Too Much Time Onboarding?
So you’ve probably done your due diligence on the right market to expand into and are now searching for the right approach to make it happen. Expanding your business beyond local borders offers substantial benefits, from reaching new markets to accessing untapped talent pools. However, without a well-thought-out global expansion strategy, you might face difficult hurdles that can make or break your business.
Consider the case of Samsung. The electronics giant encountered labor compliance issues in its operations in Brazil. The company faced allegations of poor working conditions and violations of local labor laws, leading to legal penalties and reputational damage.
To succeed in global expansion, companies must have a well-thought-out strategy to ensure your business teams consider doing market research, understanding cultural differences, and ensuring employe onboarding processes align with labor compliance.
This article will help you understand what goes into a global expansion strategy with actionable steps to plan your new embarkment.
Why Do Companies Embark On Global Expansion?
Companies embark on an expansion strategy driven by one or more of the following reasons:
● To access new markets and customers: Global expansion allows companies to reach untapped markets and customers, diversifying their revenue streams.
● To foster financial growth: By expanding globally, companies can boost their financial growth potential through increased sales, economies of scale, and access to high-demand markets.
● To diversify their talent pool: Global expansion introduces diversity into the talent pool, fostering innovation and fresh perspectives by recruiting employees from diverse backgrounds.
● To scale their operations: Expanding globally enables businesses to scale their operations across a broader geographic area, enhancing production capacity, distribution networks, and global brand recognition.
Why Do You Need a Global Expansion Strategy?
Before we delve into the intricacies of crafting a successful global expansion strategy, let's understand how having a strategy serves as a crucial tool for foreseeing potential risks, evaluating opportunities, and ultimately guiding you toward the ideal path for expansion.
Foresee and Mitigate Risks
Operating in multiple countries can help businesses spread their exposure to various factors, such as political instability, changes in government policies, or regulatory changes, which can significantly impact business operations.
Political risk: Take Google as a prime example. When Google launched in China, it faced challenges due to censorship regulations imposed by the Chinese government. China then banned Google. The Chinese government maintains tight control over the internet, actively screening and blocking anything that it considers to be critical of the Chinese Communist Party (CCP), politically sensitive, or detrimental to social stability.
Government policy shifts: Government regulations constantly change, which presents a daily challenge for businesses. These dynamic regulations can be particularly intricate when onboarding talent from the US, as different states adhere to varying tax and employment norms.
For instance, in late 2023, Illinois and Minnesota introduced statewide paid leave laws, with expectations of other states following suit. Staying well-versed in these policies ensures a seamless hiring, onboarding, and workforce retention process. To navigate these complexities, companies may choose to hire a local official or collaborate with a global PEO (Professional Employer Organization) to stay abreast of local regulations, covering aspects from business registration to document filing and permit acquisition.
Cost risks: Understanding the cost structure in a country is vital. For instance, in high-wage countries like the United Kingdom or the United States, hourly wages can range from $30 to $50 or more. In contrast, lower-wage countries in Southeast Asia may have hourly wages ranging from $1 to $10. European countries like Germany and Sweden often have average hourly wages of $30 to $60 or higher. By considering these global payroll costs and ensuring compliance with local laws, you can effectively manage your budget and human resources for a smooth market entry.
India's vibrant tech innovation landscape is an example of how an effective global expansion strategy allows for opportunity assessment, such as tapping into local talent and expertise. For example, Apple extended its reach beyond Tier 1 cities like Hubbali to acquire tech talent. The expanding startup ecosystem in India and government programs like Digital India drive this development. By aligning your approach with local strengths, companies can mitigate recruitment challenges and labor shortages, bolstered by the right global expansion strategy.
Directs You to the Right Approach
A thoughtfully designed strategy steers you toward the most suitable global expansion method, be it mergers and acquisitions, branch office establishment, or the utilization of Employer of Record (EOR) services.
For example, EOR providers help you onboard new talent from a country without the need to set up a local entity. This enables swift onboarding of local talent on a global scale, accelerating your expansion efforts. Whether your business is small or large, EORs facilitate cross-border hiring seamlessly, eliminating the complexities of global compliance and payroll. This flexible strategy remains advantageous in a dynamic market landscape where adjustments may be required.
