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Expansion International – A Guide for Modern Businesses

By October 25, 2016 October 18th, 2017 No Comments
Expansion International - A Guide for Modern Businesses

It’s an exciting time for businesses as expansion international becomes the norm and new opportunities arise overseas. If your company is successful on a local level and your team is intrigued by the idea of global growth, we’re here to help you explore the idea of seeking opportunities in new markets.

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Tips for Expansion International Strategy

Moving into a new country requires a remastered strategy outside of the original business plan. Most businesses face adversity, rapid change, and unparalleled growth potential when starting up in a new market. Preparing for these situations through proactive, versus reactive, planning is the first step to international success.

1. Stay Agile

Your team should have a comprehensive strategy guiding your company through its global expansion. In addition to an overall plan, many companies take on the day-to-day operations through the lean approach. Basically, cut down on resources while still providing consumers with high-quality products or services. Plus, sticking with the agile methodology and achieving one project at a time, through to completion with weekly sprints, keeps teams productive. By remaining flexible and adapting to change, your team will be ready for whatever curveball comes your way during an expansion international.

2. Test the Market

Using one of the lean methods listed below, companies can create a legal entity in their target country without establishing a burdensome subsidiary. Work with an in-country partner or send a sales team member to your target market to test your product or service with new consumers. If they’re successful, consider investing in infrastructure and fixed assets.

3. Hire Local Nationals

Keeping the agile approach top-of-mind, hire local nationals if your concept worked during a market test. Start small and build your team as demand grows. High-quality employees are incredibly valuable and can help you identify untapped opportunities, evaluate market strategy, and make adjustments whenever necessary.

4. Learn the Local Customs

When your company works with local nationals or an in-country partner, one of their greatest benefits to the business is their insight into local customs. Tap into their knowledge and apply your findings to your team’s global strategy. Ensure that your product or service is meeting the needs of your new market and adjust as necessary. Remember, stay agile. This rule of thumb applies to all areas of expansion international.

5. Be Committed

Growing your business into a new country takes dedication to not only your company but also the efforts associated with expanding overseas. There may be travel requirements for management teams, including yourself. Plus, you may be required to adapt to changes in day-to-day operations. The more cooperation from all levels of the organization, the more likely your company is to succeed.

A Company’s Options for Expansion International

Expanding overseas requires businesses to tackle new areas of compliance including employment liability, tax implications, and intellectual property (IP). If your company is new to international growth, there are lean methods that manage compliance while giving businesses the tools to hire employees and start operations with little to no overhead.

For companies that have experience with international expansion and are ready to make a big commitment, they can take the traditional route and establish a foreign subsidiary. This option takes months and costs thousands of dollars. Plus, it requires businesses to manage tax implications, compliance, and labor law requirements on their own so they will need a host of resources. Only proceed with a foreign subsidiary if necessary.

1. International Independent Contractors

If you work with contractors in the States or know other businesses that work with these type of team members in their international activities, it’s important that you understand the risks involved when employing an international independent contractor. A foreign contractor is an individual who lives in your target country and works for a domestic company (headquartered in any other country) under a contract that isn’t an employment agreement.

This is a viable option for employment if you have a one-time project, time-based research, or a quick need that won’t expose your IP.

Unfortunately, many contractors are used for full-time work, which creates many risks for international employers. The biggest risk to employers is if a contractor disputes their contract with labor authorities. Local employment laws will always trump your employment agreement, which leaves you liable for any number of claims your employee can bring against you. If authorities find that the contract is operating as an employee, they are subject to withholdings, taxes, and benefits. This is costly in international markets.

Plus, your company will likely need an entity to represent itself in courts. If this is lacking, your company will also face costly compliance fines and other penalties. To learn more about the risks associated with using international independent contractors, read our post on this topic.

2. Foreign Business Process Outsourcing (BPO)

BPO describes the act of a third-party provider managing business process operations and responsibilities for a company. Processes may include supply chain, manufacturing, and admin. One of the most common examples of BPO is a call center that manages customer service needs on behalf of a business.

These options provide businesses with the least amount of overhead but in turn, the team members are not your employees. As a result, businesses have little control over quality and management of the outsourced processes.

3. Employer of Record (EOR)

International PEO (Professional Employer Organization) and Foreign Subsidiary as a Service (FSaaS) are Employer of Record solutions that connect businesses with third-party companies that hire employees in the target country on your behalf and assumes all responsibilities related to that employment. These options are perfect for companies that do not need large volumes of physical assets in their new country.

International PEO and FSaaS manage risks associated with employment overseas by taking care of compliance requirements with local labor law, which is the prime offender for most companies. Employer of record services include:

  • Creating a locally compliant employment contract
  • Employee onboarding
  • Pension, health, and social security-related programs
  • International payroll including withholdings and remittances to the local authorities
  • Termination of employees.

These services also manage ongoing HR responsibilities like Paid Time Off and 13th-month payrolls. While the third-party provider managers compliance requirements, the day-to-day management responsibilities remain with your company as do employee liabilities.

Velocity Global offers employers options for international expansion. Our EOR services give companies realistic opportunities to grow into new markets. Give us a call to learn more!