Expanding internationally provides companies with several significant growth opportunities and allows companies to increase revenue and remain productive around the clock.
Global expansion refers to the process by which a company grows and begins to operate in areas outside the company’s primary domestic market. For example, a company based in the United States can achieve substantial and sustained success by accessing markets in countries like Canada, Mexico, or the United Kingdom.
According to research from the Global Entrepreneurship Monitor, there are over 582 million entrepreneurs globally, which is expected to increase by up to 15% by the end of 2024, meaning the competition for global market access is intensifying. Additionally, small businesses make up over 90% of the global business population, with over 30 million small-to-medium companies in the US alone.
This guide breaks down the benefits of hiring in new markets, along with five tips that help growing companies achieve success when entering international markets.
Advantages of International Business Expansion
Accessing foreign markets benefits companies in several significant ways. Here are a few advantages of international business expansion:
Access to a Wider Talent Pool
Expanding across borders enables companies to tap into a much wider pool of talent, which helps companies find the right talent for the right positions and address skills gaps within the organization. This is particularly important in certain industries, such as the IT sector, due to talent shortages and the increasing demand for emerging but limited skill sets in fields such as AI. Ultimately, hiring international employees helps companies access specialized knowledge that may be limited in local markets.
Increased Diversity
Prioritizing DEI and inclusion initiatives leads to advantages such as improved collaboration, higher employee engagement, and access to a wider range of innovative or creative perspectives. According to a LinkedIn study, diverse companies outperform competitors, with up to a 36% higher likelihood of financial outperformance and 35% higher productivity.
Foreign Market Opportunities
A new market allows companies to build a larger consumer base or access additional investment opportunities, increasing an organization’s ability to boost revenue.
Diversifying revenue streams helps companies mitigate financial risks, as the company is no longer dependent on a single market, reducing the impact of economic downturns. Additionally, entering emerging markets gives companies a competitive edge and positions them as a leader in the industry.
Entering a market early happens when there is little competition in a specific area or niche, and first-movers in markets help establish a strong brand reputation, customer loyalty, and the chance to gain exclusive agreements with suppliers and partners. Examples of major first-mover companies include household names such as Amazon and eBay, who both leveraged these advantages to facilitate sustained growth.
What to Consider When Expanding a Business Internationally
Understanding the hurdles of expanding your business abroad enables you to implement risk management practices. For example, common challenges include compliance-related regulations, resources for costly procedures like establishing an entity and managing global teams across different cultures.
The Importance of Strategic Planning
Strategic workforce planning refers to the process an organization takes to develop a comprehensive and proactive approach to addressing all aspects of talent engagement. This includes identifying key gaps or shortages in the workforce, allowing companies to accurately anticipate the organization’s current staff levels and future hiring needs.
An effective global expansion strategy ensures organizations have the required staff needed to support core operations while remaining aligned with the company’s budgetary restrictions. This also ensures that all new hires are beneficial to the business and have relevant expertise. Focusing on strategy also allows companies to enter markets more effectively, as workforce planning strategies in the United States differ from other countries such as the UK.
Compliance Risks
To successfully build a presence in a different market, organizations must remain compliant with the country’s local labor laws and regulations. Each region has different requirements for minimum wages, employer contributions, tax remittance obligations, necessary terms for employment contracts, and more. Failure to follow regulations opens companies up to penalties including severe fines, reputational damage, and business interruption.
Adapt initiatives and practices to align with local regulations to minimize financial or legal damages while remaining competitive in the market.
5 Strategies for Success in Global Markets
These five tips will help you succeed and gain valuable knowledge to expand your business internationally.
Tip #1: Conduct Thorough Market Research
Organizations that perform comprehensive market research before entering a new market, gain key insights that impact strategic objectives. Market research refers to the process of examining consumer behavior, the labor landscape, and other relevant economic trends by analyzing data. For example, researching the market you wish to enter gives companies an idea of factors such as the country’s economic strength, inflation rates, unemployment rates, and costs of hiring, which influence an organization’s market entry, recruitment, and compensation practices.
