Global workforce

Top 7 International Expansion Methods for Businesses to Go Global

Mayank Bhutoria

After building a successful local business, the next logical step is expanding into the international market for revenue growth opportunities. International expansion enables a company to broaden its customer base, access global talent, and gain a competitive edge.

However, not all international expansion methods offer the same value. Some may offer more market penetration, revenue potential, or talent access than others. Also, some may require more investment, risk, or adaptation than others. So you need to choose a method of global expansion that best suits your business goals, resources, and capabilities.

In this article, we will discuss the different global expansion methods and their pros and cons to help you make an informed decision on your global expansion strategy

7 Methods for International Expansion

Here are the top seven international expansion methods. 

1. Licensing and franchising 

Licensing is among the most popular international expansion methods. In this method, a company gives another company a license to use its intellectual property, manufacture its products, or offer its services in exchange for a specified fee or royalty. 

For example, company A in the US manufactures an electronics part. If the company wants to expand its business to India, it can give a license to another company B in India, which will then manufacture the electronics parts on behalf of company A in exchange for a fee/percentage of revenue. 

Franchising is a type of licensing in which a company not only permits another company to use its intellectual property, but also grants access to its entire business model, including brand identity, operating procedures, marketing strategies, and ongoing support.

An international licensing agreement can be exclusive or non-exclusive and is usually a fast way to generate income.

However, businesses must do their due diligence about the licensee as they will grant all their intellectual property and wouldn't want their brand name to get tarnished. The same applies to the licensor, as they wouldn't want to be associated with an unpopular brand name. 

While this method of expansion is quick and easy, it involves many legislative requirements. Plus, licensing arrangements work differently in different countries, so it might not be a viable option for everyone. 

2. Exporting

Exporting is a traditional global expansion method that involves manufacturing goods domestically and selling them in another country. 

Since businesses can use their existing production facilities instead of setting up new facilities overseas, exporting is considered a low-risk and affordable way to enter new markets. 

However, it may involve high upfront costs, such as transportation, tariffs, and marketing.

3. Partnerships

Partnerships are another popular method of global expansion where one company partners with a local company with an established presence in the new market.  

Partnerships are mutually beneficial as both companies can leverage each other’s strengths and resources to achieve their goals. You benefit from your local partner’s knowledge of the market, customers, regulations, and culture. On the other hand, the local partner benefits from your expertise, technology, and brand reputation. 

4. M&A

Mergers and acquisitions, or M&A, are corporate transactions where one company purchases or merges with another. 

M&A is an easy and quick way to expand internationally, as the acquiring company gains access to the target company’s infrastructure, customer base, and brand recognition.  

However, it takes years to complete and can be expensive. In addition, businesses must ensure they comply with various legislative requirements, depending on the country. For example, in the US, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) provides that M&As cannot be completed until the involved organizations have filed the case with the Federal Trade Commission (FTC) and the Department of Justice. These agencies then determine whether the transaction will adversely affect US commerce under antitrust law. 

5. Collaborating with an EOR

Collaborating with an EOR is one of the safest global expansion methods. An EOR is a third-party entity that legally employs workers on your behalf, taking care of all the legal, regulatory, and administrative aspects of hiring and onboarding talent in different countries. 

Some of the benefits of EOR for global expansion include: 

  • Faster employee onboarding
  • Efficient payroll management
  • Comprehensive employee benefits administration, and more.

Partnering with an experienced EOR like Gloroots helps you hire, pay, and manage your global workforce while avoiding the risk of employee misclassification, non-compliance, and administrative overload.

6. Managing expansion in-house

This method of global expansion involves creating and implementing your own mobility framework depending on your business requirements. This method gives you more control and flexibility but also requires more research and planning.  A few factors you need to consider while creating your mobility structure are:

  • whether you will hire local employees or relocate existing staff
  • how you will manage your employees across different locations and cultures
  • what financial regulations and tax implications you will face
  • whether you will establish a physical presence or form local partnerships

7. Greenfield venture

This method of global expansion involves establishing operations in a new market by setting up a wholly-owned subsidiary. 

