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Global Expansion: Key Challenges for Businesses and How to Overcome Them

Shaka Chiki in Japan. McMolletes in Mexico. Chicken Maharaja Burger in India. All examples of McDonald’s localized offerings that have won millions of hearts worldwide.

Although the US-based brand has been selling the American dream since 1940, its offerings are sensitive to local cultures, preferences, and tastes. This makes McDonald’s menu familiar to consumers in 118 countries and garners trust and brand loyalty.

McDonald’s also allows local players to share ownership. Forbes has described how it has enabled “franchisee-members, management, and shareholders to share the risks and rewards from the discovery and exploitation of new business opportunities.” Gradually, many multinational companies have embraced this model.

McDonald’s global rise is testimony to its successful expansion strategy – aggressive marketing, glocal offerings, standardization, robust supply chain management, and innovation and adaptability.

Through all this, McDonald’s has emerged as the biggest fast-food chain in the world. In December 2023, the firm announced its fresh expansion plan with 10,000 new stores by 2027. It will also use AI to save costs and serve faster.

Like McDonald’s, many companies worldwide are seeking to exploit the international market to diversify revenue streams, tap into unexplored markets, harness global talent, and outshine competition.

The key challenges

Organizations can consider global expansion for different reasons. The International Journal of Professional Business Review describes how Apple looked outward to expand its consumer base in newer markets, while Samsung did so to diversify its market and reduce risks.

Also, McKinsey & Company suggests goingGlobal if you can beat local to outgrow their peers. It advises firms to expand internationally if they have a transferable advantage.

However, organizations need to overcome several hurdles during their expansion journey.

1. Market research and strategy development

Businesses need to identify their total addressable market (TAM), serviceable addressable market (SAM), competitors, and purchasing power of consumers. They must also study consumer preferences and the regulatory landscape.

Denis Kalemberg of Airome Technologies told Forbes that organizations may also look at “reliable local partners who know the particularities of the market“. They must draft an expansion strategy in line with their company’s goals and vision.

Here are some questions to consider while drafting your expansion strategy:

  • Is there a need for your product/services in new territories?
  • Does it align with local preferences?
  • What could be the means to enter the market?
  • How can you take care of staffing needs and set up a reliable supply chain?
  • How can you bear the expansion costs?
  • Does your team have global experience and expertise?
  • Do you understand the local laws and regulations?
  • Will the expansion have any bearing on your domestic market?

Violation of local laws can tarnish a company’s image, batter profits, and foil expansion plans. For instance, the Indian National Green Tribunal fined PepsiCo and Coca-Cola for extracting groundwater in violation of local environment laws. This has blotted their image in the Indian consumer market.

Organizations must adhere to local labor and tax laws while hiring overseas. They must be mindful of intellectual property and data privacy regulations. And then there are international statutes regulating cross border trade, such as free trade agreements, General Agreement on Tariffs and Trade (GATT), Agreement on Agriculture, Agreement on Technical Barriers to Trade (TBT), and Agreement on Trade-related aspects of intellectual property rights (TRIPS).

You can simplify these compliance requirements using a digital tool like Multiplier. As your employer of record (EoR), the platform takes care of adherence to labor and tax laws in more than 150 countries while you focus on your employees’ productivity.

3. Cultural and language barriers

Not being sensitive to cultural peculiarities can cause gaffes to brands. HSBC’s ‘Assume Nothing’ campaign was misinterpreted as ‘Do Nothing’ in several countries. To correct this, the company had to rebrand its private banking operation at a cost of $10 million.

Practice cultural sensitivity by paying attention to local norms, traditions, and customs. Consider hiring locals though EORs or forging partnerships with local entities.

Localization has helped Nike breach markets in 190 countries. This covers local websites, collaborations, products, and social media presence.

4. Financial management and currency risk

Cross-border payments are expected to surge from $150trn in 2017 to more than $250trn by 2027. Thus, the urgent need to manage finances and offset currency risks!

Currency risks may be transaction-based, when the deal occurs in the supplier’s currency; translation-based, when subsidiaries worldwide deal in different currencies; or economic-based, owing to macroeconomic or geopolitical conditions.

To manage currency risk, firms can create a central treasury to oversee global cash flow and manage foreign exchange exposure. They can adopt strategies like forward and options contracts or implement currency hedging besides maintaining multi-currency accounts.

