If your business has done well stateside, you may be primed to expand overseas to capture additional customers and gain market exposure throughout the world.
But before you take that major step, there are some aspects to consider.
There are many nuances that drive the business decision. When pondering if international expansion is right for you, consider these four factors:
1. Culture
The cultural difference can determine whether the business is successful or not. If the product or service doesn’t add value or meet the desires of the local markets, there’s no need to go sailing! It is vital to have an intimate understanding about who lives in the community and what they value. Consider the following:
- Does your product or service provide a need or desire by the local consumers?
- Are there language and cultural differences? How will you overcome these?
- Can you manage the time zone difference effectively?
- Are there dietary, religious or lifestyle considerations that could affect your business?
- How are contracts or agreements negotiated?
- Is there any business attributes considered offensive or rude when engaging the local consumers
- Are there limitations over business practices?
- How will you market the product or service?
- What if your product or service doesn’t translate well to the local community?
Knowing how to conduct business among the “local” markets is extremely important. Do not underestimate the effects of cultural differences. You must be willing to invest significant time and energy in order to pursue an overseas venture. Seek first to understand the culture.
2. Legal and regulatory barriers
Conducting business in foreign markets is achievable if the business is flexible enough to work within the local laws and regulation guidelines. Review aspects such as:
- Labor and employment laws
- Duties and treaties
- Restrictions (import and export laws)
- Corporate organization practices
- Investment and business procedures
- Dispute resolution
- Trademark requirements
- Customs laws and regulatory requirements
- Limitations on currency repatriation
- Tax laws on products, services and conducting business
- Producer/distributor liability provisions
When reviewing legal and regulatory commitments, it is highly advised that you seek experienced legal counsel for overseas business practices to identify hazards that may cause barriers for your business. Don’t skimp on the cost of using overseas expert legal counsel, it can save you in the long run.
3. Foreign government consideration
The stability of the local government and its authority are very important when reviewing overseas business options. Aspects to consider are:
- Currency exchange rates
- Access to needed resources and materials
- Communication and transportation options
- Government assistance programs for businesses
- Access to affordable capital
- Protection policies for businesses
- Immigration and employment Laws
Government stability holds the key to contract integrity, employee security and rights, trademark and intellectual property and many other facets in conducting business. Make sure to seek “local” expertise over the political and business factors before entertaining any overseas expansion.
4. Business case
It is essential that the business case responds to the challenges, adversity and rewards of expanding overseas. Some strategies to consider are:
- Perform a market study to understand the market’s personality, economic feasibility, market trends, financial cost patterns and market forecasts
- Do a financial feasibility study to determine if the move makes financial sense
- Intellectual property and trademark protection, and making sure the governmental authorities in that location recognize and protect the businesses proprietary needs
- Partnership and liaison relationship development – seek guidance and opportunity by engaging in a “local” partnership with an existing client or supplier
Expanding into unchartered foreign market waters can be lucrative. However, it can become a nightmare. In addition to the four aspects discussed, you can reach out to the American Chamber Abroad, an affiliate of the U.S. Chamber of Commerce are located worldwide. Don’t be a casualty, be prepared for clear sailing!
As seen in the Business Journals – a division of ACBJ