Worldwide: Starting To Grow Across Borders? Don’t Underestimate The Power Of Local Nuance

Rising confidence amongst UK SMEs is leading to a surge in firms looking to new international markets for the first time in order to grow sales. However, a lack of understanding of their target market's local nuances can create unwelcome headaches, says regional Managing Director Michael Adams.

Expansion into new overseas territories is exciting and often hugely rewarding for a company. It can create new opportunities, increased sales, new clients, new products and much more, but it is also a time-consuming and expensive process, fraught with commercial and reputational risk.

As business confidence continues to improve after several years of cost-cutting, an increasing number of corporates are now looking to the horizon to grow operations. In the past year alone we have noticed a real anxiousness, amongst SMEs in particular, to be part of this big international push.

All very well and good. However, some businesses are quickly learning the hard way that overseas expansion places a huge administrative burden on them which not only distracts from the day job but also makes life very difficult when they fail to fully understand such things as local regulatory and cultural differences.

Companies based in developed Western economies, especially the UK, often take for granted the familiarity of established and transparent legal, tax and regulatory frameworks as well as the open, fair and business-friendly cultures that underpin them.

However, when looking to set up in a new country for the first time, especially an emerging economy, firms are often shocked by just how complex and highly nuanced the environment is. For example, in a  recent study we conducted of 81 countries,  Argentina was found to have the most complex corporate regulatory regime in the world. This is, to a large extent, the result of there being a civil law rather than a common law framework, as in the  UK and  Hong Kong for instance.

In many instances, the local regulatory and legislative landscapes are constantly changing, particularly relating to things such as employment, tax, real estate and environmental law. Depending on the territory, there can often be issues around transparency and predictability of pricing and the ability to enforce contracts, which can often prove costly when things don't go according to plan.

Forgotten laws

There can also be a host of regional variances within one country, or odd local bylaws that are not immediately apparent, where companies are often unaware that a breach has occurred until it's too late. And it's not just understanding those various laws, but how they are interpreted and then the practical aspects of how they are applied.

Failures in this regard can often lead to the accidental alienation of local officials, employees, communities, customers and other stakeholders. The consequences can include exposing the company to fines, suspension of trade, or worse, criminal prosecution.

To give you an example, missing a deadline for filing a tax return would in many countries represent a minor infraction. However, for one foreign-owned company operating in  Thailand where a hard line approach is taken, this oversight resulted in an arrest warrant being issued for the director in whose name the accounts should have been filed, despite the company not owing any tax.

For another, a US-based business, there were some delays with a recent routine tax review in Egypt. The local official was unhappy with the speed in which the process was moving and so threatened to issue a notice of an investigation into tax evasion. Clearly the damage that this could have caused to the reputation of the firm in question was significant.

Whilst I am constantly surprised by the range of countries that businesses are expanding into – we recently helped set up a global shipping firm in the Marshall Islands, for example  –  China still remains the most popular destination overall and for good reason.

But  China also remains one of the most complicated places on earth to operate. Whilst more business friendly than Brazil India or Russia, its regulatory system is markedly bureaucratic, especially compared with neighbours such as Hong Kong Malaysia and Singapore.

For example, in  Hong Kong it takes around 80 man hours to pay your taxes compared with mainland  China which takes as much as 400. To build a new warehouse will on average take less than a month to process the paperwork in  Singapore compared with one year in China.

And the regional variances I mentioned earlier are painfully evident in China with each province having its own unique interpretation of commercial law. Enforcing a contract in Nanjing, for example, can take three to four months, but in Changchun you can wait 18 months for the same result. In Shanghai, registering a property is a four-step process whilst in Nanning there are three times as many steps involved.

That said, companies should not be put off by the numerous challenges and potential pitfalls associated with international expansion. There are plenty of lessons to learn from those who have been there before, that if taken on board can help prevent a large headache for management.

Principally among these is prior preparation. Start early and never skimp on pre-launch research and planning. Carry out extensive research into the territory's political, regulatory and cultural environments, competitive landscape and potential areas of financial, legal and reputational exposure.

And, when the time comes, get help from trusted advisers and service providers on the ground – their local knowledge and experience will be invaluable when setting up the legal entity, assisting with recruitment and creating and supporting day to day functions such as HR, compliance, payroll and financial reporting. This will ultimately mean that firms can avoid the distraction and stay focused on what they do best.

This article originally appeared on the Growth Business website. Click here to view the article.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.