Worldwide: Five Myths About Expanding And Operating Globally

Last Updated: July 24 2014
Article by Gonzalo Garcia

Our expert Gonzalo Garcia goes myth-busting as he examines the challenges companies come up against when expanding across borders.

Within the last five years there has been an increasing trend of companies of all sizes, especially small and medium businesses, seeking to extend their footprint beyond their country of origin.

For most of these businesses this is uncharted territory; they are terrorised by horror stories from other businesses, they doubt themselves and their capacity to take this significant step and most of the time they cut their dreams short to avoid disaster (or so they think).

The truth is that in the current global economy, expanding internationally is not an option for any growing business but a must. The other truth is that if you take on this feat with the help of experienced advisors and partners this process will look less like an unachievable feat and more like an exciting success story.

I want to take a few more minutes of your time to challenge five common myths that companies expanding globally are trapped by. Hopefully, after reading this you will have a more open mind set and the confidence to ask the right questions.

Myth 1: The best way to enter a new market is setting up a branch of your existing business.

US businesses mainly ask to "register them to do business in X, Y, Z country" or set up a branch of their existing entity in such countries. The reality is that in many countries it is not possible to register a foreign business and in the majority of countries and situations the best way to enter a foreign market is not by opening a branch but establishing a fully operational local entity. In most countries, branches follow a different requirement and compliance schedule and may even be more expensive to maintain than a regular entity.

Each country has different types of entities; the most common type is the Limited Liability entity in its various forms, depending on the country. It is important to identify the best type of entity for your business' purpose and general operational objectives. It is very important to talk to your legal advisor and gather information as to which type of entity works best for your business.

Myth 2: Without big pockets it doesn't make sense to think about going abroad.

In the international arena, people are king, not money. It is who you know and who you surround yourself with that matters. There are plenty of organisations, not only in your country of origin but also in the country you are expanding to, that provide free advice and can help you create business plans and gather the information you need for your international expansion.

Once you are there, you don't need to be an expert accountant or payroll manager, nor have you to understand all the local regulations of the country to make sure you are compliant; you can outsource those activities so you can focus on your core business. If you grow substantially you may at some point consider bringing these activities in-house but yet again, the biggest as well as the smallest companies operating internationally use this model to operate successfully.

It is always recommended (particularly for small and medium size business) to seek advice from promotion agencies, the SBA.GOV website and may other sources. Just go online and do a search - you will find hundreds.

Most of the governments have self-funded promotion agencies that will be eager to provide you with as much information and help as possible about doing business in their country. If you are a local business, those same agencies can help you organize your plans to grow to other countries.

Myth 3: Compliance is too expensive and not important.

The former US Deputy Attorney General Paul McNulty said: "If you think compliance is expensive, try noncompliance." He couldn't be more right.

With FCPA, UKBA and other international regulations to add to the already complex local in-country list of legalities, it is likely your business will not be aware of every single compliance matter in the way that a local lawyer or compliance specialist would be.

It is not necessary to read the "Top 10" FCPA fines, where Siemens tops the list at $800million US dollars in 2008, to understand that this is serious business. Countries across the globe are joining forces to make sure that "things are done right".

Still, these regulations don't only apply to the world's giants but to every single business. A compliance fine of any size and colour can be a devastating blow to your business and its future.

It is also important to mention that compliance is not only legal compliance, as most companies usually think; there is also tax, payroll, data protection and KYC (know your client) compliance that must be taken into consideration.

Take compliance seriously.

Myth 4: There is no information available and it is expensive to get it.

It is hard to believe that in the era of communications and the internet people still believe this. You don't need to hire the most expensive lawyer or consulting firm to get good quality information on a specific market of your interest.

There are many articles by the biggest world advisory firms, law firms, etc. on specific countries that are free to download. If you don't believe me type "Doing business in [insert your country of interest]" into your search engine - you won't get less than a few reports (or more if it is a high-interest country) on the specific country you want to research.

If the problem is that you don't know where to start looking, there is a report for that too! Try the Ease of Doing Business report from the IFC, browse through the World Economic Forum website and its many reports, as well as many other sources, such as the aforementioned trade promotion agencies and SBA.

Myth 5: Expanding internationally is too hard to do and I'm doing well where I am.

We live in a business world that is globalising at a pace that's never been seen before; of course expanding internationally is not for every business type and it is not in the hearts and minds of every single company or business owner but it is still a reality that must be taken into consideration. Even in your city, town, neighbourhood, you are seeing new businesses from other parts of the world, new food, new clothing, coffee places...even if you are not going global, globalisation is coming to you.

This fact should be a factor when elaborating on your business plan or when reviewing your next five year strategy. And if you are one of those businesses that can benefit from going abroad, I invite you to start thinking about it sooner rather than later. As I've tried to demonstrate, the world's barriers have almost been eliminated and it is easier than ever to expand your business and find success in other countries.

Take time to research your industry, your economic environment and the vast sea of opportunities awaiting you and your business. Then talk to qualified people that show real interest in you and your business and start taking those important first steps to see your business grow and thrive.

This article was first published by Gonzalo Garcia on LinkedIn. View it here.

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 Mondaq.com.

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

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (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 www.mondaq.com

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 Mondaq.com’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.

Disclaimer

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.

Registration

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 unsubscribe@mondaq.com 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.

Cookies

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.

Links

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.

Mail-A-Friend

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.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

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 webmaster@mondaq.com.

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 EditorialAdvisor@mondaq.com.

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 enquiries@mondaq.com.

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