7 Considerations for Businesses Planning Cross-Border Expansion

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By Jacob Maslow

Tech innovations reduced barriers, and societal changes continue to move businesses toward international expansion. Organizations of all sizes are now seeking opportunities to enjoy the comparative advantages of different geographic regions.

However, just because you can, it doesn’t mean you should carry out a business expansion plan without much thought. Even if you have done the math and found that your organization could benefit from overseas expansion, there may still be other factors that you’ll need to consider more thoroughly.

Here are just a few of the considerations businesses have to account for when expanding overseas:

1.) Payment Solutions

To ensure that your overseas operations run smoothly, cross-border payments should be as simple as possible. Because of the complexities of today’s trade finance and anti-money laundering requirements, overseas money transfers can often come across some snags before they’re completed. If these roadblocks cause significant delays, they can result in employees and overseas partners not being paid on time. These delays may also hinder your overseas office’s ability to pivot to address opportunities and emergencies quickly.

For this reason, choosing a financial institution that can offer the right financial products and services through a modern digital payment solution will be essential. Before committing, ensure your preferred bank can send overseas payments with minimal delays and full compliance with all applicable laws.

2.) Tax Challenges

In many cases, your business and its employees will be expected to pay taxes in the countries you set up in. Tax laws can be exceedingly complex and multilayered, with some countries having a set of local taxes that must be paid on top of federal or national levies.

Transnational entities also face other tax challenges due to their status. Thus, the success of expansions is often dependent on knowing the existence of international treaties or various exemptions. Given all this, it’s essential to have access to competent tax advice in every jurisdiction you want to set up in.

3.) Local Labor Practices

How you do things in your home country will rarely apply overseas without at least a few adjustments. Localities have different labor laws, holidays, and prevailing attitudes toward work. These practices can also change depending on the industry.

By considering both legal and cultural practices, you will have a much better time establishing your overseas operations. Hiring the right local management team and getting legal advice from qualified local experts should also help smoothen out any issues from local labor practices.

4.) Time Zones

It’s not always feasible to demand that overseas teams work according to your home country’s time zone. This is especially true for operations meant for the overseas location’s market. Also, while it’s not usually the biggest issue you’ll face, your local team’s schedules can directly influence their stress and performance levels.

This makes it essential to schedule meetings at times that work for everyone. If the local team has to consistently attend meetings scheduled before or after their shift for no reason other than to accommodate the main office’s schedule, chances are, you will be looking for new local employees soon.

5.) Local Management Teams

The quality of your local management teams can be the biggest factor in your expansion’s success. Whether you hire locally, get new external hires, or reassign people from your home office, your local teams must be as adaptable and culturally sensitive as they are competent.

This usually means you don’t want to rush when hiring for your management team. Because of how vital your local managers will be, it’s a good idea to take as much time as you need to ensure that you choose the right people to grow your overseas branches.

6.) Expansion Project Timescale

Any expansion should be treated as a major project. And as with any major project, you need a timescale to provide structure, scalability, and predictability to your efforts.

A timescale that’s appropriately synchronized with your business’s goals, processes, and current projects will help ensure your local team isn’t focusing on less important things. It also helps ensure that they can work sustainably and are not burnt out or stretched too thin, as can easily happen when organizations step into new markets without proper business planning.

Creating a realistic project timescale for an overseas expansion will often require a lot of research. While this may slow things down, it could also maximize the odds of your expansion succeeding.

7.) Mode and Extent of Investment

The quality of your local partners and competition can significantly influence your success. This means no single entry mode or strategy will work for all situations. Most businesses may have to collaborate with a local firm or acquire one to facilitate their entry. Unfortunately, not all local collaborations will necessarily be a good fit for you. On top of this, businesses will have to consider how much risk they’re willing to take on. A market that is saturated with competitors will require a different approach to risk management compared to one that is wide open.

Given all this, any business planning an overseas expansion should carefully weigh all their options, perhaps biding their time if no suitable options are currently available.

Is It Time to Expand Your Business Overseas?

The emergence of highly effective global supply chains, digital marketing, digital payment solutions, and other modern conveniences presents businesses with plenty of opportunities. These advantages have greatly lowered the barrier to overseas expansion, for example, and they also make it possible to reach global markets without the need for an extensive presence overseas.

As always, whether expansion is “worth it” depends on the business’s growth objectives and how well they address the considerations above. By taking all these into account, businesses can avoid many of the common pitfalls associated with becoming a transnational organization.

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