Building a global presence is a great goal – but it doesn’t happen overnight. Your business might be a real force in your original market, but that success won’t automatically be transferred into foreign markets.
When companies expand internationally, they typically face significant challenges. Here are some of them, and how your business can overcome them.
1. Complex Business Structures
When expanding into foreign markets, you’re likely to encounter complex business structures that can make your company appear more like a “pass-through.” For example, you may own the foreign entity (e.g., subsidiary or branch) and contract with another party for services—creating what’s known as an “agent,” “subcontractor,” or service provider relationship. Such relationships can complicate financial reporting and compliance due to their often unknown ownership structure and unknown contractual agreements between parties working together in the foreign market. This issue may be further exacerbated by new tax codes associated with the foreign entity.
2. Language Barriers
Language barriers can make international expansion seem like a daunting task to explore, but overcoming language barriers is crucial to your success. Don’t let misunderstandings run rampant—investing in an SAP solution or other translation software can help you communicate with customers and partners at all levels of your organisation and ensure that everyone’s on the same page. Language barriers don’t just exist between colleagues: your company’s global presence may also impact its digital marketing efforts as well as its website and mobile app localisation.
3. Exchange Rate Volatility
As we’ve seen over the past few years, exchange rates can manhandle even the biggest budget—especially as currencies such as the euro soar, putting pressure on companies to make strategic financial decisions. While exchange rates are often out of your control, international expansion can help you manage an upward trend by expanding into foreign markets that have a stronger currency.
4. Tax codes
Tax codes—which vary significantly from one country to the next—are challenging to comprehend even for finance teams with years of experience in this arena. The complexity is only amplified when it comes to understanding which tax codes apply to your company based on where it’s doing business. This is especially important given legislation such as BEPS (Base Erosion and Profit Shifting) that requires specific action on the part of multinational enterprises in order to prevent erosion of their taxable income around the world through various types of aggressive tax planning strategies.
Compliance is often cited as one of the primary barriers to international expansion — and for good reason. Compliance issues are no joke, but your company can successfully overcome them if it invests in a financial reporting solution that facilitates compliance with global tax codes through automated processes and accurate data.
None of these challenges are insurmountable. Investing in the right people, processes and technology can help any business to become a global force.