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How to Ensure Market Entry Strategies Are Ready for Global Expansion

June 3, 2022, 8:45 AM

International expansion through mergers and acquisitions has become increasingly popular for US companies, with global deal volume topping $5 trillion in 2021 and experts predicting the remainder of 2022 to be even stronger. The ongoing worker shortage is also driving company leaders to look to overseas markets as they expand the talent pools they fish from.

In a world filled with economic uncertainty, global expansion offers companies a great way to gain a foothold in new, international markets, provide new revenue potential, and increase market share. But with new territory comes new challenges, and company leaders are often quick to underestimate the complexities of taking their successful domestic market strategies global.

Critical factors such as budgets, regulatory laws, tax variations, compliance concerns, and market research are often overlooked. Add in that countries are quickly adapting various laws and policies to stay ahead of Covid-19, inflation, supply chain problems, work from anywhere, and other new realities—the changes are happening faster than new protocols can evolve.

Developing adaptable, compliant market entry strategies requires proper time, research, and resources. But it’s not an impossible feat, and when done right, global expansion can help scale your business for future impact. To help business leaders navigate the tax and compliance complexities of going global, here are a few steps they can take to master the understanding of multiple markets.

Understand Gaps in Expertise

Before diving into the process of global expansion, it’s important to gauge in-house expertise when it comes to wage laws, payroll, hiring, compliance, and benefits administration in other countries.

Sit down with your team to evaluate your knowledge of:

  • Legal and regulatory compliance
  • Local payroll regulations
  • Transfer pricing protocols
  • Tax implications
  • Accounting and reporting tools
  • Setting up an entity

Even after careful evaluation, for many organizations, it can still be a case of “you don’t know what you don’t know.” Surprises will still come up. When opening a business in Brazil, for example, you’ll need 43 documents and more than 13 official procedures. And administrative offices close during the summer months, between Christmas and Carnival, causing major delays for many companies.

For this reason, many companies find they need to augment their in-house talent with consultants who specialize in compliance, and many prefer to find these consultants in the country they are expanding to. This is a smart move, as these experts know when local laws and regulations change, and they can advise a company on how to adapt to any unexpected changes.

Companies must start working on their corporate roadmap months before expansion and be ready to bring in as much expertise from the outside as necessary to ensure success.

Execute Thorough Market Research

While it’s tempting to copy and paste the market entry strategies brought forth by global high performers such as Apple, Starbucks, and Google, many companies overestimate their ability to absorb the financial risks associated with international expansion. In addition to this challenge, leaders also frequently seek to expand their operations to countries where their target audience is not located due to a lack of research and global understanding.

To mitigate these challenges, companies must thoroughly research the desired markets they wish to enter. This will help identify the strengths, weaknesses, opportunities, and obstacles before the budget is allocated to a market that may not be the right fit for your company. Asking questions about where the demand is for your specific product or service, where your competitors have a presence, and what talent is available within the target country can help guide your strategy on what market or region to prioritize. Globally fluent companies have strong knowledge of their markets, can quickly organize and analyze their data from all over the world, and can adapt to make timely, well-informed decisions.

The research phase is also a good opportunity to scope out potential partners within the country. Strategic partnerships are a valuable resource for helping your company solve business challenges as you expand your operations internationally. Legal, HR, tax, and accounting partners can be key advocates that help you achieve your growth objectives more efficiently, while also being a guide on local risks and potential consequences.

Consider Tax and Compliance Implications

Tax and compliance considerations can delay the establishment of a new entity, and delays mean unexpected costs. Each country sets its own income and social security tax rates. In Europe and many other regions, these rates can be significantly higher than in the US. As a result, it’s important to learn who collects the taxes—the government or individual companies—and what deductions or incentives there might be for establishing a legal entity within the nation.

Compliance for global mobility—the process of physically moving employees around the world—is also a demanding but vital task for a company to handle lawfully. Traveling or relocating from one country to another without a clear understanding of the local regulations can negatively impact efficient mobile workforce deployment.

Having a rigorous understanding of these requirements is key to good relations with the respective government and tax officials in other countries. Making tax mistakes or avoiding tax obligations can lead to several consequences, including costly fines, denial of future growth plans, and the alienation of the local talent that a company is trying to attract.

The world has become a diverse marketplace offering companies of all sizes the potential for large growth and scalability. Whether you’re seeking to expand your customer base globally, provide a service to meet new demands, or find the right talent to meet new strategic goals, there are many international expansion benefits that make it a solution worth considering. The key to success is taking the proper steps to ensure your company’s market entry strategies are tailored to the regulations, nuances, and requirements of other countries.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Raj Inda is a senior HR leader with more than 15 years of experience working within a variety of HR strategic areas including international expansion and employment law, mergers and acquisitions, change management, and talent management. He is the GEO chief operating officer at Safeguard Global, a future of work company that builds workforce management technology solutions for companies seeking to thrive in the global economy.

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