Legal advisors, business insurance experts, and government agencies can all help with international expansion plans. The big picture of expanding a business internationally gets even more complicated when cultural differences come into play: there are countless examples of marketing gone wrong due to an ill-chosen name or packaging that had not been properly adapted. Entrepreneur & Business Website | Talk Business | Small, Medium Business Advice, Tips | SME | Success, 3 risks of international expansion (and how to overcome them), specialises in international business expansion, Managing your finances as a business owner, Why you should travel alone at least once. But before you take your business global, you'll want to consider the following pros and cons: Advantages of Taking Continue reading It is critical that you conduct market research on your product or service well before investing in the infrastructure required to expand into international markets.. But fully committing to setting up in a new country is lengthy, expensive, and full of compliance risk. The issue that can arise in this situation is that the currency fluctuates and falls before you are paid – although on the flip side, the currency could also rise before you’re paid, leaving you with more money…. Therefore, there are two key questions you need to ask yourself before moving into a new market: For example, in some countries, the lead-time between initial contact in an export market and a sales agreement can be years. Your goods and services may stay in a local warehouse pending foreign government inspection and the payment of “import” taxes. As if there are not enough uncertainties being in business, risk factors are multiplied when you expand into international trade. Grow 5 Risks for a Growing Business, and How to Manage Them With growth comes predictable risks. These are all risks you face when trading internationally, and you’ll need to understand how things work in order to avoid them. Weigh the benefits of your company doing business abroad against the potential pitfalls. Establishing whether you should expand your business to another location internationally can be a difficult and complicated decision, and careful consideration of all the advantages and disadvantages is essential for making the right choice. Risks fall into many categories including: personal, business and competitive. Business Risks: Instability, Ineffective Management, Financial Loss. Experiencing a drop in demand as a small business can have major implications. Companies looking to expand internationally must bear in mind the large number of permits, licences and registrations they must acquire to ensure that their company is compliant in their new market. Or, there may be an event that affects a business in just one country, and not in others. Benefits of Expanding Your Business Internationally. Next time you say “expand my business,” therefore, make sure that you include a business international expansion perspective, which allows you to expand business internationally using a global expansion of business mentality, and your more optimized business plan for expansion. Failing to adapt global business models to the local market. The first risk that comes with expanding outside of Australia is having to deal with unfamiliar companies. Facebook 0 Tweet 0 LinkedIn 0 Print 0. What To Consider When Expanding A Business Internationally: Types of risks involved. Another consequence of expanding internationally is that you can introduce a time zone disconnect between your sites – as an example, an American company expanding to India might find themselves in a predicament, as the 9am-5pm office hours in America would correspond to 6:30pm-2:30am Indian time! In some places, this is a streamlined process. Spreading risk – We all know that saying about not putting all your eggs in one basket…the same is true for your business in one market. When a company moves into a new market, business models should be modified to reflect local preferences, customs, and habits. Both Nike and IBM reportedly gained access to an additional 170 million consumers by launching operations in the Netherlands, and UPS recently followed suit by expanding into European markets. Whether you are importing materials or exporting finished products, you will encounter new issues. Here are some of the risks of doing business internationally that Australian organisations should be aware of. International business involves exposure to local economic conditions, fraud, and bribery. How to Decrease the Risk of Doing Business in Foreign Markets ... internationally because co-employment does not exist in the same form elsewhere. His perspectives have been derived primarily from the travails of several major brands, including Walmart, IKEA, and Tesco. International firms have access to a larger workforce and a bigger customer base. The main cultural risks facing global businesses include: 1. Finally, there may be risks related to political corruption and personal security, especially when doing business in unstable regions like the Middle East. Expanding a business into new markets can bring many opportunities for growth and increased competitiveness. The Internet has opened up a world of opportunities to entrepreneurs wanting to start a business selling products or services. may have different meanings outside your domestic market. I am the Founder and CEO of Startup Professionals, a company that provides services to startup founders around the world. Entering into new markets can be complex. Settlement risk depends on the various risks like risk of the borrowing company’s ability to meet its debt service obligation in time, represented by the risk of its business, financial risk, market risk, labour problems, restrictions on dividend distribution, fluctuations in profits and a … What follows is a roadmap of risks to prepare for when considering expanding into a global market. Taking your company global can be both daunting and rewarding. Domestic companies can greatly increase