Global expansion provides businesses of all sizes with many advantages.
- Accessing a larger and more diverse talent pool beyond a specific location.
- Faster adoption and acceptance into new international markets that allows your company to gain a competitive advantage.
- Accelerates company valuation and diversifies your revenue streams from new markets.
- Ability to have coverage around the clock as employees or contractors are based in different timezones.
- Provides more freedom for employees to live and work where they deliver their best results. This reduces turnover and also leads to higher productivity.
But as exciting as it is to expand into new markets, many companies fail in their efforts.
After chatting with customers, experts, and through our own experiences in this space — here are seven reasons companies fail at their expansion efforts.
1. Global Expansion is Not a Priority Among Leadership
Whether it’s the C-suite, founders, the board, or a combination — the leadership team is often not aligned around their company priorities.
And those that fail their expansion efforts often put going international at the bottom of their priority list.
While global expansion might be something leadership wants to do, everyone else at the company may not be as concerned with the process and operations to ensure success. And then often miscalculate the deep understanding of the time and effort around it.
As Klaus Børme Wehage (Managing Partner at Global Class) mentioned on a past webinar with us, “They often are prioritizing new products and new segments, but new markets are the lowest priority. Yet going international often has the biggest impact on company valuation.”
2. Ignoring Local Market Research
Expanding into new markets can be a goldmine for your company.
But if you think your company can just launch into a specific country and rake in the cash, you’re in for a rude awakening.
Although you can get lucky with that approach, don't count on that being successful every time you move into a new global market.
Why? Well, every country is different in their needs and expectations of products or services. Not understanding that can lead to plenty of wasted time and money.
If you didn’t know, opening a local entity in another country can cost $20k-$150k on average. And that’s per entity and not including ongoing business or maintenance fees.
Before spending that kind of money, your company needs to understand a few critical things in the market research:
- What the local demand is that your business provides.
- What the current competitive landscape looks like.
- Any barriers or limitations that could stall your potential expansion.
3. Not Understanding Local and International Laws
Every country has their own set of labor laws, rules, and regulations.
Your company has to maintain compliance with these laws or face significant legal penalties, fines, and extensive issues with establishing a presence in that market.
Some of the regulations include how privacy data is handled (think GDPR), restrictions on imports or exports, how you hire and terminate employees, employee misclassification, etc.
Google found themselves in trouble a few years ago when they failed to comply with local laws in the UK, Europe, and Asia. There are laws in those regions that mandate temporary workers be paid equal rates to full-time employees performing similar work.
It's important for you to understand the laws. Otherwise, your company may find itself in need of hiring attorneys, accountants, etc.
And if it seems daunting and confusing to navigate it all, you can let an Employer of Record provider like RemoFirst handle compliance, local taxes, payroll, and more.
That way you can employ full-time or international contractors without worrying about fines, misclassifying employees, or spending a lot of time and money navigating laws.
4. Not Adapting Your Branding
While you already have a defined brand in your homebase, it doesn’t mean this perfectly carries over to other countries. Local markets may resonate with different messaging, branding, and experiences with your business.
Does it mean you have to build a completely new brand from scratch? No, but do your research and be prepared to be adaptable for a successful expansion.
This happened to Uber when they were expanding to other global markets.
“So Uber was very successful in a lot of markets, but they very much had this disruptive approach. You know, we're going to take our model and shove it down the throat of every municipality in the world.
And they were very successful in the U.S., but China, Indonesia, and a number of other markets, they lost out. Or had to downshift to another strategy and not stay there directly. And they realized over time, this need to not just do things the American way or the Uber way, but to do things the local way.” - Aaron McDaniel, Managing Partner at Global Class.
5. Lack of a Global Operational Plan
Okay, so you may have a good operational system in your current market. But does that carry over to new local markets?
You may not know the answer yet, but it’s something you need to explore with your team to ensure a smooth transition.
Set time aside to analyze all the components of your operational plan.
Think about everything from your financial planning and how to handle economic uncertainties, the tech stack, current infrastructure, supply chain management, and anything and everything in between.
Moving into an international market can fail FAST without a strong operational plan in place that aligns with local processes and expectations of customers.
6. Ignoring Local Cultures
Often, companies think adapting to the local culture comes down to:
- Website translated into the local language.
- Adjusting help articles and product manuals.
- Having an ambassador or two that speak the same language.
While your company should definitely do those things, it’s not all you have to consider.
You need to understand the business etiquette of the countries, how people buy, and what generates trust for your brand and products or services.
If we go back to the Uber example from number four, their initial expansions failed because they stuck to the American way of doing business. And that just did not connect well with other international markets.
It’s why it’s important to hire and invest in local teams and leaders in that country. They’ll have a better understanding of the market and how to properly build your business there.
7. Unsure of How You’ll Approach Hiring
When it comes to global expansion, the best step is to start hiring talent from the specific countries you want to expand in.
These are employees or contractors that have a better understanding of the local markets and know the cultural differences to help guide your company growth in the right direction.
But to legally employ someone in another country, you have to know HOW you plan to do that in order to maintain compliance.
There are some options and it depends on your commitment level, timeframes, and the money your company is ready to invest. Here’s the common ones:
- Opening a physical office in that country to establish a local presence.
- Work with a local Employer of Record to help set things up.
- Choose an Employer of Record provider with their own local entities.
- Use an Employer of Record provider that works with local partners.
Get Global Expansion On the Right Track
Phew! It seems like quite a bit to know and understand, right? It’s why startups and small businesses are often intimidated by global expansion.
However, it’s really about building a checklist, getting your operations in order, and choosing the right path to getting your legal entity established in the countries you want to go to market in.
Today, that pain of global expansion is getting more relief thanks to innovative technology and new services. It’s why we exist at RemoFirst.
We believe every company should experience growth in new markets and have the opportunity to employ the best talent, no matter where they live.
And while it’s important to be compliant, companies should not have to be bogged down by complicated laws and expensive processes to get started.
It might be time for RemoFirst
If you are ready to expand your business globally, employing talent is a major step. With our Employer of Record platform and services, you can quickly hire international talent and maintain compliance with all the local laws and regulations. We handle it all for you, so you can focus on your business growth.
