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Global Expansion

Expansion Benefits and Challenges of Four Leading Markets

By December 15, 2020March 10th, 2021No Comments
city representing the global expansion landscape

Companies planning an international growth strategy must evaluate a wide range of expansion factors, from a country’s talent pool and technological infrastructure to its legislative requirements. Despite the many considerations that influence expansion decisions, certain countries consistently earn recognition as leading international business destinations. These countries tend to have strong economies, business-friendly governmental policies, and geographic locations that offer a competitive edge in the global marketplace.

However, no international market is perfect, and doing business in any foreign country presents its own set of challenges. This blog post explores the benefits and obstacles of expanding into four internationally renowned markets: Singapore, Germany, Hong Kong, and Canada.

Singapore

Singapore is recognized as one of the world’s top business markets:

  • Velocity Global’s Global Expansion Tech Index™ ranks Singapore as the most-promising international market for tech companies looking to grow internationally.
  • The World Economic Forum (WEF) identifies Singapore as the world’s top economy in its most recent Global Competitiveness Report.
  • The Heritage Foundation rates Singapore as the freest economy globally, citing the country’s high per-capita income and consistent GDP growth as evidence of its free-market successes.

Singapore is renowned for its business-friendly legislation, making it easy for international companies to set up operations and maintain compliance. As a result, Singapore is home to a thriving startup culture and one of the world’s most sophisticated high-tech industries.

One of the world’s leading financial centers, Singapore is the only nation in its region to earn an AAA credit rating from S&P, Moody’s, and Fitch. The country is primed for continued economic growth after joining the recently formed RCEP (Regional Comprehensive Economic Plan), the world’s largest trading bloc.

Singapore’s reputation as a leading global business hub also creates challenges for international companies. Companies face substantial competition for resources, talent, and market share. Costs of living and doing business in the country are notoriously high. As an island nation with limited space and a rising population, experts predict living and business expenses will continue to rise in the future. Consequently, while Singapore promises substantial dividends to companies who can afford to do business there, the up-front costs of operating in the country are a barrier for many companies planning international expansion.

Germany

Europe’s largest market, Germany is the leading economy in one of the world’s most prosperous regions.

Germany has a $3.86 trillion GDP, making it the strongest EU (European Union) economy and the fourth largest globally. Germany ranks as the world’s sixth-most promising international market in Velocity Global’s Global Expansion Tech Index. The World Economic Forum also ranks Germany as the world’s 7th most competitive economy.

Because of its size and central location within Europe, Germany is an ideal launching spot for companies looking to expand across the continent. The country is renowned for its infrastructure, which simplifies transportation and the exchanging of goods to adjacent markets. Germany is also famous for its engineering acumen, and its workforce is well-suited for companies looking to hire within the sector. Similarly, the country ranks second behind only Japan in terms of investment in research and development.

Germany is the world’s third-largest exporter. Because exporting goods and services generates nearly half of Germany’s GDP, the country is susceptible to financial shock from external events such as the COVID-19 pandemic.

Setting up a business in Germany is also challenging. The most recent World Bank Ease of Doing Business Report ranks Germany in the lower 35th percentile of countries for ease of starting a business. The country also rates poorly for ease of obtaining credit, paying taxes, and registering property. As a result, companies that expand in Germany must devote significant internal resources to accomplishing these initiatives—or partner with a global expansion expert.

Hong Kong

Like Singapore, Hong Kong is continuously recognized as being one of the world’s leading economies.

Hong Kong was the world leader in the Index of Economic Freedom for 25 years before Singapore took the top spot in 2020. Hong Kong still ranks as the world’s third-most competitive economy and third easiest market in which to do business. Hong Kong also ranked as the fifth-most promising international market in Velocity Global’s Global Tech Index.

Similar to Germany, Hong Kong benefits from its central location amidst one of the world’s most economically powerful regions. Hong Kong is a financial hub for Asian and Pacific countries. It trails only the U.S. in terms of the value of goods it trades with China. The country’s renowned free-market economy is especially friendly to small and medium-sized businesses: there are over 340,000 such businesses in the country, good for 98% of Hong Kong’s total business establishments.

While Hong Kong has an extremely stable economy in terms of inflation and debt, geopolitical uncertainty with China poses a threat to businesses. Hong Kong has a complicated history as a British colony and Chinese territory, resulting in tension that still exists today. Over recent years, pro-democracy protests have resulted in military action, riots, and accusations of human rights violations. China responded to the unrest by invoking security acts that some experts believe harm companies doing business in Hong Kong.

Canada

As the world’s 10th-largest economy, Canada is internationally renowned for its economic and governmental stability.

The WEF ranks Canada as the world’s 14th-most competitive economy, while Velocity Global’s Global Expansion Tech Index identifies Canada as the world’s 11th-most promising market for tech companies. Canada also placed ninth in the 2020 Index of Economic Freedom.

Thanks to geographic proximity and a strong business relationship, Canada exports more goods to the U.S. than every other trading partner combined. Canada’s healthy partnership with the world’s largest economy contributes to its own economic strength.

Canada’s corporate tax rate is 15%, making the county exceptionally friendly to foreign companies looking to establish a North American base. The country is also home to a thriving tech scene and startup culture, with Toronto boasting one of the world’s most tech-forward workforces.

While Canada’s export-heavy trade activity benefits its economy, future risk exists. Canada is a prominent exporter of natural resources from oil and gas to metals and timber, making the country susceptible to fluctuating international demand for resources. Furthermore, as the world turns to alternative energy sources rather than oil and gas, Canada must find a way to offset its decrease in natural resource exports.

Identify Expansion Barriers and Benefits with a Global Expert

International expansion allows businesses to gain new revenue streams, hire the right workers, and grow their global brand. While some expansion destinations are known to be friendly to foreign investment, no market is completely free of challenges. That’s why it pays to partner with an international expansion expert.

Velocity Global helps companies streamline operations in 185 countries worldwide. Our expert teams support every step of your global growth, from onboarding and managing employees to ensuring ongoing compliance and risk mitigation. No matter your goals, needs, or capabilities, we help you overcome challenges and maximize potential in every target market.

Contact us today to find out how our international expertise can support your expansion.