7 Problems Businesses Face When Expanding Abroad

Business expansion to another country is exciting — for the most part. While it provides new growth opportunities, it also poses countless challenges that business owners like yourself must be prepared to face.

There are various moving parts in international business expansion, many of which can overwhelm even seasoned business owners. Regardless of the difficulty of the process, you must prepare to meet and overcome these challenges along the way.

Without a proper plan, enterprises set themselves up for financial calamity. This article will help you outline businesses’ different problems when expanding internationally and a few solutions to avoid such instances.

7 Problems Businesses Face When Expanding Abroad

The problems that businesses face come in many forms. Below are seven common challenges you need to prepare for.

1. Minimizing expansion costs

Expanding business operations is a high-priced endeavor, from establishing the necessary infrastructure to adding more employees to the company payroll. The overall costs of global expansion could be enough to put businesses dangerously close to bankruptcy if owners aren’t careful.

Careful planning is, therefore, non-negotiable. Consider ways to minimize your costs before beginning the expansion process. For instance, you may find that dispatching an initial batch of employees may be more cost-effective than hiring a new, local workforce. You may also see a better location to set up offices, one with low rent and cost of operations.

2. Dealing with foreign politics

Politics affect businesses in many subtle yet significant ways. For instance, if a country doesn’t have a good relationship with another, it can affect factors such as the importation and exportation of goods and the associated taxes. These effects can complicate and potentially increase the cost of running a business dependent on those goods.

Foreign governments will also have their own set labor laws and infrastructure, which can influence the state of the local economy, and, consequently, how businesses operate.

Hence, you need to know what you’re stepping into when selecting a country to expand your operations. You can get up to speed on the latest news to help support your expansion strategies. 

3. Overcoming cultural differences

Consider the countries with unique cultures for a successful business expansion. Disregarding a country’s culture could complicate relationships among employees and clients. Culture includes social norms, holidays, and work ethic, to name a few.

A language barrier is one of the biggest cultural differences you may face. Not only could it hinder employees from working well together, but it can compromise clear communication. For example, your company’s marketing message may not translate well to a local audience.

Cultivating an inclusive workplace when expanding your business to another country is vital to help employees understand each other and the local culture more. Encouraging inclusivity will also help eliminate racism in the workplace

4. Managing and hiring remote employees

Onboarding talented and experienced local employees is an integral process you have to do. These employees can offer you critical knowledge of the best practices for operating a business in a new country. However, acquiring top-tier talent is much easier said than done.

Your hiring managers shouldn’t only focus on finding great talent. They should also consider the cost implications of a remote workforce — such as local tax laws, social security costs, and equipment expenses.

It would be best if you worked closely with your HR officers to onboard the right people for your expanding business. Likewise, it would help if you collaborated with your HR department to manage remote employees better — a crucial process ensuring employees are engaged.

According to Gallup, around 15% of employees are actively disengaged when their managers don’t hold them accountable for their work. You must keep a close eye on your remote employees to ensure that the team works together, despite the distances. 

Read Also: Payroll Management for Small Businesses: Everything You Need To Know

5. Stabilizing your supply chain

Ensure you don’t disrupt your supply chain when expanding your business internationally. This can quickly become complicated depending on the country you’re expanding to. For instance, if your business ships goods from Europe to Australia, it must deal with the associated costs and time for the trip.

However, distance may not be the only factor complicating supply chain management. Tensions among governments can significantly affect how certain countries import and export goods. These situations opened ways to “friend-shoring” and “ally-shoring.” These methods emerged as a solution for many businesses struggling with their supply chains.

Each company has specific needs that need addressing. However, there isn’t a single correct way of solving supply chain problems since each business is unique. What’s important is that you carefully assess the expenses attached to managing international supply chains and the trade politics involved to avoid disruptions in your processes.  

6. Complying with local regulations

Complying with a country’s local regulations should be among your priorities as a business owner looking to expand operations. Regulations and compliances include tax obligations and labor laws, to name a few. This can pose detrimental effects if addressed incorrectly or not at all,

Before expanding your operations, you should familiarize yourself with the country’s local regulations. Failure to comply with specific regulations can result in costly legal trouble and damage your brand reputation.

To make it easier on your part, you can try reaching out to local lawyers and tax accountants to ensure your business operates smoothly and legally.

7. Competing in new markets

Popular products and services in one country may not receive the same demand in another. Alternatively, it’s also possible that the country already has a famous brand, which you must prepare to face, should you continue expanding in that direction.

Competing in a new market is one of the reasons why it may take some time for businesses to find success in another country. You will need to analyze the local competition to understand how to position yourself in the market you’re entering and how you can create an effective marketing strategy.

You may experience slow starts and low customer demand, but don’t be disheartened, as success can slowly start to pick up.

Expanding To Greater Heights

Expanding to another country has many benefits for your business. It provides you with new opportunities for growth and impact. However, it doesn’t mean it’s easy to grow.

Companies that fail to prepare to meet the challenges of international expansion set themselves up for financial ruin. As such, ensure to take the necessary steps like researching and cost saving to prepare for this next big step in your business.

You can consider working with professional employer organizations such as Global Expansion to help ensure your expansion is off to a good start.

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