Expanding Into New Global Markets
Global Expansion – One of the most organic growth paths a business can take. It can be an expansion driven by operational opportunities like affordable skilled labor, proximity to potential markets, better supply chain, or abundance of certain raw materials. Or it may simply be a business expanding into a market where its products or services might already have a presence or a strong opportunity for demand.
Why Expand into New Global Markets?
For a business, the need to expand into a new global market might be driven by positive or negative circumstances beyond its control. But there are several reasons why you might choose to expand your business into a new global market, even when a reason or a set of factors are forcing your hand in this regard.
New Opportunities: Many international markets might be poised for your products and services. Then there are larger, more sizable markets that might allow you to grow your profits organically. Some new global markets might also allow you to expand your product/service portfolio for greater profitability and safety through diversity.
Access To Better Human Resources: Oftentimes, a business expansion is driven by HR priorities. You may be looking for a cheap labor pool, more affordable skilled workers, or a richer pool of skilled individuals than you may have access to in your home country. It’s worth noting that for much software/digital businesses, this might not necessarily require a proper expansion, and you can simply take advantage of remote work arrangements and consider using Aadmi as your employer of record, rather than setting up a legal entity.
Supply Chain: Some global markets are better suited for operating your business as they may offer you access to better routes and other supply chain benefits. There are markets that might offer access to other markets due to their regional positions and established trade routes.
Diversification and Early Bird Advantage: Expanding into a new market helps you diversify in a number of ways. You have access to multiple labor pools, sources of raw materials, and target markets, which reduces a business’ dependency on its home markets and provides them with relatively more leverage. Moving into a new market before your competitors also gives you a strong early-bird advantage. Relationships with the stakeholders in the new market and establishing the business as the most well-known foreign brand in the business segment is a benefit that carries on for years.
Challenges And the Necessary Steps for Expanding into a New Global Market
No major business venture is without its risks or challenges, and global expansion is no exception. There are multiple challenges a business needs to face when they are expanding into new global markets, including:
- Understanding the local culture and market. If you don’t understand the target audience, you may not achieve the desired results from your expansion, and it’s made difficult if there is a significant cultural clash/difference between the home and host countries.
- Compliance challenges may differ based on how welcoming a country is towards foreign businesses. Many countries have restrictions in place to ensure that a foreign business doesn’t disrupt the domestic market, which includes requirements like local board members, investment caps, local management, etc. Some new markets tend to be very business-friendly, while others are more challenging to navigate, which increases the cost of expansion significantly.
- A unique competitive landscape. Unless your products and services are quite unique/proprietary, local businesses in the same industry/domain might be in a better position to offer you rapid competition than other foreign businesses. And unless you develop your knowledge and understanding of the local market while keeping pace with the local competition, this may significantly undercut your profit and growth potential.
- Misalignment of expansion goals. Superficial or only compliance-related understanding of the target market may prove counterproductive. You need to understand the specifics of the regions you might be operating in and all the gray-area requirements/challenges you might face.
These and most other challenges associated with expanding into new global markets stem from an inadequate understanding of those markets. And this is where a trusted global expansion partner such as Aadmi can be a significant resource. Aadmi specializes in helping businesses expand to new markets and territories and has the requisite knowledge, on-ground resources, and access to research and compliance tools that can be put to use to give you a solid footing for rapid expansion. Not leveraging an expansion expert means that you will have to learn by trial and error, but many “errors,” especially in an unfamiliar market, can be quite costly. A bad first interaction with local regulatory bodies or advertisements that are insensitive to local populations’ cultures and beliefs are just two of the many mistakes a business can make while expanding into a new global market.
Regardless of how they go about it (with or without an expansion partner), a business needs to follow (at least) these steps while expanding into new global markets:
- Learn about local compliance.
- Understand the necessary business registration requirements.
- Choose a business entity best suited for the expansion.
- Open a business bank account, which may require local business representation or work with a bank that also operates in the home country.
- Meet all the compliance/documentation/registration requirements associated with starting a new business in the host country.
- Securing premises for business operations. This is relatively easy for businesses that only need office premises. But manufacturing or logistics-related properties are slightly more challenging to secure, especially without local help.
- Understanding the local labor laws, hiring practices, compensation trends, etc., before hiring your first employees and local management.
The steps may differ drastically from one global market to another. Foreign business-friendly countries have protocols in place and may guide you through every step of the process. In contrast, countries that discourage foreign businesses (even if they welcome foreign investment in local businesses) may have more convoluted systems that will need assistance that our expansion experts can help with. When navigating these challenges, you can contact Aadmi for a free consultation by visiting our website or contacting us here.