production and profits by expanding into global markets. Don’t place all your eggs in one basket is as true of business as it is anywhere. Companies can start to export and serve international buyers to help increase demand and profits. In an increasingly global business world, it has become common for companies to consider international expansion. How to take your business international. Take Your Company Public In India, Selling To A Reluctant Audience: Marketing Hacks From Late-Night TV And The Fitness Industry, Seven Reasons Iran Could Become An Entrepreneurial Powerhouse, 7 Questions To Help Kickstart Your Content Marketing. Taxi drivers block an avenue to protest against American multinational taxi-booking mobile... [+] application-based UBER, in Rio de Janeiro, Brazil, on April 1, 2016. Business can be interrupted by political problems such as insurrections, problematic diplomatic relations, hostility from locals, and volatile foreign governments. When you set up a company in a new country, chances are that you will be getting paid in the local currency instead of your own. This document evaluates your needs, goals, readiness and commitment to operating abroad. Expanding into a new market means adopting a new set of policies and rules, which, of course, means taking on different taxation regulations. In general, the risks of conducting international business can be segmented into four main categories: country, political, regulatory and currency risk. The Risks and Rewards of Expanding Your Business Overseas. The inability to accurately predict or prepare for sudden changes in the local economic environment creates risks for the markets you know, but can wreak havoc for global initiatives. Failing to adapt global business models to the local market. Few — if any — small or midsize American businesses are unaffected by the global economy. Expanding Globally into Overseas Markets – Osborne Clarke There are many legal issues to consider when expanding globally – creating new entities, tax implications, employee hiring, etc. Establishing an entire HR department can strain your initial set up budget and take away a huge chunk of your time during the initial establishment. When expanding into a new market, a business must adapt and operate accordingly to the country’s regulations. As with any major company changes and business restructures, it opens up a slew of risks and these can simply be amplification of existing ones or new risks created due to expansion. This could be a problem for a newly set up business that relies on a high volume of sales with low profit margins, as it could greatly change your profits. Business growth brings pressures to a system that may not have had the time/experience to get geared up for increased production or services. This may be caused by an economic or political event in that country. Conduct research on your foreign market, evaluating your advertising methods. Sanctioned countries. Expanding a business is a daunting step for any business owner or entrepreneur – but the decision is even more complex and risky when you’re planning on expanding your business internationally whether you’re only going into a single country, a region, or multiple countries. Here are the steps to take, the mistakes to avoid, and the basics of exporting and importing. The major international risks for businesses include foreign exchange and political risks. In a new book, “Global Vision,” by NYU Stern School of Business scholar and leader Robert Salomon, I finally found some great insights on what to look for, and how to make the necessary changes. What type of outside services are best for business, Access inside offshore business information at OffshoreCorpTalk. Country Risk. In an increasingly global business world, it has become common for companies to consider international expansion. application-based UBER, in Rio de Janeiro, Brazil, on April 1, 2016. Before you begin to set up entities and hire staff abroad, it’s vital to understand the new marketyou plan to expand into. Nevertheless, the global business scene can expose companies to a wide variety of … Here are some ways in which international expansion may or may not be the right move for your business. Large businesses, as well as small, still fail often by not addressing the very real cultural, economic and political differences. Your company’s materials, supplies, and services might already be purchased from outside the country. By Michael Evans | In: Business Planning, International Business, Legal, Starting a Business. When expanding your business internationally, your communication strategy should therefore be specifically tailored to your target market and to the population you are addressing. With the availability of high-speed Internet and social media access around the world, it’s easy for entrepreneurs to assume that the world is just one big homogeneous market, and project their business will scale accordingly. The first solution would be to have your clients pay you in your home currency, meaning that your customer will cover your risks. Product risk An SME owner must first conduct research on whether there are certain requirements or expectations that their product can fulfill in a specific market. Published Feb 23, 2021. Yet, I believe the conclusions and strategy recommendations are equally valuable for every new entrepreneur who intends to expand outside their local country: My summary recommendation is to quantify the context difference or institutional distance to each new market. Countries and emerging markets that may offer considerable opportunities for expanding global businesses may also pose challenges, which more established markets do not. Growing businesses invest considerable time and energy pursuing new contracts - the bigger the better. Expanding a business Internationally – Risk factors. Currency restrictions also can play a part in how you will do business in a foreign country as well as export-import laws. My background includes a 30-year track record…. Before expanding