Mid-2020, the idea of expanding globally and globalization, in general, was in retreat. With borders shutting, airlines dropping routes, and the global supply chain in crisis, mobility came to a halt. However, fast forward a year and a half, we’ve come to realize that global expansion and globalization are not in retreat but rather have transformed to meet the ‘new norm’ of business. Now, the need for diversification in business is more evident than ever. As a result, companies are looking into ways of diversifying their revenue stream and one strategy of doing so is expanding into new markets.
A global expansion strategy is an effective method towards business growth, creating a presence in new, international markets. When done correctly, a global expansion strategy translates to higher profits, increased brand awareness and a larger market share. The potential for entering a new market is endless and means reaching a different audience and targeting more potential customers.
Scaling operations on an international level requires meticulous planning and a deep understanding of the legalities of the new, local market. This process can be time-consuming and daunting. But the advantages for why you should have a global expansion strategy far outweigh the disadvantages. And, when your company is ready to take the leap into a new market, Elements Global Services has the right tools and support to navigate your business into a new region.
Benefits of Expanding into New Markets
International Customer Base: One of the most obvious advantages of global expansion is an expanded customer reach. Diversifying your audience means your company no longer solely needs to rely on a domestic market, which may be oversaturated with competitors vying for the same customer’s business. This untapped market has the potential to translate to increased revenue.
Access to a Larger Talent Pool: Moving into a new country doesn’t necessarily mean your domestic employees are obligated to move to the new market. A different approach is to localize your new base with employees from this new market that speak the local language and understand the local customs. This gives your company access to a diverse pool of talent that likely has a different perspective on marketing to local customers.
Cost-Effective Manufacturing and Production: Moving production out of the US has long been a way to reduce overall business costs. While this doesn’t necessarily mean that the entire business must move closer to the production site, it is often a solution to have an employee in the immediate region to oversee the supply chain. China has long been popular for its low-cost production; however India and several countries throughout Southeast Asia are also countries to consider for reduced costs on manufacturing.
Tax Incentives: Governments across the globe are offering companies generous incentives to attract foreign businesses to set up operations. This helps determine which country is the most suitable and could mean a business is entitled to grants, subsidies or tax incentives. For example, the Malaysian government offers a 50-cent subsidy to every $1 dollar spent on research and development (R&D). The Philippines offers incentives for companies working in the sustainability space. And, several countries in Africa offer tax allowances and reductions for job creation within exports and manufacturing.
How to Choose the Top Countries for Global Expansion
Determining which country to expand to is a major factor in a company’s global expansion strategy. This will require in-depth research or a third-party advisor to consult on the most suitable country based on your needs. In addition, you’ll need to consider the market and whether it’s ideal for your service or product, the bureaucratic process of entering the country, tax and business regulations of operating in the country, and timing, among other factors.
New Zealand is noteworthy for its overall ease of conducting business. Registering a limited liability company (LLC) can be done quickly and conveniently online, with the process generally taking less than a day. A small fee of NZ$115 applies. This is a stark difference compared to Venezuela, where it can take months to process an application to establish a business. The red tape surrounding the establishment of a company is made more challenging by political and economic instability.
Singapore, the sovereign city-state located in Southeast Asia, is also notable for its business-friendly regulations, making it easy to set up an LLC. For example, online registration generally takes two days. And, more importantly, the government offers a wide range of tax incentives. A 25% tax write-off is granted to companies qualifying under the mergers and acquisitions allowance within a specified period and subject to a cap of SG$5 million. Other subsidies incentivize technology, intellectual property development and financial services, among other sectors.
From an economic standpoint, the former soviet republic of Georgia, situated strategically at the intersection of western Asia and Eastern Europe, has expanded rapidly in recent years. While improving its economy, the country focused on developing free trade agreements and attracting foreign direct investment (FDI). Today, a company can generally register itself in one day. Georgia offers businesses a favorable climate to work in. It has one of the lowest overall tax rates globally and a social security contribution of only 2%.
Other favorable countries to expand a business include Hong Kong, Denmark and South Korea, all ranking high on the World Bank’s Doing Business Index.
How Elements Global Services Can Help
Setting up a new legal entity in a different market can be complex and time-consuming. Before embarking on expansion into a new market, it is crucial to fully understand your company’s needs and the country’s business regulations, along with the economic and political climate of the new market. The implications of a global expansion plan done incorrectly can be damaging, leading to penalties and fines, delays, harm to your company’s reputation and its bottom line. But there are solutions to ease the complexity of the global expansion process that keep you away from the negative.
Using an Employer of Record (EOR), such as Elements Global Services, lets the company focus on marketing its products and services in the new country, while the EOR steps in and acts as the legal employer. That means your company doesn’t have to spend time setting up a legal entity in the designated, new market. Instead, an EOR assumes all liability and responsibilities for a company’s employees. So, while onboarding and paying local employees are taken care of by an EOR, like Elements, the typical day-to-day task management would still be conducted by the original company.
Along the way, Elements keeps you informed of the latest regulations to ensure that your company is compliant with all local laws.
One of the most significant reasons for why you should use an EOR is the speed to market. On average, it can take up to 20 weeks to create a local entity; in many cases, even longer. Elements can help reduce that period because the legal entity is already available. This may be cut down significantly to as little as four weeks. Any further challenges that may arise from travel restrictions can also be avoided.
The types of solutions available to assist companies with their global expansion are endless. There are several different approaches Elements can take to help with expansion into a new market. If you are struggling with where to start in your expansion strategy, perhaps the first step is acquiring some knowledge of the market’s business and tax laws. Through Elements’ Expandopedia platform, you’ll find all the verified intelligence necessary to make informed decisions. This includes information on labor laws, salaries, employer taxes, visa requirements, business regulations, the local talent pool and more. You can even conduct comparisons between two potential markets to determine the best fit for your company. Then, when you’re ready for the next step Elements can guide you through the process.
For more information about Elements’ EOR solution, click here.
About Elements Global Services
Elements Global Services is a global tech firm, focused on software built to go beyond country borders and simplify a company’s ability to expand their business, onboard employees, manage compliance and pay globally. Headquartered in Chicago, Elements offers customers 100% direct Employer of Record services in over 160 countries, powered by proprietary HR technology that simplifies everything from payroll, benefits and human capital management to HR outsourcing, local compliance, and visa & mobility.