5 Steps For Building a Successful Global Expansion Strategy
Here are five key steps to guide you in building a strategy to drive your business toward success.
Step 1: Establish clear goals and objectives
The first step is to provide your teams with a clear sense of direction - objectives for the short term and long-term
Establishing company-wide goals allows you to harmonize global expansion with your overarching company vision and discern how it can actively contribute to accomplishing these objectives. This process aids in prioritizing the various facets of global expansion, allocating a suitable budget, selecting your target market, establishing revenue benchmarks, and creating a meticulously defined timeframe for achieving each stage of the expansion journey.
A well-defined goals and objectives will steer your global expansion strategy with precision and focus.
Step 2: Conduct thorough market research
This process is essential for uncovering opportunities and challenges, ensuring a clear understanding before investing valuable financial resources in your expansion strategy.
This involves exploring various aspects, including immersing yourself in the local culture, studying consumer behavior patterns, assessing economic conditions, analyzing the industry landscape, understanding the regulatory environment, gauging demand for your products or services, identifying potential competitors, and conducting a comprehensive analysis of their strengths and weaknesses.
This knowledge serves as the foundation for customizing your offerings and strategies to cater to the specific needs and preferences of each market. Furthermore, it enables you to optimize profitability, mitigate risks, and instill confidence in stakeholders and investors, validating the soundness of your global expansion plans.
Step 3: Identify possible legal and compliance issues
Complying with local laws and regulations is crucial for successful global expansion. Remember, every country has its own set of laws and regulations governing various aspects of business operations, including employment, taxation, intellectual property, data protection, and more. Failing to comply with these local laws can result in legal penalties, fines, and even the possibility of your business being shut down in that region.
In recent years, numerous companies worldwide have harnessed global talent, with 55% of decision-makers expressing a preference for hiring internationally to secure superior talent.
While this approach offers several advantages, managing an international workforce also presents numerous challenges. One common legal and compliance error is the misclassification of workers, exemplified by Uber in the UK. In this case, the court ruled that Uber drivers were workers and not contractors. This led to Uber paying hefty fines and unpaid benefits and taxes.
To ensure a smooth global expansion, it is best to conduct thorough research the employment, tax, data protection, and intellectual property laws of the countries in which you intend to operate. Ensure that your business structure, contracts, and operations adhere to these regulations to avoid legal complications and safeguard your reputation.
Step 4: Seek guidance from local partners and experts
If you're uncertain about how to navigate local laws and regulations, collaborating with local businesses or experts can offer invaluable insights and support. These partners can assist you in understanding and managing cultural nuances, establishing crucial relationships with key stakeholders, and accessing essential local resources.
For instance, a successful global expansion and business-level strategy must consider the challenges associated with global hiring. To effectively promote your product in a new territory, you'll need highly skilled employees with specific expertise.
For example, if you're considering hiring in the Philippines, it's important to understand that contractors have specific tax considerations that differ from those of regular employees. Also, full-time employees have specific threshold regarding withholding taxes. Having a specialized partner like a Professional Employer Organization (PEO) or an Employer of Record by your side will help simplify this process and ensure that you employ staff quickly and compliantly.
Step 5: Decide on a comprehensive global expansion strategy
Based on your research and analysis, develop a comprehensive global expansion strategy outlining your approach to entering and succeeding in the target markets.
In your strategy, you must articulate your distinctive value proposition, delineate your marketing and sales strategies, establish efficient supply chain management protocols, and detail your customer service plans. However, remember that flexibility is key; your strategy should be agile enough to respond to evolving market dynamics and unexpected obstacles.
Your global expansion strategy is not just a blueprint but a dynamic framework that guides your actions, helping your business thrive.
Develop the Right Global Expansion Strategy with Gloroots
Glooroots can speed up your global expansion game and help you:
● Streamline the process of hiring and onboarding international employees: With Gloroots, companies can hire employees in over 150 countries without the need to set up a local entity, saving time, resources, and money.
● Stay 100% compliant: Gloroots takes care of all the complexities of international employment, including payroll, taxes, benefits, and compliance, ensuring that companies remain compliant with local laws and regulations.
With Gloroots as your trusted partner, you can confidently expand your presence in new markets, assured of reliable and compliant support at every stage of your journey. Want to learn more? Schedule a call today!