Why do companies enter in foreign markets?

The world is getting smaller every day, especially for owners of small and medium-sized businesses. Based on foreign exchange company OFX’s second annual SMB Confidence Indicator, which surveyed 500 small and medium businesses (SMBs), 57 percent are both positive and confident about conducting business internationally. Around 63 percent report booming growth as they expand into international markets.

International or global expansion is a strategy businesses use to enter new overseas markets. Why do companies expand internationally, and why should you consider taking your company global?

Reasons companies expand internationally

Companies that are already thriving in domestic markets may be asking themselves, “Why expand globally?” If you ask five business owners why they chose to expand overseas, you’ll get 10 different answers. But, in general, the reasons for international expansion are usually similar.

First, there is the potential for increased revenue and cost savings. Expanding your market helps you find new customers, which results in more sales while simultaneously lowering operational costs and saving the company money. These expansions also open up new markets and customer bases, allowing you to explore parts of the world that were previously closed to you.

Other reasons for international expansion include diversification, accessing new talent with more diverse education and language skills, and gaining an advantage over the competition. Even your closest competitors won’t keep up if they’re not working in a global marketplace.

The last reason companies expand globally is their reputation. Going global assists in building brand recognition and credibility that can help attract new customers.

Best practices for expanding your company internationally

If you’re not sure where to start, here are some best practices for expanding your company internationally.

Start by testing the market. Do you have a unique product or service that will help you succeed in the market, or will you find yourself competing with existing companies?

Next, you’ll need to understand and decide on your operational structure. Will you be setting up a fully independent office and sending your existing staff overseas, or will you be hiring employees from the country you wish to expand to who can help you integrate with the local population, market, and culture? Considering how and who to hire is a big part of taking your company global, and there are many steps you’ll need to consider when hiring new employees in your expanded market.

Payroll options and their implications come next. Countries will have different requirements when it comes to things like salary, taxes, and benefits that you have to offer in order to stay compliant.

Finally, take the time to immerse yourself in the culture. Don’t enter a new market and assume you know best, especially if you’re not already familiar with the country, its culture, and its people. Approach each new market with an open mind and seek out the assistance of local companies or employees that can help you immerse yourself entirely in the culture.

Learn how we can help

If you’re planning to take your firm global in the future, contact Globalization Partners today to learn how we can help with your planned international expansion.

Foreign Market Entry is basically introducing your company to new markets by selling your product or service in a different country. It can enhance sales and profits, build brand recognition, lower the risks of just operating in one market and lengthen the life cycle of your product. 

Entering a foreign market might be risky and expensive, but the rewards can be huge, especially if you have plans/strategies to support your company. Market entry strategies give companies a roadmap to successfully break into foreign markets. Companies will select the best strategy based on their objectives and target market since there are numerous ways to sell their products abroad. 

For a successful foreign market entry strategy, these are the factors that you should consider: 

1. Marketing – how do you organise and implement marketing efforts? 

2. Sourcing – whether to get items, make them or buy them? 

3. Investment and control – will it be an acquisition, joint venture or worldwide partner? 

Companies employ foreign market entry techniques to organise, distribute and ship commodities to foreign markets. The cost and extent of its control over distribution may change depending on the strategy an organisation chooses. A company’s strategy is typically determined by the kind of product it sells and how much it costs. 

Here are some of the market entry strategies you can employ to sell your products or services in exciting foreign markets: 

Exporting 

Marketing your manufactured goods in the nations where you plan to sell them is known as exporting. Some businesses engage in direct exporting, whereby they sell the goods they produce directly to consumers abroad. This foreign market entry strategy is frequently used by businesses that sell luxury goods or have previously sold their products in international markets. 

Piggybacking 

Consider piggybacking if your business has connections with businesses that already sell goods abroad. This market entry technique is asking other companies if they can include your product in their foreign or international inventory. If your business and a foreign business agree to this arrangement, each sale’s earnings will be split between the two parties. Your business can reduce the risk of selling internationally by delegating international marketing to a partner while concentrating on domestic retail. 