Thorough market research helps you assess market demand or compatibility and identify potential growth opportunities in emerging markets to avoid mistakes throughout the expansion process.
Common methods for market research include:
To effectively conduct research, mix primary methods, which involve obtaining information firsthand through qualitative and quantitative means, with secondary methods, which include analyzing data from public records or other resources to make informed decisions.
Tip #2: Understand Your Target Market
A target market is essentially the specific group of people you aim to reach with your product or service. These people share certain characteristics like age, income level, and lifestyle goals, which define who they are and what they need.
You can tailor marketing and outreach strategies to address specific pain points or issues experienced by your target market, fostering increased brand recognition and interest, generating new leads, and attracting new customers.
For example, companies manufacturing toys may choose to target boys or girls of a certain age range, allowing the company to generate interest in the product or service. Common tactics to effectively understand target markets include developing buyer personas, segmenting the market, and engaging with existing customers. In fact, recent data suggests targeted advertising can increase click-through rates by up to 670%.
Tip #3: Localize the Product or Service
Product localization refers to the process of adapting a product or service to align with the values or standards of the cultural market the company is targeting. Localizing your product facilitates sustained growth by helping local audiences understand the product or service’s benefits, increasing trust among your consumer base, and making it easier for your audience to interact with the brand.
An example of localizing a product includes providing service offerings in the native language of the market. This is significant for companies reaching a new audience, as recent research suggests that up to 76% of customers prefer making purchasing decisions with information in their own language.
Real-life examples include Netflix, which creates targeted content suggestions based on region, and McDonald’s, which offers menu items in certain regions that appeal to cultural standards, such as vegetarian or chicken replacements to respect local religious beliefs. To implement region-specific offerings, companies can translate content, adapt pricing structures to align with regional expectations and customize features.
Tip #4: Build Strong Partnerships
Building strong partnerships helps you avoid issues with market penetration and gain valuable expertise in the local market. Market penetration is all about measuring how much your product or service is being used compared to the total estimated market for that product or service. Think of it as figuring out what slice of the pie your business owns.
A partnership refers to a mutually beneficial relationship that combines resources and knowledge from both networks. By doing so, both companies assist each other in achieving their long-term business goals.
Some ways to build partnerships include:
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Identify and work with partners with aligned values and goals
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Offer an appealing value proposition to prospective local partners like a revenue share agreement
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Maintain regular communication and clear expectations
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Get involved in local industry associations
Opportunities like joint marketing initiatives or pop-up events help companies engage with the community.
Tip #5: Navigate Cultural Nuances and Communication Challenges
Recognizing cultural differences and solving communication challenges enables your international employees to feel valued by the company and fosters a greater sense of belonging.
Practices and policies that accommodate a variety of cultures in the local business environment create a safer space for employees to express themselves and their values. For example, countries such as Japan have formal and punctual business standards, while the expectations of employees in certain European nations are far less strict.
Language barriers are another major hurdle for global companies. Ensure your company has identified requirements for multi-lingual employees or effective translation strategies if necessary.
Prioritize gaining cultural intelligence, demonstrating sensitivity and respect, and being mindful of common practices. Hiring local employees also helps companies access unique perspectives and important region-specific knowledge.
Additionally, emerging technology, such as AI chatbots, provides international employees with valuable guidance in real-time and in their native language.
Why Borderless AI?
Borderless AI is an Employer of Record (EOR) that enables you to hire, manage, and pay your global team in over 170 countries worldwide without establishing legal entities. We take care of administrative tasks such as global payroll, compliance with local labor laws, filing and reporting taxes, administering benefits, and more.
Partnering with an EOR alleviates the risks associated with hiring global employees. An Employer of Record is a great choice for businesses that are rapidly growing and need to quickly and compliantly explore new markets and engage international talent.
Alberni - Your AI Agent for Global HR
Alberni is Borderless AI’s agent for global HR. With Alberni, you can gain insights into global employment laws, hiring costs, and generate employment agreements within seconds.
Speak to our global workforce experts to see how we can help you compliantly hire top talent and support your international expansion.
Disclaimer
Borderless does not provide legal services or legal advice to customers, contractors, employees, partners, or the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
