
2. Remember, what works at home might not work abroad
Your successful domestic business model can be detrimental when expanding abroad. If something is working well, it’s natural to want to continue with business as usual. However, applying business as usual internationally can prove disastrous.
The most famous example of corporate failure abroad is probably Walmart’s ignominious exit from Germany. The behemoth likely failed in Germany for a mix of reasons that contributed to the success of its business model in the US: customers probably found the fake smiles of the checkout staff creepy; employees most likely didn’t appreciate having to screech ‘Walmart’ in unison before starting a shift; and the German market did not like the company’s boisterousness.
There are two critical considerations when planning a business model for a different country (which Walmart didn't consider): your business needs to be aligned with the foreign market's cultural practices and projected value.
In addition to extensive market research and consultation with local experts, hiring senior managers locally (see point below) is one way to receive feedback on your business model. Although driven by head office, a successful overseas operation will have a careful understanding of the local market.
3. Hire the right (local) people
You may be thinking about sending your team abroad, or they are already there. Using your most successful and trusted employees seems like a logical thing to do. They helped drive growth at home, so why would they not do the same abroad?
But there are several reasons why sending a team from the US could be detrimental to your expansion. First, you still have a national operation. Who will continue to drive your most important market if your team is abroad? Second, you are expanding into a new country with a different culture. Your national team may not understand the market or be familiar with the target culture. Assuming cultural parity—even in 'similar' countries such as Ireland or the UK—could lead to a disaster. Not considering cultural issues in 'different' countries is certain to end in disaster. Last, the expense and visa complications of sending people may be much higher than expected and interfere with the expansion process itself.
Conversely, local hires will understand their national market, culture, and business customs. They don’t need to be relocated, and your national team can continue to grow your domestic operation.
4. Don’t invest heavily in your own entity to begin with
The highest cost of expanding overseas could easily be establishing and setting up your own entity in the target market. How long the process takes depends on where you are expanding to: business-friendly Switzerland will take less time than bureaucratic India.
However, wherever you expand, at the beginning of your journey, obtaining the correct licences, setting up a bank account, ensuring tax compliance, renting office space, and understanding bureaucratic requirements will likely detract from the goal of expanding your business. Plus, getting any of this wrong could result in severe fines.
Testing the market with the least amount of overheads (both time and money) could be a sound option. After it has proven to yield the expected benefit, committing to opening a permanent entity will be easier. You will also have a more in-depth understanding of the country in which you operate.
5. Ensure you have the proper functional infrastructure
If you don’t invest in your own entity to begin with, what are your options? You still need a functional infrastructure to support your company and your employees with the following issues:
- Human resources
- Legal counsel
- Information Technology
Organising your own solution can be expensive and time-consuming; however, a virtual subsidiary could provide you with the support structure you need to begin. Outsourcing payroll and HR to a trusted partner is a cost-effective, quick, and compliant way to design your international business expansion strategy.
6. Ensure regulatory and legal compliance
Expanding internationally without violating regulations or laws has to be the number one goal of any firm. Regulation differs widely between US states, and foreign countries with different legal systems have massively different employment and corporate law regulations.
A solid international business expansion strategy requires paying forensic detail to numerous regulatory and legal considerations.
- What legal structure (branch, subsidiary, virtual subsidiary) to set up?
- How to open local bank accounts?
- How to apply for local commercial certifications?
- How to register with tax authorities?
- Where to keep corporate records and filings?
- How to comply with payroll, taxes, employee benefits, etc.?
- What are the differences between employment law in the US and the target country?
- What to do if a lawsuit is filed against you?
Resolving these issues in-house requires dedicated expertise, which you have at head office. But your people are experts in your home market. Asking them to resolve these matters abroad could result in a lawsuit in a foreign court. And US courts are employer-friendly, while European courts often side with the employee.
7. Ensure your Intellectual Property is protected
Your IP is your biggest asset—it generates your revenue and most of your value. So, when you expand, protecting your company's IP is one of the most important tasks. Although many companies presume their IP is covered, some, unfortunately, find out the hard way that they are not.
Many employees have access to different parts of a company's IP. The technical support team, for instance, has access to the computer program, and the salespeople have access to company databases and tech sheets. If you only have an office in the US and employ staff nationally, their access to your IP is not a problem, as you are covered by all the benefits of their employment (confidentiality, immediate ownership of the IP they create, etc.).
But when you expand internationally and hire people abroad, this uninterrupted chain of trust and possession of your IP no longer flows directly from your company to your employees and back again.
8. Respect all cultures
Companies with an international office often experience a cultural tug of war. Simultaneously respecting the founding culture at head office with the new culture you have expanded into is challenging.
One way to navigate a difficult situation is to have a cultural intermediary who understands both cultures and can translate cultural differences. Some firms pass this off as unnecessary, but the importance of understanding cultural differences, especially your employees', should not be overlooked.
Hiring the right people is crucial, but retaining them is even more critical. Not paying enough attention to culture will undoubtedly increase churn, complicating achieving your goals. Depending on the size of your company, you might have a dedicated employee experience team, or you might have one person acting as a cultural intermediary. Whatever you do—a multicultural strategy is key.
9. Consolidate your operations abroad
Companies expanding into the EMEA market might first open an office in Germany. This could be followed by an office in the UK and then an office in Dubai. One common route taken by firms that decide against opening their own entities is to use global PEO / EoR services.
There are many serious legal pitfalls with PEO / EoR solutions; however, having multiple offices abroad is also a communication challenge. Communicating and supporting teams using three different providers can prove difficult.
A beneficial solution could be to consolidate all three countries under one supplier. This will improve employee experience as there will be one central point of contact to address issues or concerns proactively.
If you have yet to expand, choosing a partner with its own entities in the target territories will enable you to grow coherently and interconnectedly.
Conclusion – collaborate with a partner
An international business expansion strategy is not set in stone; it is a template that should evolve. Regardless of whether you have already expanded or are just starting, finding the most efficient way to expand will be your top priority. The best strategy is the route that saves you time, ensures compliance, finds the right team, supports the team, and allows you to focus on the expansion.
Shackleton didn't conquer the Antarctic unsupported, so there's nothing wrong with getting some help along the way. The right partner can help you crack overseas markets the easy way.