Automate workflows and create audit trails to manage finances better. Optimize for taxation through transfer pricing strategies. And leverage digital tools like Multiplier, which helps you comply with tax laws in 150+ countries and pay your employees in local currencies. It also provides you one unified platform to manage your global payroll.

5. Supply chain complexities

Recently, the Ukraine war has further disrupted global supply chains, which was already floundering since the onset of the Covid-19 pandemic and the US-China trade war. Goldman Sachs has observed that the recent global semiconductor chip shortage has impacted 169 industries. So many economies are now looking for regional sources, but this will take time, according to the Harvard Business Review.

Willy C. Shih at Harvard Business School has suggested ways to strengthen your supply chains. He vouches for supply chain mapping, including identification of critical nodes.

Consider how these nodes could recover from disruptions or be replaced. You’ll also need to diversify your supply chains and explore new technologies like automation and continuous-flow manufacturing to lower costs and improve flexibility.

6. Intellectual property protection

Defending a patent lawsuit can cost up to $3mn for companies. So securing intellectual property rights can save costs and business. Recently, Apple had to call off some watch sales in the US over an international patent dispute.

To avoid lawsuits, file for patents, trademarks, and copyrights as early as possible in target markets. Further, you must enforce non-disclosure agreements relating to trade secrets with employees, contractors, and partners. Also consider alternative dispute resolutions like mediation or arbitration to avert hefty litigation costs. You can check WIPO’s IP strategy checklist for inspiration..

7. Hiring and managing a global workforce

Modern HR functions today are looking to hire abroad. According to a study, 33% of HR functions expect to hire more candidates “that live or have lived in countries outside the organization’s location in the next five years”.

Having a global workforce brings several benefits to firms. They can tap into specialized skill sets unavailable locally, save costs by hiring cheaper workers, and even build high-performing teams by tapping into diverse perspectives.

You can hire both employees and freelancers across 150+ countries using Multiplier. Our platform helps draft locally-compliant contracts, offer benefits, onboard employees, pay them in local currencies, and manage expenses. It also manages compliance to local labor and tax laws.

8. Quality control and standardization

Standardization of consumer experience has let Starbucks emerge as one of the biggest coffeehouse chains in the world. The ‘Starbucks experience’ –  how you’re greeted on entering the store, the coffee flavor, and ordering experience –  is the same for consumers, whether in New York or Madrid. This is a result of regular employee training and strict quality checks.

Ensure standardization through global training programs and clear communication and collaboration, while ensuring cultural sensitivity. You can also maintain quality by creating detailed manuals, through regular audits, supplier qualification, and standardizing raw material sourcing.

9. Political and economic instability

A recent survey by the World Economic Forum has expressed concerns about geopolitical tensions and tightening financial conditions slowing down global economic growth. This instability can disrupt supply chains, slow demand, and create currency fluctuations and labor shortage. It can even make it unsafe to do business in case of social unrest and conflict as in Ukraine or Afghanistan.

To mitigate risks, companies must proactively monitor political, social, and economic indicators in local societies to look for critical signs. They must be ready with contingency plans. Further, organizations must diversify dependence on markets.

Cultivate stronger bonds with local businesses, government officials, and communities. The World Economic Forum is already urging governments to step in and help businesses navigate geopolitical tensions.

10. Adapting marketing strategies

In a bid to connect with local consumers, PepsiCo started labeling its beverage cans in local Indian languages like Punjabi, Marathi, and Bengali. It also launched the ‘Pepsi Blue’ campaign to serve local tastes in Japan.

Marketing to suit local preferences can let companies foray into new markets, boost sales, and win customer loyalty. For this, they have to view localization beyond language and include cultural contexts, values, and beliefs.

Use locally credible sources like celebrities for endorsements and distribution channels preferred by your consumers. You can also empower local teams to lead your marketing efforts.

11. Customer service and support challenges

According to PwC, for 73% of customers, their purchasing decision is primarily driven by experience. Customer support must be consistent across markets. If customers receive less value in one territory than those in another, they perceive your offering differently, says Nataly Kelly, chief marketing officer at Zappi. She adds, “This is not only unfair to them, but it can also hurt your business in the long run.

To provide efficient customer support, organizations must offer multilingual support in the form of a knowledge base including FAQs and troubleshooting guides, and on-call resolution.