your company overseas, however, be aware of the additional risks of the foreign trade market. Tags: help your business grow , how to grow a small business into a big business , risks of expanding a business , new business plan , financing new and growing business ventures , small business funding sources A risk when expanding internationally is remaining compliant in this new country and ensuring you have all the proper procedures in place – failure to do so could result in costly penalties. Human resources play a crucial role in helping businesses expand internationally. You should carefully consider the pros and cons of expansion before pursuing business growth. I'm now in "give-back mode" as a mentor to startup founders, and an Angel investor. According to such theories, it costs less for a company to go into countries that are culturally similar to your own. Assistance for exporters A business with an international presence must deal with the different time zones that exist on the planet. Solution: Develop a strategy, a business plan, and a budget The absolute worst thing you can do is rush into international expansion without proper planning. However, expansion of any kind comes with some degree of risk and in … However, expanding your business isn't without risks. As businesses grow, so do their opportunities and risks. Product risk An SME owner must first conduct research on whether there are certain requirements or expectations that their product can fulfill in a specific market. Business growth – Perhaps one of the more obvious advantages is that you are greatly expanding your pool of potential customers by making your product or service available internationally. International expansion reduces the overall risk to the business of any such event. As U.S. and Canadian businesses plan to expand their business overseas this year, their executives are worried about supply chain failures, data breaches and political instability, according to … Another solution is to seek expert advice from a company that specialises in international business expansion and/or international accounting, so you can receive expert assistance. To avoid disappointment, be sure to deal with all red tape far in advance – as long as you are organised and stick to your timeline, you can efficiently and effectively set up your business. Thus, it is for crucial for CEOs and business leaders to understand its full impact and determine if the rewards outweigh the risks. It’s true that international business expansion can be daunting, and these are just some of the risks you may encounter. Consumer attitudes and behaviours are highly influenced by culture. How to know when it’s time to expand your business. In general, the risks of conducting international business can be segmented into four main categories: country, political, regulatory and currency risk. There are ways, however, to reduce or avoid the inherent risks in this process. The risks of business are real, otherwise everyone would grow their business. However, companies getting ready to establish their presence within new jurisdictions must be prepared to manage legal and regulatory obligations to mitigate some of the risks that come along with expanding a company internationally. To make sure that your finances are all taken care of properly, it is often wise to outsource your accounting to a local service who knows the market and will guarantee that your company is compliant. AFP PHOTO / YASUYOSHI CHIBA / AFP / YASUYOSHI CHIBA (Photo credit should read YASUYOSHI CHIBA/AFP/Getty Images), 5 Tips To Finding The Best City For Your Startup, 8 Secrets To Pushing Your Startup Ahead Of The Crowd, Want To Serve The World's Poorest Citizens? The guides also provide information on potential risks including human rights issues, bribery and corruption, terrorism, criminal activity and intellectual property. Just because you think your product or service will thrive in a new country doesn't mean it actually will.Diego Caicedo, co-founder and CEO of OmniBnk, which operates in multiple Latin American countries, said scaling across borders is complicated and expensive regardless of a company's size, and the process c… Opinions expressed by Forbes Contributors are their own. And for businesses who have achieved stateside success, the allure of expanding internationally can be tempting. You should choose the means of communication you are going to use, according to the targeted audience’s habits. Growing your business at home comes with its challenges – and these are only accentuated when you expand your business internationally. However, expansion of any kind comes with some degree of risk and in many cases, that risk is higher when dealing with international factors. Conducting business internationally carries many risks that domestic business does not. Here, Galvin International explores the ins and outs of an expansion into Canada, from the countless benefits to the challenges that may need to be overcome. My background includes a 30-year track record as an executive in general management, computer software development, product management, and marketing. 1 – Unknown trading partners. The main cultural risks facing global businesses include: 1. It creates timing issues. What Does A Healthy Business In The 21st Century Look Like? We take an integrated approach to ensure growing businesses are protected and able to take advantage of every opportunity. Foreign economic growth creates opportunities to tap into new markets, target new consumers/buyers and expand a company’s brand awareness. In the past, people working in international business embraced the notion of cultural distance. Business, no matter the customer base or industry, will always revolve around the principle of supply and demand. The greater the difference between your current and the new context, the more challenging it will be to expand there. It will always take smart entrepreneurs, armed with the latest knowledge and modern analytic tools, to minimize the risks and maximize opportunities.