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Why Small Companies Should Think Globally

Why Small Companies Should Think Globally
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By Thursday, 29 August 2019 11:56 PM Current | Bio | Archive

Advances in technology enable companies to move swiftly into international markets, expanding their opportunities and brands on a global basis. As a result, ambitious business leaders seeking rapid growth are wise to consider an international strategy as a foundation for their organization’s success.  The questions is - how best to proceed?

Where to go?

The answer very much depends on the market you are in and the business that you are engaged in.  In the United States, we effectively now have full employment.  Along with increased immigration restrictions, these two opposing forces have created a skilled labor market shortage.  Companies therefore need to go to where the people are and not try to get people to come to where they are.

Going global isn’t always easy especially if done in conjunction with the growing pains of upscaling a startup. Building products for an international customer base and creating multicultural and multilingual brand awareness across borders incurs costs and adds complexity to the business. However, those early growing pains can lead to great success, providing an edge on competitors. 

Global expansion may also set your company up for a more successful sale in the future.  After all, today’s buyers want a company that can be successful in a global marketplace. This means that small U.S companies need to think globally right from the start.

Strategic Execution

Begin with an expansion strategy – and strangely that strategy could sometimes begin by not actually choosing the country to expand to but instead choosing the first senior person abroad you plan to hire.  For example, if you are a software company and you cannot hire and retain software engineers because your local market is too hot, you will need to look for talented engineers elsewhere, for example in India or in Eastern Europe.  Your roll-out strategy can therefore begin by finding a person who has the contacts to grow the local operation. Conversely, if you are planning to establish and grow a substantial manufacturing operation, local country incentives may be a factor driving your choice of location.  Whichever way, it is important to understand the local cultural milieu to both build and retain staff in a successful foreign operation.

It is equally important to look at the pool of labor that your company needs.  If it is manufacturing, there are many countries today that can provide workers at a lower cost than China.  Emerging markets that include Vietnam, Philippines, Bangladesh, Sri Lanka and Cost Rica, for example offer favorable alternatives with relatively stable political environments. 

Making it happen:

This is best illustrated by an example.  Let us assume that you have decided to setup a software development operation in India.  There are several considerations to keep in mind:

1. Set up of a corporate entity – it is important to work with an experienced provider of international expansion services who, for example, can help you decide if you should create a subsidiary or LLP, there being pros and cons to each option.  Once decided, the service provider will set the entity up for you, activate it and support it.

2, Finding an office – Be savvy about negotiating the right rent and terms as prices often go up when a foreign company is involved.

 3. HR matters – Employment laws for blue collar workers are stringent.  The reverse is true for white collar workers.  Jobs for skilled employees are plenty, so favorable “learning” oriented HR policies are needed to retain key employees. An experienced international services company can guide you through both mandatory and discretionary rules and regulations.

Expansion in terms of Tax Advantages:

People often think that there are tax advantages to international expansion. This is not often the case.  Rather, expanding internationally may be needed to preserve and grow your business.  It is advisable to steer clear of risky strategies involving structures developed purely to reduce tax with no business nexus.

Summary Tips!

Think about international expansion early in your company’s lifespan.   Be sure you have a budget that enables you to setup safely without cutting corners.  Understand the local country culture and the drivers to retaining local country employees.  Ensure you utilize the services of international expansion consultants with the international and local country expertise to assist you.                                                     

Shan Nair is the president of Nucleus, a one-stop global expansion solution for businesses and a consultant on international expansion.

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Advances in technology enable companies to move swiftly into international markets, expanding their opportunities and brands on a global basis.
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Thursday, 29 August 2019 11:56 PM
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