International expansion is always going to be appealing to businesses. It allows them to access vast new markets and drastically boost revenue opportunities, but why do so many businesses fail when they enter new markets?
One of the essential things is that we learn from other businesses’ mistakes when entering a new market, so here are four common reasons why businesses fail with international expansion.
Business and Tax Obligations
One of the biggest reasons for companies failing in new markets is the litany of business and tax regulations they must comply with. When you move into a new country, there are so many regulations you must be aware of and keeping track of them all can be difficult.
For instance, it’s a misconception that you have to establish a foreign entity to expand into Japan, when, in fact, you can just use a PEO. If you use a PEO in Japan, then you can enter the market and start hiring without setting up a foreign entity.
Every country has its own way of doing things; you often need experts on the ground in those areas to guide you through the process.
Political and Economic Landscape
If you’re used to doing business in countries with a stable political and economic landscape, then moving into more risky markets can be extremely challenging. Countries with an unstable political outlook can offer lots of opportunities, but that opportunity is matched by risk.
If you want to do business in a country, then you’ve got to comply with their laws, but if you don’t know what the political regime is going to look like from one day to the next, it is challenging to plan for the future.
Many companies underestimate the political aspect of international expansion, and it turns out to be something they can’t overcome.
Advertising gives us some amusing examples of how cultural differences can cause big headaches for businesses.
US beer giant Coors failed in this area with their Spanish advertising campaign based on the slogan “turn it loose.” When it was translated into Spanish, it used an expression commonly used for “suffer from diarrhea” – not a look you want when you’re selling beer.
While advertising might give us some funny examples of cultural faux pars, they can happen in any area of your business. If you’re not on top of these cultural differences, then you can find you alienate your employees, stakeholders, and customers all in one go, INS Global can help you to avoid those mistakes.
As you grow your business, you put huge resources into ensuring it continues to run efficiently. Great care is taken over recruitment and training, and processes are put in place to keep the company functioning at a high level.
When you enter a new market, that expansion is much more complicated, and you will need to find new HR practices that work in that country. HR needs to be able to account for these cultural differences, but still, ensure the business can grow efficiently.