Expanding your business overseas can be a bold move. In addition to the time commitment needed to make the project happen, it will also be a capital-intensive period for your business.
Yet despite the risks, companies are expanding globally all the time. When done correctly, the payoff for expanding overseas makes the extra work worthwhile.
Here is a short list of what to be aware of if your company plans to grow and expand overseas.
1 - Economic scenario analysis
Your product/service is taking the domestic market by storm. It seems reasonable that overseas customers will react the same way once you expand your business into new territories. Unless, of course, your new target market is at a different point in the economic cycle to your domestic market.
It is important to get a sense of some of the economic leading indicators to help you assess the new market.
- How is the overall economy doing?
- Is the jobs market growing or declining?
- Will this have a significant impact on consumer confidence?
- How are debt levels in your new target market?
- Is disposable income rising or falling?
- What about inflation and interest rates?
If you consider the base performance of the underlying economy, you will be able to build a picture about the viability of your offering in this new market.
If you are looking to set up a location for your business in Europe, why not download our eBook for more information on Ireland as a location?
2 - Competitive landscape
If you have considered expanding into a new location, there is a good chance your competitors have too.
Equally, there could be a similar product existing in this new territory already that has a loyal customer base.
It is important that in addition to weighing up your opportunities in a new market that you consider the competitive forces that may arise once you begin operations.
3 - Currency implications
The currency markets never sleep. They are actively traded 24/7/365.
If you factor in time zones this can compound the problem. You could find yourself waking up to a significant loss in value due to a currency fluctuation in reaction to some event in a faraway country.
Currency hedging will provide some protection against drastic swings. Expanding into countries with stable political and financial systems is a more effective way to mitigate against currency risk.
4 - Cybersecurity
This risk is relatively new but one that keeps business owners awake at night. Global insurance company Aon conducted a survey in 2017 across 60 countries, 33 different industries involving 1,843 risk assessment professionals. Cybercrime ranked as the 5th-largest risk that companies were facing.
In a similar study carried out in 2018, by German company Allianz, 48% of respondents said the biggest long-term risk will come from cyber-incidents. 54% of respondents claimed cyber-incidents were also the most underestimated risk by business owners.
The report estimated annual impact of cybercrimes at $450 billion per year.
5 - Keyman Risk
Sometimes in smaller companies, the CEO or a single key employee can be the driving force behind the early growth. It’s important to remember that an overseas expansion may be spearheaded by different personnel.
If one key employee is tasked with expanding internationally in addition to overseeing domestic operations, they could be spreading themselves a little thin. For such a huge decision for your company it’s important to make sure you have the people in place to do the job.
Promoting from within sends the right message to your employees but seeking outside help is an option too.
Smart MBS, through our parent company Pearse Trust, has over 30 years’ experience helped overseas companies establish in Ireland, the UK and other jurisdictions.
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If yours is a company that is companies looking to expand globally, why get in touch and see how Smart MBS can help?
You may find these articles helpful on how to set up a company in Ireland and why Ireland is a good choice for international companies.
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