Before Expanding Your Business Internationally, Consider These 3 Factors
OK, so you’ve thoroughly tapped your local market and worked hard to get your business over a certain growth threshold. You feel enthusiastic and ready to conquer the world … literally. You feel confident you’re in a position to take your business and its offerings overseas. How exciting!
While you know you’re ready for growth, it’s usually wise to look before you leap. Before expanding internationally, consider everything that may make going global more challenging. There are a few factors that are often overlooked, but they can lead to bigger issues down the line.
Market conditions, consumer lifestyles and preferences, labor laws, and general business regulations can impact your strategies and decisions during expansion. Regarding your team, factors like employee classification laws, payroll logistics, and cultural differences can influence hiring and employment best practices. With any international expansion plan, feasibility more often than not becomes a guiding force. As you strategize about taking your team global, here are three things to consider.
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1. Hiring in International Labor Markets
Some businesses transfer a small team of existing employees overseas to begin operations in a global market. However, this requires finding team members who want to move abroad, which may be challenging. Most companies must eventually hire from local talent pools as operations grow and business takes off. Other approaches skip the transfer of existing teams altogether, starting from scratch by hiring new teams in new countries from the outset.
Welcoming locals to the team may sound like an easy decision. Your business needs people who live and breathe the area’s culture and know the market inside and out. While this may be true, companies can’t just hire from local talent pools without potentially violating a few laws. Even if laws are disobeyed by accident, there can be some serious consequences.
Typically, businesses must establish a legal entity before hiring and paying employees. This formality isn’t always practical for companies that want to start operations immediately or hire only a few remote employees. Fortunately, businesses that lack a local legal entity can work with an employer of record service to achieve their hiring goals.
EORs establish a business presence in various foreign countries and can hire full-time employees on a company’s behalf. They are able to ensure all local legal requirements are met. Many EORs also provide global payroll services, so companies can comply with tax regulations and other specific labor laws.
2. Labor Market Conditions
When you grow your team internationally, you’re entering labor markets where your employer brand may be unknown. Your business will compete with employers and organizations local talent is already familiar with. These are employers with established networks and knowledge of job seekers’ priorities.
Native organizations also know which dominant skills exist in specific geographical areas. These businesses may have become employers of choice for certain skill sets, much like tech giants have in the United States. Before expanding into a different country, it helps to research labor market conditions. It’s unrealistic to think your business won’t compete for talent. But you should know whether there are enough potential workers with the knowledge you need.
Besides expertise, regulations that govern employee-employer relationships can influence hiring and recruiting practices. In Portugal, for example, laws dictate the minimum monthly salary for full-time employees. The current minimum salary is 705 euros, and employers must also pay a holiday and Christmas allowance. Each of these allowances must equal the worker’s monthly pay. Higher salary minimums can likewise apply to specific jobs or professions. It’s important to know about these details before expanding internationally.
Some of the expectations that exist in international labor markets may be quite different from the U.S. Knowing what demands your business must meet and who your competition is can help you know what to expect and prepare. You’ll be able to more easily shape successful recruiting strategies. As an employer, you don’t want to fall outside normal practices or violate a country’s regulations.
3. Location and Distance
In real estate, location determines nearly everything. Asking price, time on the market, and demand for a specific home feature are just a few examples. Similar situations exist with international business growth and team expansions. When leaders enter markets farther away from their home locations, the feasibility of operating there can decrease. Not all businesses are easily replicable.
It may be impractical to ship products to that market on time to meet demand. Local laws might make it too difficult or expensive to build facilities. Cultural and language barriers in some countries could be less surmountable than in others. Huge gaps in time zones might also make real-time coordination with international teams nearly impossible.
The market potential for products may exist in nations near or far away from an organization’s home country. However, that doesn’t mean all those locations are practical choices for international expansion. You must consider logistical and cultural compatibility, in addition to market potential. For instance, it may be easier for a U.S. company to expand to another nation rooted in Western culture.
It might make more sense to choose a neighboring country, depending on the nature of a business’s operations. Trade agreements and smaller distances can reduce expenses and increase the likelihood that international teams can periodically collaborate face-to-face. Smaller distances may also help sync the company’s culture between employees and work locations.
Taking Teams Global
Expanding your staff is usually a sign of healthy growth and exciting potential. But assembling a team can get complicated when that growth treads into international waters. It’s not as simple as posting a few job openings, interviewing candidates, and welcoming new hires into the fold. In fact, approaching hiring as you always have could get you in trouble.
Labor laws and market conditions, as well as geographical and cultural differences, can determine the practicality of a company’s expansion plans. Employer of record services, extensive labor market analysis, and workable distances make hiring international employees more viable. As your business aspirations grow beyond your home country’s borders, so can your team.