Franchising 

An individual or group of buyers pays for the right to oversee corporate branches on behalf of the company in a franchise, which is a chain of retail stores. Strong brand awareness is often necessary for franchising since customers in your target market should be aware of what you have to offer and be eager to buy it. By using an indirect management style and a well-known brand, franchising gives businesses a chance to make money. 

Licensing 

Licensing is when one business grants another company the right to make use of or sell a product. If a corporation has a product that is in demand, and the company it intends to license the product to has a sizable market, it may adopt this strategy.  

Joint ventures 

By forming joint ventures with other businesses that want to sell in the international market, some businesses try to reduce the risks of entering a foreign market. Joint ventures can generate more money than individual businesses because they frequently operate like big, independent businesses rather than a merger of two smaller businesses. This foreign market entry technique runs the danger of uneven corporate participation, but both parties can cooperate to create fair procedures to avoid this problem. 

Turnkey Projects 

Companies that offer services like environmental consulting, architecture, construction and engineering are well suited to turnkey projects. Turn the key, and the facility is operational. A turnkey project is one in which the facility is constructed from the ground up and delivered to the client ready to use. The client is typically a government, and frequently, the project is being funded by an international financial organisation like the World Bank, so the risk of not being paid is minimised. This is a very good technique to penetrate overseas markets.  

Greenfield Investments 

The maximum level of foreign corporate involvement is necessary for greenfield investments. A greenfield investment is one in which you purchase the property, construct the facility and continuously run the business in a foreign market. It is undoubtedly the most expensive and risky, but certain markets may compel you to accept the cost and risk because of legislative requirements, transportation expenses, and the availability of technology or trained labour. 

Best International Business Locations 

After looking at the top 100 economies in the world and compared them based on a variety of factors, including the workforce’s skill level, the infrastructure’s quality, economic predictability, appealing tax policies and market accessibility, Great Business Schools, a business education organisation, created a list of the top five places to do business internationally updated last 18 May 2021. 

1. Singapore 

Singapore has made significant investments in infrastructure and connectivity to stay on top of the ever-changing economic landscape. According to the World Bank, Singapore is the world’s top logistics destination, putting it at the forefront of supply chain solutions in today’s market. Apart from being one of the world’s most connected economies, the nation is also known for having a very solid infrastructure and high-speed connectivity at both regional and global levels. To draw in foreign enterprises, Singapore provides a business-friendly regulatory framework. 

Some of the industries Singapore is renowned for include biomedical sciences, tourism, logistics, construction, finance, health care, info-communications, and media, as well as in chemical development and manufacturing base globally. For your convenience, Bolder Group also has location in Singapore that can help you with your market entry needs in the country. 

2. Sweden 

Given that Sweden performs at the highest levels of international competition, investing there is a smart move. Sweden ranks first in Europe for innovation and is amongst the world’s most productive countries. The country is investing 64 billion euros in the expansion of its highways, railroads, and metro system, and between now and 2030, 150 billion euros will be used to build new homes and businesses. As a result, there are now several prospects for contractors, and there is a present demand for global competence along with foreign enterprises to innovate and develop. 

Other significant industries known in Sweden are pharmaceuticals, green technology, information technology, communications, automotive and transportation technology and tourism. 

3. Canada 

Canada welcomes foreign investors with open arms and provides significant benefits for company growth as a vibrant, multicultural hub. A diverse economy, low company tax rates, prudent budgetary management and banking regulations have all contributed to the nation’s success. Profitability can also be predicted by having a strong banking system, a steady workforce and a corporate environment that supports innovation and entrepreneurship. Technology is also creating limitless opportunities for economic enterprises and is a major factor in the current infrastructure developments in the nation. 

In industries like Oil & Gas Field Services, Construction, Marketing & Media Software Publishing, Financial Technology, Virtual and Augmented reality and Medical Marijuana, Canada offers significant opportunities for strategic foreign investment. 

