5 Considerations to Expanding Your Company Internationally
So you are ready to go global? Before you do, there are issues you need to consider first. There are many different ways to assess these issues in the external environment for doing business either in your home country or another country. Almost all of them use an acronym to help users remember all the dimensions, but these always seemed very academic to me. I prefer to be more straightforward and practical. So I don’t have another fancy acronym for you to remember, but I do have a list of five kinds of issues you should consider when you analyze a market for potential expansion.
Politics. This is the political and regulatory environment. How do the official laws and regulations affect the way you will do business?
Every year, the World Bank issues a report on how easy it is to do business in 187 different countries. The report measures how the regulations in ten areas affect the ease of doing business and ranks countries accordingly. The areas are starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. The report also measures labor market regulation, but does not include it in the rankings.
It’s important to dig down to the details to discover how the government is involved in business. China, for example, has state-owned companies. In South Africa the Black Economic Empowerment (BEE) initiative is taken quite seriously and prioritizing job and economic opportunities for Black South Africans is a very important aspect to investing in the country. Government officials are going to ensure requirements are fulfilled.
Infrastructure. The physical environment can make things easy or more difficult to do business. Transportation, communications systems, sanitation, water, and the electrical grid are all examples of infrastructure. When the systems are good it makes it easy to do business.
It’s not enough to know the rating of a particular country’s infrastructure. Once again you’ve got to get beyond the basic numbers to the details of the infrastructure to know how it will affect your business and the people who work for you. In many emerging economies, reliable electric service is rare. If you expand there, will you need to provide your own, reliable electricity, or will you allow for the disruptions that blackouts and brownouts can cause?
Here’s another example. In India and Brazil, there is a young, well educated, workforce hungry for opportunities, but logistics is a major concern. Many high-tech firms provide transportation for employees in order to minimize downtime and maximize productivity. Traffic is very congested in the cities and it can take hours to travel back and forth to work sites.
Something that seems simple, like participation in conference calls at non-peak work hours is normal in the US and Europe. People commuting to and from the office by car can be on a call undisturbed. Calls taken on a noisy, densely populated bus become impossible and can impede productivity, particularly working across time-zones.
When you’re analyzing infrastructure you should analyze the effect on your operations and also on your people. Ask yourself what special things you will need to do so your operations will run ethically and profitably.
Safety. Safety is important everywhere but it’s an especially critical in certain markets. In some parts of the world occurrences as extreme as kidnapping can happen. Foreign executives make good targets. They usually work for companies who will pay a ransom. And because they’re not familiar with the area, they may put themselves in danger without realizing it. Be aware of your surroundings and make sure you’re prepared.
Security has two aspects whether you’re analyzing the situation for people or facilities. First what is the threat level? Once you’ve assessed that you can develop tactics for preventing an incident or for dealing with one.
Society. Be aware of the strength of family ties. In countries where the people have exceptionally strong ties to family, the workforce may be less mobile which will affect recruiting. You may have to make provisions to include flex-time and support familial connections in countries where family ties are especially important.
For example, Volkswagen, in South Africa, grappled with how to handle days off for employees who had a death in the family. Two weeks for burial preparation and grieving is not unusual there. And sadly, given the high rate of disease, the rate of death is a bit higher than elsewhere.
Culture. There are many cultural aspects that influence the success of business negotiations. How quickly relationships are built, motivators for driving business, and the importance of third-party introductions. Be aware that money may not always be the key driver, but considerations you may not have thought of. It’s very important to have conversations with local partners to determine the best path forward.
If you take the time and make the effort to learn as much as you can about yourself, your company, and the market you’re considering, you are setting yourself and your company up for success in any market you target.