Planning the future environment to flex with changes
The COVID-19 pandemic has dramatically reshaped the global business landscape, compelling organizations to reassess their strategies and future-proof their operations. As companies seek new avenues for growth and revenue, international expansion emerges as a crucial imperative. In addition to impacting individual businesses, international development is pivotal in positively impacting the global economy and job market. Organizations venture into new markets and create new revenue streams and employment opportunities worldwide, fostering economic growth and resilience during economic headwinds and pandemics.
This comprehensive article delves deeper into the implications of international expansion on employees, examining factors such as reduced travel, enhanced customer proximity, employee happiness, cultural nuances, employee choice, support mechanisms, and the importance of futureproofing. This article also outlines benefits, pitfalls, potential challenges, and actionable strategies and their impacts for smooth employee and business transition during international expansions.
Understanding International Expansion and its Significance
International expansion goes beyond merely venturing into new markets; it is about identifying untapped opportunities with high growth potential to expedite revenue growth while optimizing operating margins. By moving closer to their customers through international expansion, companies can improve customer experience and services while placing employee well-being at the forefront.
A timely global expansion strategy ensures that organizations target the most promising and profitable countries. While economic indicators such as GDP growth are essential, evaluating market competition, talent availability, cultural differences, ease of doing business, and employment legal landscape is equally vital to make informed decisions. (Papagni, 2019) 1
International expansion provides an entirely new market of customers that your business or product can serve, allowing for significant business growth. Understanding the challenges of global expansion and planning well in advance is essential to ensure a smooth transition. (Expert Panel Forbes Councils Member, 2022) 2
Common Pitfalls and Potential Challenges
The challenges around conducting business internationally are multifaceted. Navigating the intricacies of employee transitions and employment is a critical aspect to consider when engaging customers on an international scale.
- Language Barriers and Cultural Norms: It must be prioritized, as transferred employees interfacing with international customers may encounter hurdles that can impact operational gains and customer experience.
- Employment Laws: Varying employment laws and payroll regulations, ranging from ‘at-will’ to constitutionally protected, can significantly influence hiring, growth, and retention policies for the team.
- Employee Preference: In pursuing international expansion, it’s essential to acknowledge that personal preferences and corporate plans may not align perfectly with all team members. As such, finding common ground and ensuring a smooth transition becomes imperative with proactive and transparent communication while supporting employees during the transition.
- Employee Safety: Ensuring the safety and security of employees must remain a top priority, given the diverse challenges posed by each country, region, city, and even neighborhoods within cities.
- Political Stability and FX rate: Political stability, crime rates, and environmental risks may vary significantly, necessitating meticulous planning and risk assessment. Currency exchange and inflation rates, laws governing business dealings with international entities, trade agreements, and tax implications can all pose significant obstacles.
- Insufficient Technology Support: Lack of technology readiness and support during international expansion can lead to poor employee experience and confusion during hiring, onboarding, benefits selection, payroll processing, and commission calculations for sales teams. For example, some countries require employers to translate all employee-facing documents into the local language. Thus, the employer must account for the localization process and systems supporting the local languages while hiring or transferring employees to new markets.
By proactively addressing these challenges, organizations can position themselves for success on the global stage.
Actionable Strategies for Smooth Transitions
Navigating the potential pitfalls and challenges during international expansion demands a proactive approach prioritizing employee experience and support. Organizations can ease the process and improve employee satisfaction by providing employees with choices and assistance during the transition. This flexible and personalized approach is essential in the post-pandemic landscape, where disruptions have emphasized the importance of employee well-being.
The following actionable strategies can contribute to a smooth employee and business transition during international expansion:
- Hiring an International Team: Building an internationally recognized brand requires a local team to understand what it takes to enter and grow in foreign markets. Partnerships, alliances, and direct hiring can facilitate assembling an international team that can effectively cater to local needs. (Expert Panel Forbes Councils Member, 2022)2
- Role of Technology and Support Resources: Streamlining procurement, employee onboarding, payroll, asset management, and workplace services ensures stellar employee experiences. Investing in training and product feature rollouts in new markets helps overcome linguistic barriers and cultural differences.
- Change Management Strategies: Effective change management frameworks and strategies are critical to navigating organizational transitions during international expansion. Prioritizing employee engagement, communication, and stakeholder management can foster a positive work culture during change. For example: Hosting proactive and regular employee office hours to transparently communicate with the employees and their managers to share a timeline and set expectations on the changes and support provided by the human resources team can reduce the employee pushback and build trust in the organization.
- Leveraging Diversity and Inclusion: Embracing diversity and inclusion in international contexts drives innovation, improves decision-making, and enhances organizational performance during expansion. Encouraging diverse perspectives can lead to creative problem-solving and better customer understanding.
- Ethical Considerations: Addressing ethical challenges related to labor standards, human rights, diversity and inclusion, and corporate social responsibility is integral to responsible international expansion. Operating ethically in global markets builds trust and enhances brand reputation.
