Is It Time to Expand into Global Markets?October 31, 2016
If your business is looking to expand its geographic reach and boost revenues, entering international markets is a critical step
If you sell to only domestic customers, you could be missing out on significant growth opportunities in today’s global marketplace. KLR’s 2016 Manufacturing Industry Survey report found that 40% of respondents operate internationally. Half of the respondents who export increased their foreign sales in 2015.
“Going global” can expand your geographic reach and boost revenues, especially if you venture into developing countries or markets that have a strong preference for American-made products. While global expansion strategies can add significant value, they also bring added risk. International expansion plans aren’t right for all businesses. So, it’s important to realistically weigh the pros and cons before exporting.
Use Caution and Restraint
U.S. business owners are often surprised by the amount of legwork it requires to operate in another country. The process begins with research into the local regulations, customs and tax rules in the countries you’re targeting.
If the country’s business environment seems conducive to your products and services, the next step is a formal market feasibility study to gauge demand. This stage typically includes a small test launch to evaluate demand on a smaller, more tangible scale. This test may require you to work with local companies who are registered in and familiar with the foreign market.
In many cases, you’ll have to modify your product specifications, price, packaging and contract terms, based on cultural norms, customer preferences and local regulations. Post-sale customer service may also require a different approach overseas. Remember, English may not be the primary language in the markets you’re targeting, and some people who speak English as a second language may be unable to read it fluently.
Learn the Nuts and Bolts
Successful global strategies are rarely launched on gut instinct. Instead, you’ll need to create formal business plans and financial statement projections, based on how much you’re willing to invest. If you plan to borrow funds to expand, your banker will scrutinize these documents.
You’ll also need to get a handle on export issues, including how to document exports using certificates of origin, when you’re required to obtain export licenses and who’s responsible for duties, taxes and legal issues as products cross borders. Mistakes can lead to unexpected duties and interest expense.
Ready, Set, Go Global
Penetrating a foreign market takes time, patience and in-depth analysis — but the payout can be substantial.
Our global tax specialists have experience helping U.S. companies expand into international markets. Together with our partners at LEA Global, we have a proven global network of more than 18,000 professionals in more than 100 countries available to help you identify hidden costs and prepare management for the challenges and opportunities ahead.