Every business, at some point, grapples with the idea of expanding operations to a different region. After all, expansion is a natural part of business growth. As you ask yourself when, or if, you should expand, you'll realise there's a lot to consider. Let's look at some of the most important factors to remember when choosing to expand operations overseas.
Research: Can your business do what's necessary to thrive in a new country?
Aside from choosing a country that'll provide an appropriate market for your business, you should also consider the local competition. Buying locally has become the norm in many parts of the world. As a foreign company, you have to plan your entry well so that you don't seem like a direct threat to local communities and organisations.
Look at similar brands serving the local population and identify ways to stand out. When establishing your brand in a new country, you want to blend in as much as you can—but also shine as your authentic self. Doing so requires a positive relationship with the local population. Understand holidays, religious and social beliefs, as well as the contributions of local indigenous cultures. You might have to alter your business operations to fall in line with local customs and historic events. In Indonesia, for example, a large portion of the population is Buddhist and, therefore, consider full moon days as sacred and a time for worship. Similarly, in countries where Abrahamic religions are most prevalent, the Sabbath is a crucial part of the week. No one will work or conduct business on those days.
Finally, research the economy and the current business ecosystem. Global events impact every country differently. The everyday challenges people face may be wildly different from those we're accustomed to in Australia. In countries that rely largely on imports, for instance, inflation of the US dollar may have greater impacts than in Australia. Meanwhile, Europe is dealing with energy issues and some African countries are battling food shortages. Eastern Asia faces military coups and simmering international tensions. Austrade has extensive guides with advice on navigating each country and region you might want to explore. It also runs Landing Pads, a program that offers you a short-term co-working space and connects you with business networks and ecosystems in certain countries. This is an excellent way to get your bearings when you land in a new place.
Seek counsel: What are your legal obligations, and what are the challenges of meeting them?
It's important to know what legal regulations you'll be up against in a new country. The laws that apply to you will depend on how you plan to run your local operations. For instance, if you're a food product manufacturer partnering with local sellers to introduce your product to the market, you won't need to set up a local office right away. In that case, you'll have to consider trade laws on partnering with local shipping vendors and ways to overcome practical challenges that might arise in the supply chain.
On the other hand, if you intend to set up a local entity of your business, you'll need a stronger presence in the country. You'll have to register your operations under the local (state and national) business authorities, comply with local data processing requirements, maintain accounts according to local accounting standards, and accommodate local national languages.
We recommend talking to professionals to understand the requirements for a foreign company operating in their country. Seek guidance on the local real estate market and whether you have the right to purchase property in the country. If you have an existing managing director relocating to take over local operations, they should have the necessary visa and the rights to employ local nationals. As an international business, you'll have to learn about local labour laws and union movements, superannuation and wage regulations, and workers' rights.
It's also important to familiarise yourself with local government structures and their policies on businesses. As a new company entering the country, you should ideally know what support local governments will extend to you and how to navigate bureaucratic processes.
International trade requirements: How does your expansion relate to, and impact, other nations?
International trade is governed by the World Trade Organisation (WTO). It serves as the central authority that defines trade protocols and regulations between member nations. The WTO is also responsible for negotiating inter-governmental trade agreements and settling trade disputes. To support businesses engaged in international trade, the WTO formed the Trade Facilitation Agreement (TFA). This agreement is designed to reduce red tape and delays, and improve the export process. Most of this work is managed by the Department of Immigration and Border Protection when goods arrive at the border. Under this agreement, as an exporter, you'll receive thorough guidance from border authorities.
To support international trade further, the WTO has also created the Agreement on Government Procurement (GPA). This agreement exists between 21 parties. The European Union (a group of 27 countries) is considered one party, and therefore, the agreement applies to a total of 48 WTO member nations. The agreement's sole purpose is to assist new businesses in acquiring government agency deals in foreign countries. With this agreement in place, if you're an Australian company establishing roots in the United Kingdom, you'll have the right to apply for government procurement. The GPA ensures government agencies don't discriminate against overseas suppliers when choosing business vendors. This fosters healthy competition in the procurement market, benefiting both businesses and the local economy. If you're in an industry that supplies products or services to government agencies, you'll benefit from the GPA.
To encourage and support international trade, the Australian Government also constantly establishes free trade agreements (FTAs) with other countries. FTAs can help you expand operations into new countries by providing information and guidance, and reducing the intermediaries involved in starting an overseas operation. When planning a possible overseas expansion, have a look at the trade agreements in place with those countries. This will help you build your international trade strategy. For instance, under the Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA), Australian exporters have priority and receive special tariff rates over other exporters when they conduct business in New Zealand. It works the other way, too. This means that an Australian business expanding to NZ will get more benefits if they partner with NZ-owned businesses over another overseas business.
There's a lot going on when you're a growing business, and expanding overseas is a natural progression. However, it's important to know what lies ahead and what support is available for you. We hope this post has given you some clarity and helped you in your deliberations.