- Geo-political Stability, Taxes & Ease of Doing Business: Careful evaluation of the target country’s stability, tax laws, safety of the employees, and ease of doing business is crucial for informed decision-making. Understanding the business environment and legal landscape is essential to avoid potential complications. For example: Identify whether the jurisdiction has a stable and established tax system that respects precedence and comports with international tax norms (e.g., treaty network, OECD guidelines). It is also crucial to determine if the country has foreign exchange restrictions and how those would impact the organization and tax incentives available with headcount growth or industry, potentially impacting the operating margins.
- Understanding Employment Laws and Payroll Regulations: Complying with the new local entity’s employment laws and payroll regulations is crucial to avoid legal complications. Expert legal counsel can help organizations navigate the complexities of international employment laws.
- Researching Target Country’s Business and Cultural Norms: Tailoring offerings to meet the needs of local customers requires an understanding of their preferences and customer expectations. Adapting business practices to local cultural norms can foster stronger customer relationships. Cultural nuances can significantly impact how your organization operates in different countries. For example, customers in Asian countries have different cultural norms than North American or European customers, so the approach and business practices that work in one country may not work in another. (Papagni, 2019)1
Benefits and Impacts on Employees, Customers, Business, and Economy
Impact on Employees
Employee satisfaction plays a pivotal role in ensuring business continuity and future growth. Satisfied employees foster resilience, adaptability, and positive customer experiences. A strong link exists between employee and customer satisfaction, underscoring the importance of employee well-being in driving business success. An organization’s crucial objective is shifting towards a culture that puts the customer first. The satisfaction of customers and employees should be prioritized as two sides of the same coin. (Chamberlain & Zhao, 2019)3
Content and support employees can deliver personalized and relatable experiences to customers. International expansion with a local presence enables companies to achieve this goal effectively. Instead of bridging time and cultural gaps between customers and remote teams, having employees physically present in target markets fosters trust, deepens business relationships, and contributes to continued success. Employee satisfaction translates into cascading impacts on customer experience and business.
Impact on Customers
- Early Market Entry & Improved Customer Trust: When competitors establish a presence in target emerging markets before other companies, they often win deals even if they don’t have the best products. Customers tend to choose local competition over remote international teams, emphasizing the importance of a local presence in building trust and winning deals. Thus, expanding in the global market and building a local presence signals an organization’s long-term investment in the country and enhances customer trust.
- Investment in Customer Countries and Reduced Industry Compliance Requirements: International expansion directly translates to local job creation, fostering innovation through diverse perspectives. In many countries, selling products to highly regulated industries requires strict compliance with industry requirements. A local presence helps alleviate such hurdles and improves the customer experience of buying products and working with teams.
- Customer Cost-saving & Affordability: One critical aspect of international expansion is addressing the affordability challenge for emerging market customers. Despite their admiration for products, foreign exchange headwinds and price sensitivity may make the product unaffordable. By expanding internationally and conducting business in local currency, organizations can mitigate these challenges, reduce the cost-to-serve, and make their products more accessible.
Impact on Business
- Sales Impact: Reduced time to market directly impacts the ability to effectuate Annual Contract value growth and mitigate compliance exposure. Local employees who understand the local customers and their needs enhance sales deals’ win rates and reduce customer churn.
- Revenue & Cost Impact: Tapping into new markets and customer segments can boost top-line revenue and increase market share. Access to local talent helps reduce the cost to book, cost to serve, employee salaries, and travel expenses for sales teams.
- Risk Reduction: Spreading business operations across different regions insulates organizations from country-specific risks such as economic recession, war, or political instability. Geographic diversification enhances business resilience and reduces risk created by external factors for the organization.
Impact on the Economy
- Resilient Economy and Job Market: Beyond its benefits to individual organizations, international expansion is crucial in positively impacting the global economy and job market. Companies expanding into new markets create new revenue streams and foster economic growth in those regions. By investing in local talent and resources, organizations contribute to job creation and economic development.
- Risk Diversification: During economic headwinds and pandemics, international expansion is a source of resilience for the global economy. Diversifying operations across different regions reduces dependency on specific markets, mitigating the impact of economic downturns in one area. This diversification ensures a more stable and robust global financial ecosystem capable of weathering unforeseen challenges.
In this rapidly evolving landscape, the power of international expansion and a commitment to employee well-being promise a thriving and prosperous future. International development has become a strategic imperative for businesses seeking growth and resilience. But new expansions can fail if companies don’t prioritize employee choice, customer expectations, and ethical considerations. By embracing the opportunities presented by international markets and understanding the diverse cultural nuances, organizations can future-proof their businesses and establish themselves as global leaders in their respective industries.
1 Papagni, F. (2019, December 13). International Expansion Strategy: How to Target Specific Countries. Retrieved June 01, 2023, from https://bit.ly/47AcnJZ.
2 Expert Panel Forbes Councils Member. (2022, May 10). Expanding Your Business Internationally? 15 Essential Things You’ll Need To Do. Forbes Business Council, https://bit.ly/3OL4nh0.
3 Chamberlain, A., & Zhao, D. (2019, August 19). The Key to Happy Customers? Happy Employees. Retrieved June 03, 2023, from https://bit.ly/3DZK4al.