The landscape for business is increasingly becoming global, and American organizations continue to increase their global footprints as they look to new opportunities for expansion. Whether you are looking to expand programmatically, take your product or service into new geolocations, grow your operations by adding international satellite offices or move your entire operations to a new office overseas—you must weigh the risks and the rewards to help navigate your organization through the pain points of expansion in order to successfully enable growth.
The appetite for growth
From innovation of emerging markets to the world becoming increasingly connected—the appetite for expansion continues to grow. Spending on global business travel is on the rise and expected to reach $1.6 trillion by 2020—according to the Global Business Travel Association (GBTA)—demonstrating that organizations show no signs of slowing down on their investment in doing business globally.
The motivations for organizations to seize the opportunities for growth include:
- Location. Expanding your physical location allows you to diversify geographically in order to scale.
- Audience. New regions bring new groups of consumers, potentially doubling your customer base.
- Talent. Going beyond borders gives you access to a new talent pool of people with skillsets to help you grow in the lands you seek opportunity in.
- Innovation. Today’s fast-paced, high-tech era creates an opportunity to innovate by leveraging partnerships from external sources.
Although the reasons to expand are incredibly opportunistic, the decision to go global also presents an exhaustive list of associated risks and barriers to entry that must be evaluated before acting.
The struggle is real: 6 key risks to expansion
Risk comes from not fully understanding the challenges you are up against, and when organizations make the decision to go global, everything becomes more complex. You may have pressure to move quickly to expand, however, if you fail to do your homework to understand and comply with a new market, you could easily end up hurting your organization in a number of ways.
Each country has its own economic and social climate, and unique set of risks and rewards. To mitigate as much risk as possible, you must consider the following risks in your expansion strategy:
- Regulatory risks. The costs of non-compliance, including permit processes and possible Foreign Corrupt Practices Act (FCPA) violations, are unpredictable and business laws might not be clearly defined or consistently enforced in certain markets.
- Legal risks. A great deal of time and money must be spent on legal counsel to ensure compliance with tax laws, customs laws, import restrictions, corporate organization rules, intellectual property protection and liability laws.
- Taxation risks. Uncertainties around a country’s tax program can create a significate barrier to entry, and the hours required to navigate tax spend can be massive.
- Supplier risks. Determine if your domestic supply chain model will translate internationally. Organizations are responsible for the action and compliance of suppliers, vendors and partners in new target markets as well as your own internal activities.
- Intellectual property risks. Organizations must protect their intellectual property (IP) such as trademarks, domain names and patents because some countries have weak IP laws.
- Financial risks. Current influences and fluctuations make breaking into new markets difficult. Foreign exchange volatility is higher than it was in recent years, and is viewed as a huge threat to going global.
(Source: Thomson Reuters – Going Global Report)
Turn expansion into a rewarding risk
Forging ahead to new markets requires connectivity between process, people and systems. Your expansion strategy should be supported by data, analytical tools and technology to help you evaluate risks, inform your business decisions, and prime your organization for growth and global ambitions—turning expansion into a rewarding risk.
In order to plan to expand, data and technology helps you:
- Understand and comply with regulations
- Identify and assess financial risks
- Manage complexities around tax and compliance
- Build an effective risk mitigation program
- Utilize resources and workflows for growth and scale
- Provide support across the globe
- Respond to supply chain disruptions
- Make payments overseas and format receipts across the globe
- Facilitate international payroll and conduct remote meetings
- Strategize global business travel and duty of care obligations
Paving the way for growth
Expansion will never be risk free because no two markets, supply chains, legal systems or sets of consumers are the same—and requires more time, money and energy than how you are currently running your business.
Fortunately, there is a new way to leverage the right data, technology and human expertise to pave the way for growth. As a client of Concur, you’ve already made the wise investment in a truly integrated travel and expense solution to prepare you for growth. If expansion is on your roadmap, now is the prime opportunity to enhance and optimize your solution to make it work for you in planning and executing your expansion strategy.