4 Key Steps to Expand your Business Overseas

Business December 13th, 2016
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4 Key Steps to Expand your Business Overseas

By Joseph Wong, Senior Vice President – Legal & Compliance

A three-time Pulitzer prize winner and New York Times columnist – Thomas Friedman penned an inspiring read called “The World is Flat” which highlights how globalisation has changed the world’s core economics. The title of this book metaphorically represents a levelled playing field where all competitors have an equal opportunity.

How does this translate to an SME? One might ask. Globalisation has helped SMEs expand to regions and markets as easily as an MNC. The flip-side however, is that this levelled field demands agility and competitiveness that equals the quality of an MNC. In today’s business environment, how can Singapore’s SMEs thrive and expand their operations to overseas markets?

There is support

Although expansion is exciting or even scary to some, SMEs in Singapore can take comfort from the fact that our government is supportive and has in place several grants and schemes to help. The budgets for 2015 and 2016 included express measures to support internationalisation by SMEs. IE Singapore offers both Market Readiness Assistance and Global Company Partnership grants to help finance overseas expansion.

In addition to making use of the available resources and help, there are four key areas SMEs need to pay attention to:

Driving overseas expansion for the right reasons

Overseas expansion is a long-term investment. If you are expecting quick results, you are setting yourself up for disappointment.

If you are experiencing lack of growth in the domestic market, first ensure you have revisited your product offering or your business strategy to improve your revenue. If you go overseas without re-strategising, you may have to face more losses in an overseas market. It is essential that you invest the necessary time and resources to build your business successfully.

Understand the differences between the overseas market and the domestic market

Singapore has an excellent infrastructure and you might have developed your product or service around its market needs. Thailand, for example, might be entirely different. Some of the challenges an overseas market presents are culture, infrastructure, knowledge, and resources.

When E-bay launched into Japan in 2000, it used the same business model as its platform in the US. It failed to adapt itself to the conservative Asian market. According to an article in www.investmentgeekz.com, it failed in the following areas: lack of management, restricted payment methods (in early 2000, Asia was still new to online transactions and there was much skepticism at the time), low marketing expenditure and delivery issues.

In 2010, Google pulled out of China due to restrictive government regulations. Everyone expected Google to make waves in the China – the largest internet market in Asia. In addition to regulatory issues, it also had to compete with Baidu which had a 63% market share at the time.

Our friendly Starbucks too suffered in Australia. “Eight years after it began selling its espressos and frappucinos in Australia, the US giant has succumbed to powerful financial and cultural pressures and has closed 61 of its 85 shops across the country,” BBC reported in 2008.

These are examples of companies with a billion-dollar turnover and have significant cushioning to sustain such failures. An SME in comparison cannot sustain such setbacks. So, ensure that you have analysed the market you are considering before you expand.

Beware of taxes and hidden costs

Maintaining and controlling international activities is not easy. Each country has a set of laws that change periodically.

If you are expanding to Scandinavian countries, for example, they have VAT rates exceeding 20 per cent. Another example is, in 2014, when the US launched the Foreign Account Tax Compliance Act, it impacted non-financial companies with compliance issues. They were required to implement due diligence, US tax documentation, and reporting etc. So, a Singaporean SME doing business with the US or employing US nationals were required to comply with this law.

Although your overseas office is successfully generating business, any oversight on laws and hidden costs could significantly affect your company’s bottom-line.

Register your trademark in the overseas market as soon as possible

In 2009, McDonald’s lost an eight-year trademark battle to stop a restaurant in Malaysia calling itself McCurry. If this could happen to the Big Mac, it could happen to you too. In many countries, the first person to file a trademark application in the country will own that trademark.

No sooner you have considered and overseas expansion plan, get started on registering your trademark in the country even if you are not ready to go.

Should you expand your business overseas?

As the saying goes – Fortune favours the prepared. If you do your research, bridge cultural gaps and calculate your risks you are on your way to a successful expansion venture. After all, we are a nation of over 5.6 million and not every business can thrive on this pool of consumers alone.

To simply put it – yes you must plan to expand your business overseas. We hope the key steps we shared will benefit you in your business endeavour.

 


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