Enforce round-the-clock support, including support through AI-based chatbots. Omnichannel support through phone, email, and social media can also enhance customer experience. To boost standardization, you can regularly monitor communication and create standard operating procedures to resolve customer queries.

12. Technology and infrastructure gaps

According to the Global Infrastructure Hub, the world is poised to face a $15 trillion infrastructure gap by 2040. Businesses could be seriously hit as they need infrastructure for warehousing, maintaining supply chains, opening stores, and managing digital operations.

Organizations can plug infrastructure gaps by conducting needs assessment and upgrading legacy systems in line with business objectives. They may invest in emerging technologies like AI, machine learning, or internet of things to automate tasks. For instance, cognitive procurement and container tracking solutions could help you manage supply chains better.

Leverage technology to manage human resources by automating repetitive administrative tasks and overseeing operations from one platform.

13. Entry barrier and competitive analysis

Companies face tariff and non-tariff barriers while entering a new market. While many can be crossed with strategic planning and execution, some have macroeconomic causes that are difficult to identify and surmount.

Entry barriers for companies while entering a new market include:

  • High startup costs
  • Government-led trade barriers, including tariffs and quotas
  • Competition from established players
  • Intellectual property regulations or lack thereof
  • Infrastructure gaps
  • Language and cultural barriers
  • Political and economic instability
  • Limited access to financing
  • Corruption and red-tapes
  • Taxation and accounting standards
  • Data privacy regulations

Entrenched competitors in the market are also a challenge. Organizations must assess the need for their product or services in the market, the market size, and growth potential.

Gauge market share distribution to identify niches you could exploit. McKinsey & Company believes that to anticipate the moves of your rivals, it’s essential to “understand how their strategists and decision makers think”.

14. Partnerships and joint ventures

The Economic Times posits that strategic partnerships with local businesses can herald many benefits. They can provide market insights, access to established customer bases, and help overcome entry barriers. To put it simply, “they can accelerate your international growth”.

Be mindful of what to expect from different types of joint ventures and plan the management process before setting them up. There are different kinds of joint ventures you can explore: project-based, vertical (between buyer and supplier), horizontal, or functional.

Examples of such ventures include BMW Brilliance of BMW and Brilliance Auto Group in China and Nestle and PAI Partners for frozen pizza distribution in Europe.

In addition, you can consider partnering with Multiplier to handle compliances, onboarding of employees, and payrolls worldwide. With its legal entities in 150+ countries, the platform acts as your people’s legal employer while you manage them directly.

15. Scaling and sustainability

While it’s important to maintain a fixed set of core values and purpose, companies must also be infinitely adaptable in terms of their strategies and practices to enjoy global success, as Jim Collins and Jerry I. Porras explored in their book ‘Built to Last: Successful Habits of Visionary Companies’.

For scaling, organizations must focus on markets with higher growth potential and adapt their products, services, and marketing efforts to resonate with local preferences. You must build a diverse workforce with international exposure that can help you succeed in different markets.

Consider the following while drafting your global growth strategy:

  1. Conduct market research to identify growth opportunities
  2. Develop long-term roadmap outlining scaling goals
  3. Invest in global talent
  4. Improve global supply chain
  5. Harness technology for global operations
  6. Explore market-specific customizations
  7. Create risk management plans
  8. Utilize performance indicators aligned with global strategy to track performance in each market
  9. Build strategic partnership and alliances

Partnering for global expansion

Multiplier can power your global expansion by making international hirings, compliances, and payroll easy and risk-free. The platform helps you enter new markets and avoid the hassle of incorporating a new entity.

  • Manage payroll: Run payrolls in 120+ currencies and view taxes, social contributions, and pay-slips on one platform. Automatically calculate deductions, withholdings, and deposits in compliance with local laws.
  • Hire globally: Use the employer of record solution as your primary international employer, while you manage day-to-day operations with your employees. Multiplier handles contracts, payrolls, taxes, benefits, and expenses for your people.
  • Offer benefits: Provide your global employees with locally competitive benefits and insurance. Ensure employees worldwide are receiving homogenous benefits.

Start your global expansion journey with Multiplier today. Try for free!

Binita Gajjar
Binita Gajjar

Content Marketing Lead

Binita is a Content Marketing Lead at Multiplier

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