Although the concept of a multinational company is a relatively recent one, it has rapidly become an implacable part of the business growth lifecycle.
All of the companies listed on the FTSE 100 and the Dow Jones operate in multiple countries, as do a significant portion of smaller and medium-sized businesses.
For many, overseas expansion is often the only way to continue growing, once a business has maxed out its prospects in the domestic market. For others, going abroad is a way to attract exciting opportunities and try something new.
Whatever your motivation, it is important to remember that overseas expansion is challenging, no matter what size your business is. Here are some essential tips to get you started.
Nail Your Niche
The first step is to figure out your business niche and how it will translate to certain overseas markets. Remember, there is no use expanding, say, an athleisure business into a country where the market is already oversaturated.
You will need to do your research and identify where there is high demand and a low supply for certain goods and services. Alternatively, you might just want to take advantage of a more favourable market or regulatory climate in other countries, which is where niches like real estate or financial trading can be a good option.
Understanding Global Currency Markets
One of the crucial elements that people tend to gloss over when expanding overseas is how global currency markets, also known as forex, actually work. As explained in this comprehensive guide to forex trading, the value of different currencies relative to one another changes rapidly according to global events, meaning that the value of, say, the US Dollar to the British Pound, can fluctuate rapidly in a short period.
This means that any business with an overseas presence needs to be aware of what currency they are receiving for their goods and services and how they stand to benefit or lose from current exchange rates. Forex rates can have a massive impact on your bottom line, so stay on top of it and factor this into your budget planning.
Understanding Regulatory and Compliance Issues
No matter what country you are coming from, it is more than likely that the regulatory regime in the country you are expanding into differs widely from what you are used to. A business activity that is regulation-free in your home country might require a raft of permits and compliance activities before you can conduct that same activity in your new country.
Of course, the reverse is also true. Many business owners find that an overseas country offers more favourable and relaxed regulatory regimes, allowing them to try alternative business models and use the new regulations to their advantage. What is important is that you are fully up to speed on all compliance requirements in a new country before you set up shop there.
Overcoming Linguistic and Cultural Barriers
Finally, there are the language and cultural barriers you will need to consider. On the most basic level, you will likely struggle to conduct business in any country where you have no-one on your team who knows the local language. Beyond this, it is worth bearing in mind that business success often depends on your ability to navigate cultural norms and local business etiquette.
For example, you would struggle to find any business partners in China if you did not begin a meeting by accepting their business card with both of your hands outstretched, whilst following the etiquette imposed by the guanxi system. Always undertake comprehensive language and cultural training before expanding overseas.
With these essential tips for overseas expansion, you will be able to transform your local business into a truly international operation.
