Many businesses are attracted by the benefits of expanding internationally but what should you consider before taking this big step? In this article, experts from Russell Bedford member firms give their insight into key areas of focus for any business thinking of going global.
Developing your strategy
As business becomes ever more globalised, many businesses will consider whether expanding internationally makes perfect sense. Before taking this step and investing heavily in an overseas presence you should first:
• evaluate your business to test readiness
• clearly define a strategy that supports your reasons for expansion
• understand your market.
Evaluating your business
Going global is a big commitment that can take your business into an unfamiliar political and cultural environment. Before doing so, you need to be sure that your business at home is working well and can provide the funding you need to expand overseas. You can explore other sources of funding, but you will need to demonstrate that the impact on business cash flow is manageable, supported by detailed analysis and forecasts.
Defining a strategy that supports your objectives
Aside from improved profitability and competitiveness, businesses will have different motivations for expanding overseas. Some may look to diversify their income streams by expanding their customer base and better serving customers in their chosen region. Others may look to take advantage of lower labour costs and a diverse talent pool. Whatever your reasons, identify your target market and formulate a strategy to exploit that market in a way that doesn’t jeopardise your business at home. Your international strategy must always align with your overall business strategy.
Understanding your market
Market research is vital, not just from a business and competition view but also from a legal, compliance, and political standpoint. Language barriers can also affect how you formulate your strategy – don’t assume everyone is willing to deal in English and be prepared to tailor your marketing material to local needs.
To succeed in your chosen market you need to support your strategy with measurable key performance indicators (KPIs). Design your KPIs to deal with both short-term and long-term requirements and be prepared to adjust your plans to adapt to a changing business environment.
Tax planning and legal considerations
Most business owners will view international expansion as risky because it takes them outside their business comfort zone. Ensure you develop an international toolkit that covers:
• risk and legal framework
• customs implications
• international taxation implications.
Your business will need the knowledge and skills necessary to overcome the obstacles it will encounter. The more active you become in overseas markets, the more important managing risks becomes. This will test your business’s resilience and its ability to minimise the impact of any disruption. Familiarise yourself with the support available from local and international institutions in case you need them.
Ensure you are familiar with the laws applying in your chosen region. Don’t fall into the trap of assuming that what works at home will work everywhere. Instead, examine the general rules of international law, together with local laws, even if you think your requirements aren’t that complex.
Customs and VAT
Any cross-border trade requires an appreciation of customs duty and VAT rules and processes. Keep all evidence of exports; local tax authorities will oversee VAT-free exports to ensure compliance.
International tax strategies that exploit the gaps arising from overlapping non-coordinated national tax systems require specialist knowledge of local taxation systems. This will be even more relevant when dealing with transfer pricing issues between, for example, the headquarter and foreign subsidiaries. In any case, it makes sense to seek advice from local professionals.
In summary, going global can have a transformative effect on a business but only if you’re well-prepared and informed. At the same time, you must not lose sight of your home business and any potential impact that may arise from your international expansion objectives. To succeed globally you need to be sure of your strategy and have a good understanding of the local market trading conditions as well as legal and taxation requirements. When in doubt, seek advice from local experts.
Marketing – reaching the right prospects in the right place
A marketing function is a cost centre when its activities are passive and focused on areas such as image, advertising, and customer communication. But it can be more than this. If your marketing reaches the right prospects in the right place, collaborates with partners to promote different services, and nurtures with valuable content by delivering legitimate messages as an expert provider, you will gain trust. Later, these prospects will approach you when they need what you offer.
You can carry out integrated marketing campaigns using traditional methods such as print, mass media advertising, and PR as well as digital resources.
Modern technology, like customer relationship management systems (CRM) and artificial intelligence (AI), allows you to support more traditional activities with digital campaigns; these include email, social media, webinars, and podcasts.
Depending on the business you’re in, with the right use of technology and a real understanding of your market you can move your marketing function from cost centre to business generator.
Supporting global expansion with artificial intelligence
The latest developments in artificial intelligence (AI) are having a sweeping impact on global business decision-making. Professional firms are playing a key role in helping their clients think and act strategically in a fast-changing technological landscape. The opportunity seems limitless, but at what cost?
One concern is data privacy. When your proprietary data is exposed to a platform such as ChatGPT, should we assume that it’s effectively open-source? Because if your organisation uses AI to analyse client data and develop predictive models or solutions, that exposure could have significant implications.
Another is the quality of any database that becomes accessible using AI. If you do business globally, you’ll want to assess industry benchmarks to know whether (or how) to expand. Doing so requires reliable information, yet the accuracy of some AI-generated data is fragile at best.
These are only two points to consider—and neither are prohibitive when it comes to leveraging the power of AI. At this stage, it’s likely best to regard artificial intelligence as a tool that has the capacity to highlight everything from emerging trends to niche markets, with its usefulness enhanced by effective prompt engineering. The technology’s evolution will continue and the value to business leaders will only grow over time.
For now, we should take small steps forward as we better understand the many benefits that AI can deliver.
About the authors
Erica has more than ten years’ experience of providing Hong Kong and regional tax advisory and compliance services to multinational organisations from a wide range of industries. She is experienced in advising on tax efficient structuring, cross-border transactions, pre-IPO tax planning, and tax due diligence, as well as representing clients in handling tax field audits and investigation cases.
Fabio is a partner in Russell Bedford’s Milan member firm Studio Corno, managing accounting and business consulting for the firm. With over thirty years’ experience in corporate restructuring and reorganisation procedures and internationalisation processes, he is also an associate professor at University of Milan – Bicocca, specialising in the areas of accounting, and business administration, and is the founder of MAIB – Triple Degree Master’s in International Business Development.
Mexico City, Mexico
Javier is the managing partner at Russell Bedford Mexico City and board member on the board of directors for Russell Bedford International. A CPA with more than 30 years of experience in various audit areas, he was formerly an audit manager at another international firm and currently leads the audit practice at Russell Bedford Mexico City. With extensive experience assisting companies in different sectors, Javier is a speaker at various conferences in Mexico and around the world for the Mexican College of Public Accountants (CCPM) and other organisations. He is also certified in accountancy by the Mexican Institute of Chartered Accountants.
Jenny has been with KRP as an assurance partner for more than ten years and brings knowledge in multiple disciplines including accounting, audit, financial management, and estate, corporate and personal tax planning. Jenny is responsible for a large and diverse client base of owner-managers, entrepreneurs, and not-for-profit organisations. Her broad experience helps her direct clients to the best available expertise, whether from her network of professionals or her fellow partners.