Greenfield ventures offer complete control and ownership, but they also require significant time and financial investment and involve high risk due to the complexities of navigating unfamiliar market terrains. 

This global expansion method works best for companies who have already gathered enough knowledge and experience in the foreign market and have the resources to build a new operation from scratch. 

International Expansion Modes: Pros and Cons

Entry Mode Pros Cons
  • Gives fast access to the market
  • Increased revenue and reach in the new market quickly
  • Paves the way for future collaboration
  • Cross-border legislations governing licensing are varied and complex
  • There can be a risk of third-party breaches
  • High legal fees
  • Fast market entry
  • Fewer risks since the products are manufactured domestically
  • Low degree of control
  • High transportation costs are involved as the products are shipped internationally
  • It’s a low-risk deal
  • The investment cost is shared between both partners
  • Partnership firms are considered local entities
  • The business cost is higher compared to other methods of global expansion, like licensing or exporting
  • If both companies have different work cultures, integration may be challenging, leading to conflict
  • It’s a high-reward international expansion method
  • Access to complete infrastructure and distribution framework
  • Potential to build stronger brand identity
  • Access to new talent pool
  • Involves high risks
  • Misalignment of culture may occur
  • Involves a lot of money, time, and resources
Collaborating with an EOR
  • Ensures full compliance and prevents employee misclassification, protecting you from legal risks
  • As the EOR is an expert in regulatory guidelines and legal requirements, your time-to-market speed is accelerated
  • Constant support throughout the collaboration period
  • Need to do proper due diligence to identify the best EOR for your business
Managing expansion in-house
  • You’re in full control
  • Needs a lot of time
  • Needs a lot of research
  • It can be costly
Greenfield venture
  • A high degree of control
  • Works best as a long-term solution
  • The business has easy access to local market knowledge.
  • Brings in new opportunities for the business
  • Needs a high amount of investment
  • Involves high risk
  • It’s a slow process.
  • It is intensive and requires complex strategy planning.

Factors to consider when choosing the best global expansion method

Each business is different and has different requirements. So, you must consider various factors to determine which global expansion method works best for you. 

Strategic objectives

Begin with understanding your strategic objectives and goals, as this will largely help you decide your global expansion method. So, ask yourself if you want to achieve economies of scale and market share or diversify your revenue stream, and then decide your expansion method accordingly. 

Local regulations 

Understanding the different laws, regulations, and standards to be complied with is one of the biggest challenges in global expansion. Hence, you need to research the local regulations for each expansion mode to determine which works best for you in the given situation.

Ease of hiring

Understand the ease of hiring in the local market. For example, setting up a foreign subsidiary may require more research, compliance, and investment than partnering with an EOR that can handle onboarding and payroll for you. Similarly, an M&A gives you access to a vast talent pool but may also carry some financial risks.

Internal expertise

Before expanding, evaluate your internal expertise and the resources needed for global expansion. Also, consider your infrastructure, technology, supply chain, human capital, and financial resources to gauge where you stand. Once you have identified any gaps, you can acquire the resources to fill them.

Availability of local partners

Evaluate and conduct due diligence to select local partners who align with your company's mission and brand values. If your local partners are not in sync with your goals, the collaboration might not be as fruitful and, in the worst-case scenario, can impact your brand image negatively.

Potential risks

Evaluate the potential risks of each of the expansion methods. Also, consider the various risk mitigation techniques to make the right choice. 

Expand Into Global Markets Efficiently With Gloroots

Partnering with an EOR like Gloroots can accelerate your global expansion strategy. Gloroots helps companies hire and onboard employees across 150 countries without setting up a local entity.

Gloroots takes care of all the legal and compliance requirements so that there’s no risk of employee misclassification that can lead to penalties and lawsuits. It also takes complete care of payroll management, taxes, and benefits so that you remain compliant with the local labor law.

Want to give it a try? Get in touch today. 

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