Expanding overseas: have you decided it’s time to broaden your organisation’s operations? Given the rampant globalisation of recent decades, spurred on most recently, by our adaptation to COVID – including borderless workforces, and the massive increase in how we use technology – the concept of expanding overseas is increasingly appealing for many Australian organisations.
There are several ways to achieve success in this venture: yes, expanding overseas is stressful and complex. But with so much empirical evidence and hard data on how to best approach this mission, it’s arguably easier today than ever before.
In today’s Q&A post, we’re going to take you through some of the more practiced methods for expanding overseas. These are the methods you’ll need to research further, to achieve your global expansion, as not every option is right for every business.
1 Expanding Overseas: Where Do We Start?
A proven, lower-risk strategy when commencing your expansion journey, is to initially proceed with a very light footprint. Many companies withhold infrastructure investment or even hard, local costs, until their overseas operation is established.
This is a great way to keep costs down initially and sets your company up for a healthy long-term ROI.
The caveat here is this: don’t remain out-of-sight for too long. Why? Because nothing can replace the value of people on the ground, in your foreign location. Local talent is priceless, especially in the early stages of expanding overseas. A strong global workforce strategy will allow you to engage workers who can evaluate the market, provide daily insights, identify opportunities in your sector and help you set the right expansion pathway.
Using an international Professional Employer Organisation (PEO) to employ local people is a great option especially if you’re unwilling or unable to establish a legal entity in the international market. More on that later.
2 Expanding Overseas: The In-House Approach
This is the option where you have most control – and also, potentially, most complexity.
In managing your own in-house expansion, you develop the roadmap and expansion method that you believe is best for your business. It requires a lot of time, research, and strategic effort.
Some of the key factors to consider with an in-house approach include:
- Local employment legislation and regulations
- Financial regulations and compliance issues for overseas market entrants
- Undertaking a physical presence or partnering with a locally based organisation (known as an In-Country Partner, or ICP)
- Local hiring practices
- Workforce management practices
- Local supply chain insights (if relevant)
- Considerations for expatriation or local hiring
Key guidelines for undertaking the in-house approach include:
- Adopting a clear product/service strategy
- Establishing company buy-in; the foundation of your international operation needs to be an aggregate of your current operation. And the support of your existing workforce and key stakeholders will be crucial for success
- Technology considerations to support expansion
- The team: who will lead and help facilitate the process for expanding overseas?
- Research: all points above must be researched thoroughly
Expanding into global markets can offer companies of every size opportunities to diversify their operations, reach new customers, and tap into new sources of materials and talent.
3 What About Exporting to Other Countries?
Exporting is a hugely practical, proven, and popular means for expanding overseas.
What are the pros of exporting?
- It’s a simple entry to a new market. If you’ve done your research and you’ve determined demand for your offering, you have a great reason to enter this new locale
- Engaging local marketing agencies can help to successfully impact this new market, and provide priceless insights from local operators
- Local distributors help to reduce the burden of transportation and reaching all market corners
What are the cons of exporting?
- A significant financial investment is required, to undertake exporting
- Environmental factors may impact your ability to transport goods to another country
- COVID has placed enormous strain on global supply chains throughout the past two years: this needs to be a major consideration, in terms of the investment risk you’re prepared to take
- The cost of tariffs can be crippling
- The cost of fuel is currently very high; this may be a major commercial deterrent to exporting
4 What About Mergers and Acquisitions?
Mergers and acquisitions are the commercial arrangement where two organisations merge, or one business is consolidated into another.
Cross-border merges and acquisitions are on the rise across the globe, thanks to the advancement of digitisation which has simplified and enhanced merger opportunities.
There are several precautions to consider:
- Local legislation: in some countries, there are restrictions placed on foreign ownership of local business entities
- If your company doesn’t have the size or scope to chase industry domination, there’s a high risk of failure. According to Wharton, between forty and sixty percent of M&A ventures fail to increase the organisation’s market value. Robust research and a realistic lens on your capacity is key
- M&A can be costly. Much of the cost depends on interest rates and currencies. However, if the acquiring firm has a stronger home currency, the process can be affordable
M&A can be a quick solution to enter a new market – given your business will be merging with or taking over another business with an established footprint. But be cautioned: it’s never simple or straightforward.
5 Expanding Overseas: What is a ‘Global PEO’?
A global PEO (Professional Employer Organisation) helps companies to hire workers and expand operations in offshore locations, without having to establish legal entities in that foreign jurisdiction.
The PEO takes care of related issues including HR, payroll, tax, finance, and accounting issues. It makes expanding overseas more simplistic and achievable, as no legal entity liabilities are incurred, contractor risks are greatly minimised and a faster speed to market is achievable.
The PEO takes on a significant level of responsibility for you. They’ll help you uncover how well suited your infrastructure is for expansion to the target location, and how well suited the offer is to the new country; they’ll also research the financial, legal, and cultural implications and immigration laws.
The PEO will also help you expand progressively, in line with your business plan and goals.
Expanding overseas is a major business growth initiative. And often at the core of an organisation’s long-term business plan. Remember this is a long game; establishing an entity or operation in another country takes time, knowledge, and a team of honed expertise. Be proactive in your approach, when expanding overseas. Research your market and make sure your entire team is on board. In this way, you’ll make your global reach a long-term business success.
As one of the world’s leading providers of contingent worker management solutions, CXC is well positioned to optimise all elements of your contingent workforce strategy. With operations in more than 50 countries across five continents and decades of experience, we can assist with every aspect of your program.