4. Australia 

Due to its strong economy, strategic location near developing Asian markets, political stability, and adaptable regulatory environment, Australia is attracting more foreign investments. The country has strong infrastructure for information and communication technologies and invests innovation. In fact, its strong economy has led to an increase in immigration to Australia, and this growth has improved the country’s extensive infrastructure.  

With the abundance of natural resources, Australia is a strategic location for investors. Agriculture, resources and energy, finance, biotechnology, education and tourism are among the important sectors for entrepreneurship particularly in building, civil engineering and transportation. 

5. Switzerland 

Some of the top multinational corporations in the world, including major league players in the pharmaceutical industry and the largest food and beverage business, are headquartered in Switzerland, one of the 10 richest countries in the world. Switzerland has a favourable geographic location that makes it accessible by land and has a well-developed automobile infrastructure network for global trade.  

Switzerland has a long history of being seen as a sanctuary for investors, and because of its political neutrality, it has been able to sustain a robust and stable economy. One of the most significant industries in the country is banking, but other fields are also drawing in outside investors. As an illustration, other important economic sectors include pharmaceuticals, information technology, tourism and brand-new sectors like bio- and nanotechnology.  

Entry to the Dutch market 

The Netherlands is the ideal location for high-tech firms to thrive due to its excellent business infrastructure. A first-rate logistics network that includes airports, seaports, high-speed roadways, rail and IT connectivity can be advantageous to businesses. Major firms have been drawn to the nation throughout the years because of its open corporate business culture, transparent administration, competitive tax system and advantageous location. Foreign businesspeople can now apply for a temporary residence visa in the Netherlands under new restrictions.  

As a subsidiary of Bolder Group, Bolder Launch concentrates on assisting businesses in entering or expanding in the Dutch market. Our Bolder Launch team can help you incorporate your business and ensures smooth entry to the Netherlands. With regards to corporate, accounting and business development issues, our skilled staff is available to help you. You can start a Dutch BV, Dutch NV or Dutch Branch. We can also assist you from the first to the last step of company formation in the Netherlands in person or even remotely. Everything you need to know on how to launch your products or services into the Dutch market is available here. 

Entry to the US market 

The US consistently ranks amongst the top nations in the world for its competitiveness, creativity and ease of doing business. It is one of the most popular investment destinations globally. There are imminent key infrastructure projects of $450 billion that are planned for the near future, even though infrastructure quality varies widely across the nation.  

The US is renowned for supporting and encouraging free enterprise, rivalry and economic expansion. In fact, the United States has the largest consumer market in the world as well as a market-based, open economy. Energy, manufacturing, transportation, healthcare, agriculture, financial services, IT, and telecommunications are some of the major businesses in the United States. Risk diversification, the effectiveness of the financial system and the country’s robust corporate governance are all factors that encourage international business owners to invest in the country. 

To the clients interested in entering the US market, Bolder Group is ready to help you penetrate the American market. Currently, we have three offices in the United States that you can check. 

Entry to the Hong Kong market 

Strategically located in Asia close to China, Hong Kong is a great place for foreign businesses that intend to enter the Chinese market. Although Hong Kong’s political system is a part of China, its legal system is completely independent, giving businesses the opportunity to conduct business in the country without interference from the government. Moreover, Hong Kong offers a very advantageous tax system that for companies.  

The benefits of entering the Hong Kong market are numerous, including:  

•  Zero taxes on profits from abroad  
•  Low taxes and simple taxation regime  
•  Entry point to the giant China’s market 
•  Foreign owners are allowed to own companies 
•  One of the freest economies in the world 

In addition, starting a business in Hong Kong is simple compared to other countries according to international standards. It only takes a few days and won’t cost you that much money.  

Bolder Group can help you in establishing a Hong Kong business and will frequently manage all necessary processes from beginning to end. You can visit our office in Hong Kong so we can better assist you. 

Bolder Group as Your Partner in Entering a Foreign Market 

As a business support and market entry service provider with thirteen locations across the globe, we can provide you with customized and professional assistance for your business’s entrance in a foreign market. 

Get in touch with Bolder team today to learn more on how we can help you start your business.