A company that is performing well in its country of origin is likely to begin eyeing international markets in which to expand; it’s the next logical step for many. But, in deciding where to expand, there are several factors to consider: does the domestic demand lend itself towards a new product or service in the new international market? How might the political and economic environment impact operations? Does establishing an entity immediately make the most sense? Is an Employer of Record solution right for the near or long term? Exploring these and other considerations can help ensure that, when the time comes to expand, the global expansion strategy has accounted for challenges that a company may experience.
Tip 1: Consider the Political and Economic Environments of your Global Expansion Location
Having a solid understanding of how the governmental structure and political environment will impact an expansion into a new market is key to mitigating certain risks and ensuring businesses are following local regulation. While a stable, business-friendly government is ideal, this is not always the case for companies that are considering entering new markets—but there are ways to mitigate risks when entering an uncertain environment.
Though each global expansion plan is different, businesses would be wise to ask themselves a number of questions when exploring new markets, including:
- Will the company have access to all resources and materials needed to continue production?
- Does the government provide business assistance programs?
- How will employment and immigration law impact talent acquisition efforts?
- How will the exchange rate impact revenue?
- Does the product or service meet the needs of the local market?
Companies may find it challenging to answer each of these (and other) questions themselves. That’s why working with an experienced partner to not only answer these questions but to also provide country- and region-specific reports and market entry strategies only strengthens a global expansion strategy.
Tip 2: Explore the Market’s Talent Pool
Gaining an understanding of the desired market’s culture (and the talent that contributes to that culture) assists in the talent acquisition process. The reason for this is twofold: when a company understands the culture, it can tailor its talent acquisition efforts. It can also help better determine if the desired market offers the type of talent that aligns with its in-country goals for both the near and long term.
While nailing down cultural fit for building out an international team is crucial, companies do not need to assemble a full-time team right off the bat. Hiring international contractors to assist with breaking into a new market can allow a business to establish itself in the new market without the additional stress of hiring multiple employees while trying to seamlessly continue operations. Contractors can also provide the company with invaluable insight into the market’s culture, allowing the company to learn and adapt as the expansion efforts continue.
By hiring international contractors while implementing social media campaigns, paid ads, and PR from the headquartered location, companies can develop broader coverage in their new market before onboarding a team of full-time employees. This can help companies prioritize which positions need to be filled first, and which can wait until a presence is further developed.
Tip 3: Determine the Right Footprint for your Expansion Goals
Establishing an entity in a new market is a major step for any business—but it isn’t the only option. For companies looking to hire marketing or software development support, project-based contractors may be the most effective employment method. If looking to test the market with a small sales team, a global Employer of Record is a solution that will put compliance at the forefront. It can also mitigate risks associated with global expansion. Moreover, a company can seamlessly transition into entity establishment once its employee count makes the most financial sense to do so.
But for companies that are certain they want to establish an entity and are expanding into a country that offers a low corporate tax rate, establishing a permanent presence through entity establishment may be advantageous—and not just financially. Establishing an entity may cost more upfront, but it can be seen a sign of credibility and commitment to become a permanent part of the market by the local community.
You Don’t Have to Expand Alone
Taking the leap and expanding your company overseas is a significant undertaking—but it’s one that can offer numerous rewards. If you’re considering a global expansion but are unsure of where the next step should lead, get in touch with Velocity Global today to learn more about how we can assist in guiding you towards your next conquered market.