Key factors for international business expansion

In today’s global marketplace, business success increasingly requires active trading participation in foreign markets. Emerging companies typically operate in rapidly evolving industries where expertise, speed and efficiency are rewarded, writes Rone Silke, Business Development Manager at Sovereign Trust (SA).

International expansion can add to the long-term success of businesses by enabling access to new markets and customers, driving higher sales volumes, and increasing revenue and profits. Business expansion also helps to diversify business risk, reduce dependency on a single revenue source and gain exposure to new ideas and technologies.

Modes of entry may vary – internet, exporting, licensing, commercial agents, distributors, strategic alliances, joint ventures, overseas manufacturing or sales subsidiaries – but international expansion will inevitably involve unfamiliar legislation, regulations and processes, as well as creating international legal and tax considerations.

Key factors to consider include:

• Choice of jurisdiction – you will need to evaluate the ease of doing business in the specific country by assessing the set-up procedures, available corporate structures, licence and permit requirements, and availability of utilities, business accommodation and workforce.
• Cultural challenges – companies must adapt to a wide range of potential cultural and linguistic differences, as well as business practices and regulatory environments. To navigate successfully through cultural complexities, onboarding local experts in an expansion venture can help provide cultural intelligence and valuable insights.
• Legal and regulatory compliance – you will need to select a jurisdiction with high quality legislation and regulation, a robust judicial system, good international reputation, and access to well-qualified professionals that will offer you flexibility and security.
• Financial challenges – you will need to assess the currency exchange risks, the strength of banking facilities, access to financing, the quality of investment protection, as well as the ongoing operational and maintenance costs beyond initial set-up.
• Risk management – you will need to identify and analyse potential threats or uncertainties by assessing the economic, political, technological, environmental and competitive factors that could affect your business. Organisations that embrace strategic risk management are more likely to deliver stakeholder confidence, better business outcomes and revenue growth.
• New business model – for entrepreneurs considering business expansion it is essential to adapt your business model to clarify goals, identify potential obstacles and outline the steps needed for success. This will enable you to make informed decisions that support long-term growth and sustainability while aligning with the local conditions.
• Tax benefits – international expansion can offer opportunities to reduce the tax burden of the business by gaining access to potentially lower corporate and personal income tax rates, reduced withholding taxes and import duties, tax incentives and exemptions, double taxation agreements (DTAs), as well as lower capital gains and estate or inheritance taxes.

Creating a solid business plan is essential to clarifying your goals, making informed decisions, and minimising costly mistakes. This involves conducting thorough research, setting realistic targets, and seeking guidance from local professionals who also understand the wider international context. This will enable entrepreneurs to identify potential risks and opportunities and make informed decisions that support the long-term growth and sustainability.

For further information on making a success of international business expansion, please contact Rone Silke by phone on +27 (0) 21 418 2170 or by email below.