Gotransverse
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May 11, 2017It’s estimated that more than 75 percent of the world’s economic output takes place outside of the U.S. border. This is a very enticing statistic for investor and executive teams that are looking to grow their business and increase shareholder value. In today’s digital, connected enterprise, the ability to go global is easier than ever.
Whether your company is interested in international expansion because of a key customer or you are simply looking at ways to accelerate business growth, establishing a presence in another country presents many new challenges that need to be evaluated. This includes dealing with various cultural nuances, language barriers, unfamiliar regulations and even things as trivial as time zones. Below are four steps to help you navigate the terrain overseas and ensure your global initiative is a companywide success:
Understand how to conduct business in the local country and plan accordingly
A common mistake companies make when expanding internationally is selecting a region (like Europe) versus a single country (like Ireland). As you can understand, the way business is conducted in Ireland is very different than the way business is conducted in Spain. A company starting their international expansion strategy should target one country and use it as a beach head to expand within the region. It’s typically best if you can pick a country that has a similar language and culture. This will speed up the amount of time it will take you to learn “the laws of the land” and allow you to apply these lessons to other countries as you expand.
Another mistake companies make during the planning phase of an expansion is not understanding cultural nuances that may exist. I am often reminded of a scene in Pulp Fiction where Vincent describes why Burger King calls its “Quarter Pounder” in Paris a “Royal with Cheese,” and that’s because they use the metric system. It is important not to overlook these seemingly trivial nuances as they can have a significant impact on your business. It is generally a good idea to work with someone locally that can help you navigate these pitfalls.
Employ a partner strategy to break into key international markets
From easing the transition into a new region to providing credibility, utilizing partners as part of your global expansion strategy is highly recommended. Partners can help bridge the gap between cultural differences as well as provide insight on things such as country specific regulations and employment laws. Partners also can provide you with credibility with a local presence.
While working with partners is a great practice to employ when expanding into new international markets, it’s important to remember they’re an extension of your brand. As such, you need to ensure that they align and abide by your company’s code of conduct. Just because a certain practice is acceptable in the country you are doing business in, you will still be held accountable by customers, employees and regulators. The fact that the “partner” was the one engaged in the practice does not provide you with the opportunity to turn a blind eye. This can damage to your business’ reputation as well as result in fines and even loss of privileges.
A great example of this is when I was involved in a business situation where a partner in a particular country paid a bribe or kickback to a buyer for a very large contract. While this is a common business practice in that particular country, the situation was unknown to me until after we won the contract and the partner asked to be reimbursed as part of a “finder’s fee”. Knowing that kickbacks and bribes are illegal in the United States, we terminated the partnership and the employees that we expected knew about the transaction, alerted the customer of the wrong doing, and reported this matter to the proper authorities. Not only was the situation embarrassing for those of us involved, but it also could have resulted in a large settlement with the Justice Department.
Prepare your back office operations for new complexities
Before expanding globally, businesses also need to ensure back office operations are fully prepared. Understanding legal entity structures, employment practices and establishing bank accounts is just the beginning.
When expanding internationally, your business systems must be able to handle the complexities, multi-currencies, multi-languages and various payment methods that are required. When it comes to monetization platforms, it’s important to ensure that your billing systems can keep pace – some systems are simply not flexible enough to support the ever changing international requirements without heavy customization and long deployment cycles. When preparing your back office for global expansion, make sure your system is flexible enough to support international strategies and work beside your ERP and CRM systems to bring the functionality necessary with going global, or find one that does.
Understand how international tax laws will impact your company
International tax laws can be complex. As we’ve moved from traditional supply chains to eCommerce and digital services, the rules and regulations have transitioned. In each case, companies will need to consider the taxable statuses, taxable supply, place of supply, exemptions and who is liable for the tax.
Electronically supplied services, which include subscription services and digital downloads, are particularly relevant with the growing popularity of recurring revenue models. Digital services come with their own set of taxation challenges as well, so understanding what this means for your business could have a significant impact on how, when and where your company expands.
Companies make the decision to expand into international markets every day, but not every expansion story ends well. Doing your homework, understanding cultural nuances and preparing your back office are a few steps that can help set the stage for successful global expansion.