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Five Questions To Ask When Deciding Where To Expand Globally

By November 30, 2020March 10th, 2021No Comments
graphic representing criteria for determining international expansion strategy

Developing an international expansion strategy is an exciting process for any company. Moving into new markets helps your business reach more customers, hire the right workers, and establish itself as a global brand. But for many companies considering international expansion, the first question is often the hardest: What markets best fit our needs?

Many factors determine which countries are right for your company, from your industry and target demographic to your financial resources and long-term goals. Read on to discover five questions to ask when deciding whether an international market makes sense for your business.

Will I Be Able To Source the Right Talent?

Companies looking to expand internationally must consider how a country’s workforce is suited to meet its hiring needs. By choosing a country with workers who excel in a desired skillset, you gain access to the talent you need to support near- and long-term growth.

There are several ways to determine the skill level of international workforces.

Coursera’s 2020 Global Skills Index evaluates 60 countries based on worker skill levels in three areas: business, technology, and data science. Switzerland ranked among the top three countries worldwide for each area, while Russia ranked first in technology and data science. Austria and Denmark ranked second and third in business, while Belarus ranked second for technology and Belgium ranked third for data science.

Companies must also consider how countries encourage workers to develop more general skill sets. For example, according to the most recent World Economic Forum Global Competitiveness Report, Switzerland leads the world in overall vocational training. At the same time, Finland ranks first in fostering critical thinking and teaching students digital skills.

Other firms evaluate workforces by a country’s education standards. One metric companies use is the amount of money a country spends per student. In terms of education spending proportional to GDP (gross domestic product), Norway, New Zealand, the United Kingdom, the United States, and Canada lead the world.

Test scores also provide insight into a country’s education level. The OECD (Organisation for Economic Co-operation and Development) uses the PISA test (Programme for International Student Assessment) to rank 80 countries on how their students perform in reading, math, and science. China, Singapore, Estonia, and Canada led the way in the most recent OECD PISA results.

Using the above resources and criteria to understand a country’s workforce, you can ensure your company sources the talent you need to succeed internationally.

How Competitive Is My Target Foreign Market? 

Finding the right country for your business requires understanding how crowded its markets are—and how your company competes with other companies for workers, customers, and other resources.

When your company decides to expand into an internationally renowned market, you should be prepared to face a high level of competition. London, for example, is often seen as the fintech capital of Europe. As such, it is both saturated with fintech companies and facing a skills shortage. Due to the high competition for workers in London, resourceful fintech companies turn to up-and-coming destinations like Vilnius, Lithuania, which offers a growing talent pool along with lower operating costs than higher-profile destinations.

Similarly, Tel Aviv is renowned for its thriving startup culture. While the city brings considerable opportunity for innovative companies, newcomers must be ready to face a crowded field of competitors when securing talent, venture capital, and market shares. That’s why some emerging companies turn to lesser-known cities like Ljubljana, Slovenia. While Ljubljana’s startup culture is still maturing, the city features less competition for funding and easier access to accelerator programs that nurture emerging companies.

How Will Legislation Affect the Ease of Doing Business?

Dealing with red tape when doing business overseas requires companies to invest excessive amounts of financial resources, manpower, and time. Your company must understand how a country’s legislation will increase the challenge of your expansion process.

The Ease of Doing Business report, compiled annually by the World Bank Group, ranks 190 countries worldwide on their conduciveness to opening and managing new firms. According to the 2020 report, companies must spend nearly six times as long starting a business in countries with complicated commerce regulations than in countries with business-friendly legislation.

To compile their yearly rankings, the Ease of Doing Business report evaluates countries on how easy they make it for companies to:

  • Deal with construction permits
  • Register property
  • Obtain credit
  • Pay taxes
  • Trade across borders
  • Enforce contracts
  • Resolve insolvency
  • Get electricity
  • Start a business

Your business must consider the ease of completing these tasks and more when deciding which countries to target for international expansion.

Singapore, which ranks behind only New Zealand in the most recent Ease of Doing Business report, provides a case study for how pro-growth legislation makes it easy for businesses to expand internationally. Commerce regulations and laws in Singapore are transparent, simplifying compliance for new firms. Entrepreneurs can establish companies quickly and easily. Singapore’s immigration laws streamline the process of hiring foreign workers. And the government provides a host of grant-related programs to incentivize new businesses. As a result, Singapore attracts many overseas companies and consistently ranks amongst the world’s most competitive economies.

How Developed Is the Country’s Technological Infrastructure? 

For companies operating across multiple global locations, having access to sophisticated technological infrastructure is more essential than ever.

The transition to remote work in 2020 revealed the internet’s importance in keeping the business world connected. Companies are increasingly making remote work a long-term plan rather than a short-term solution, underscoring the necessity of ensuring your expansion destination provides strong connectivity.

In addition to helping your company communicate internally, tapping into a highly developed technological infrastructure increases your ability to generate new business. Internet connectivity is critical in helping companies connect to customers via e-commerce or digital marketing. For B2B firms, a well-developed technological infrastructure offers the ability to attend online conferences, pitch to new clients and investors using video conferencing services, and close deals electronically.

Velocity Global’s 2020 State of Global Expansion™ Report: Technology Industry identifies countries that excel and fall short of optimal internet connectivity infrastructure. Though 56% of U.S. and UK companies name China as a top destination for international expansion, the country suffers from poor internet connectivity and usage rates amongst its population. On the other hand, many executives overlook countries like Denmark—which boasts the world’s best internet connectivity—and the Netherlands, which also has a sophisticated technological infrastructure.

What Data Protection Requirements Will My Company Have to Meet?

Companies looking to expand internationally must also take time to consider how they will comply with data protection requirements in a new country.

Firms that fail to meet international data protection standards face considerable costs. Under the EU’s GDPR (General Data Protection Rule), companies who fall out of compliance face fines of 20 million euros or up to 4% of global revenue—whichever is greater. For example, British Airways paid a fine of 183 million euros ($231 million) after a data breach in 2018.

Brazil is the world’s most recent major country to develop a comprehensive data protection regulation. It passed its LGPD (Lei Geral de Protecao de Dados) in September, creating new challenges for companies doing business in the country. Brazil joins countries like New Zealand, India, Japan, Australia, and more who require companies to adhere to complex data laws.

Maintaining compliance with data protection laws requires companies to invest significant internal resources. Legal must coordinate with IT to ensure a company is appropriately storing data, notifying users of data collection, and monitoring regulatory changes. Because some countries have more stringent data laws than others, your company must carefully examine the steps required for compliance in your target market.

Answer Every Expansion Question with a Global Expert

Developing a global expansion strategy is not an overnight process. Determining where to go and how best to get there demands foresight, intention, and care. By partnering with a global expansion expert, your company develops a strategic growth plan as quickly, compliantly, and cost-effective as possible.

Velocity Global has helped businesses like yours expand into over 185 countries across the globe. We take time to understand your goals, help you ask the right questions, and mitigate risk while developing the right expansion approach. With expertise in everything from managing payroll and employee benefits to interpreting tax laws and compliance regulations, we’re by your side every step of the way.

Reach out today to find out how Velocity Global can help you confidently approach global expansion.