Home Business NewsBusinessBusiness Growth News Three things you need to know when choosing a global expansion location

Three things you need to know when choosing a global expansion location

27th Mar 19 6:33 am

London is a city with an expansive international outlook, where businesses are used to operating on a global stage. For many companies in the capital, there are clear reasons for pursuing global expansion ambitions. Uncertainty continues to hang over the UK; however, emerging economies that lie elsewhere in the world present massive opportunities for growth.

But taking that step into unknown international territory is undeniably a challenge. And, like any major business decision, this comes with an element of risk. Identifying the right markets is essential to mitigating that risk as much as possible and ensuring businesses can hit the ground running in new territories.

The formula for getting that decision right can, more often than not, be boiled down to three fundamental elements.

Knowing the political and economic environment

Every country is different with its own political and regulatory nuances. Getting to grips with how the landscape will impact expansion plans is a vital consideration before settling on a location.

While a stable, business-friendly government is always preferable, this won’t always be the case and shouldn’t necessarily be a reason not to explore a new market full of potential customers. China, for instance, is seen as a potential new frontier for tech companies in the West. Yet, some elements of how the economy is set up can make it a challenging market to enter. For example, China’s joint venture system means that western corporations usually have to partner with a local entity to do business there.

This hasn’t stopped a lot of western businesses from looking to exploit the opportunities available in China. But the successful firms are those that understand the environment going in and prepare accordingly.

Just as important is understanding the local regulatory environment. Setting up an entity will be far more complex—and likely more expensive—in some countries compared to others. Equally, immigration and employment laws on the ground will dictate how easy or difficult it is to establish a footprint in a new country.

Building an understanding of the relevant regulatory and compliance obligations is crucial to assessing whether a country has the potential to help drive future growth.

Understanding the local talent pool

It’s a cliché, but a company is only as good as its workforce. This is particularly pertinent when a workforce is based in a different location to the core business; it needs to be competent and trustworthy enough to operate with a degree of local independence.

Understanding the culture and people who drive it is a good way to gauge whether a new location is going to offer the right talent to support the needs of the business. It will also enable businesses to tailor the recruitment approach so that it resonates with the local talent pool. Finding the right candidates within a desired market enhances a business. Access to established, localised expertise makes it more effective on the ground, but also provides more diversity in perspective and experience that can eventually be fed into company-wide strategic thinking.

Having the right people involved from day one who have a local understanding can help with tailoring marketing, PR and recruitment campaigns that are orchestrated from HQ. It also means being able to prioritise hiring efforts on key positions without slowing down actual operations.

Know what type of footprint the business needs

Setting up a fully-fledged legal entity in a new country is always a challenge. But it’s not always the only option, and is actually often not the most efficient or compliant method of accessing a new market.

One option, which many companies utilise, is working with project-based international contractors. They can be very effective in enabling companies to hire local marketing or web and software development support at short notice, for example. But setting up and managing temporary contracts that meet with local compliance standards provides more work for HR and poses a threat to the security of IP, and also opens doors to the risk of having misclassified employees.

Using an Employer of Record (also known as an international professional employment organisation), offers a flexible solution, with an added layer of compliance. Let’s say a business wants to test the water in a new country with a small sales team, and requires people on the ground quickly who speak the local language and understand the environment. Working with an Employer of Record offers the agility and compliance to do this setup can be delivered in under 48 hours, and avoids committing to the more arduous task of establishing a full entity in an untested market.

An Employer of Record gives a company the same relationship with a workforce as if they were its own employees. It handles all of the administrative burdens of payroll and local employment compliance requirements, and makes proper contributions to the required social programs such as healthcare and pensions schemes.

Making use of these more agile ways of hiring oversees means not having to fully commit to a new market straight away. This can make the whole process less complex and still allows for transitioning to full entity establishment when local presence and workforce size makes it sensible to do so.

Putting a business on a global footing is always a daunting prospect. But many companies in London are reaching a critical mass where exploring a new market is not only the next logical step, but vital to continued growth. For them, applying these three factors to new-market thinking will help to ensure they pick the right location and continue the momentum built on the home front.

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