Business Expansion in Europe: What to Consider

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When it comes to business expansion, foreign markets are highly appealing as they represent opportunities that have yet to be tried. There are more than a few emerging regions offering a market that is only now able to afford commodities that have been enjoyed by developed markets for years. And with more countries able to adopt the social network culture, reaching those global customers is easier than ever.

However unplanned costs, legal liabilities that you didn’t anticipate and regulatory nightmares you didn’t see coming can turn your plan for global expansion into a death knell for your company, so consider the following before you make the decision to expand:

Consumer need

The first factor, and the most important one, is whether there is a need or potential demand for your product or service in the new target market. As average personal incomes in Africa remain low compared to developed countries, the fact that it is home to some of the fastest growing economies in the world does not mean it is a viable market for expensive consumer goods.

Barriers to entry

From “soft barriers” such as a different language and culture to more business related ones such as poor infrastructure and high logistical costs, there can be quite a few challenges to overcome for an international company. Therefore in-depth research of these barriers is essential to evaluating whether a particular region is a viable option for your company or not.

Exchange rate and country risk

Another factor to consider is potential fluctuations in the exchange rate as well as any monetary restrictions imposed by foreign governments. For example, countries like China and even Greece have strict capital controls that could mean there is no real financial benefit to operating within their borders. There is also the risk of political and economic instability, particularly in the Middle East and Africa. While Ireland, on the other hand offers numerous advantages and benefits for business expansion. Also, Brexit made Ireland the only English speaking member of the EU.

Foreign legalities and regulations

From unfamiliar trading laws to tax implications, gaining an in-depth understanding of the local laws and regulations in your new target market is crucial to the success of any international business. Trade eligibility is one of the most significant considerations, as are potential tariffs and legal costs of entering a foreign market.

An important consideration is local employment and labour regulations. For example, there is no minimum maternity leave requirement in the U.S. But in Europe, a minimum of 14 weeks maternity leave must be offered to employees.

International accounting

Different tax compliance requirements, rates and systems can be quite a challenge when it comes to the accounting of a multinational organization. A sound accounting strategy is essential to maximising your revenue, and where your foreign business is registered can have a huge impact on your tax liability.

Companies who operate around the European Union may benefit from the Common Consolidated Corporate Tax Base proposal whereby tax liability is limited to one corporate centre. This tax consolidation has led to over 1000 companies being headquartered in Ireland as its business-friendly corporate tax policy is highly appealing.

Find the right strategic partner

Despite the risks and potential challenges of global expansion, it can sometimes be a necessary business move if you want to remain a competitor in your particular industry or niche. But in order to turn your international business opportunity into a success, it is best to combine forces with an expert who not is not only aware of the risks involved but also understands them well enough to put the right structures in place. With the right global expansion partner, you will not only be able to navigate the intricacies of a foreign market, you will be able to overcome more easily any challenges your global expansion may face

 

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Tuesday, 23 October 2018
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