While many people grovel that 2016 was the worst year in recent history, the negative sentiments spread into international business uncertainty. Looking forward into 2017, we’re shining a positive light on emerging markets and why now is a very good time to consider taking your business overseas.
Previous Year’s Positive Changes to Provide Hope
Despite changing leadership and impending policy updates in the coming year, small business owners saw improvements in local regulatory framework across more than 130 economies from 2015 to 2016, according to a study by The World Bank.
The more than 200 business reforms around the world led to reduced complexity and costs of regulatory processes for starting a business. In addition, there were positive changes for business owners when it came to paying taxes, getting credit and trading across borders.
There were certainly ups and downs over the past year, especially during the tumultuous election cycle. While some remain uncertain of the future under a U.S.-led Trump, investors do believe that his policies may further economic growth. That leaves another glimmer of hope moving into 2017.
Election’s Effect on International Business Uncertainty
Even with the positive regulatory changes, many in the business community are concerned about the market outlook post-election. Whether you sit on the left or right side of the party lines, there are potential reasons to feel uncertain about the state of world relations with Donald Trump in office.
U.S. & Russia
America’s relationship with Russia has always been volatile, but it took a significant downturn after Russia’s bloody conflict with Ukraine. The U.S. imposed sanctions on Russia, which combined with the drop in oil prices, took a big hit on the country’s economy.
Whether or not the relationship between Vladimir Putin and Trump is as friendly as the media portrays, Russian officials have stated that they believe these sanctions will be lifted once Trump is in office. This will help the Russian economy open up more business opportunities between countries.
Ways to invest in Russia include:
- US-listed exchange-traded funds (ETFs) and securities listed on the Russian Trading System (RTS).
- Global expansion into Russia
Expanding into a country like Russia comes with its challenges considering the legislative burdens and overall international business uncertainty. But the opportunities in areas including technology and telecommunications are vast. You can enter the market using an agile service like International PEO, which helps you maintain compliance while operating overseas.
Trump’s Tax Plan
President-elect Trump has a proposed tax plan that will lower the corporate tax rate from 35% to 15%. The Pro-Growth Tax plan urges businesses to bring and keep jobs in the States. With the additional 10% tax on repatriation, the plan would bring trillions of dollars back into the American economy.
Although many businesses would find it appealing to keep operations localized, there are still benefits outside of tax savings to international expansion. These advantages include:
- Exposure to new consumers
- Access to fresh talent
- Revitalizing underperforming products and services
Trade Policy Changes & International Business Uncertainty
Under Trump’s trade plan, the President-elect lays out seven policy changes, which include some international business implications. In particular, he’s urging the U.S. to renegotiate NAFTA, withdraw from the Trans-Pacific Partnership, and bring trade cases against China.
Global investors and economists fear that these severe policy actions may result in a global trade war.
Financial Volatility Across the Globe
In the wake of the election results, the market saw a jump on Wall Street despite initial fears of its tumble. Overall, the U.S. banks fared well in 2016 and are hoping for a prosperous future despite a volatile business outlook for 2017.
Outside the domestic borders, there is uncertainty for many global leaders including China and Italy.
How to Succeed in the Wake of International Business Uncertainty
There will always be challenges when running a business. Whether you’re currently a multinational organization or considering the first-time jump overseas, international business is now – and will be – a necessity for sustainable growth.
To succeed in your international business venture, you’ll need to prepare a global strategy for overseas growth. Below are a few best practices for finding success when entering a new market.
Understand the Culture
Before committing to a market, be sure to fully understand the landscape of both the business environment and cultural traditions. For example, if you’re targeting Tokyo, work with a local business partner to help you familiarize yourself with the language, customs, and marketing techniques before starting up your operations.
You should also keep in mind the barriers to entry for a new business. Different countries are easier to start a business than others. According to the World Bank, the five countries with the best landscape for starting a business include:
Starting an international operation always comes with risks. There’s a chance that your plan of activities may not succeed in your new market. Rather than avoiding global expansion altogether, you can protect yourself by staying lean during international growth.
Avoid investing in hard assets until you’re fully confident in your results. You can take a lean approach to international expansion by staying agile.
Use an Agile Approach
Utilize International PEO or Foreign Subsidiary as a Service (FSaaS) to gain access to new markets without investing time and money in a permanent foreign subsidiary. Agile structures provide your business with the ability to keep a human presence on the ground to identify opportunities and provide feedback, while simultaneously ensuring your ability to leave at any time if the situation deteriorates.
It’s the best way to approach a new market entry in during times of international business uncertainty.