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Globalization has long since stopped being nothing more than a buzzword. Instead, it has become one of the leading principles in today’s business world. Once their presence in their domestic market is secured, the next step for businesses is to expand into new markets to keep growing - or to at least tap into the global talent pool to gain a competitive edge.
Before venturing into new markets, it’s necessary to do some profound research to uncover potential pitfalls and evaluate the potential and chances of international expansion for the business. In this process, business leaders and decision-makers might wonder if their industry is well-suited for global expansion - or if the opposite is the case.
In this blog post, we’ll point out different industries that are more poised for global growth than others. Plus, we’ll highlight some key considerations you should take before kicking off your expansion project.
International expansion (or global expansion, whichever term one prefers) refers to the process of expanding a business’s activities to foreign markets in order to extend the customer base and increase the sale of the products and services offered by the company.
There are numerous benefits associated with expansion. Not only does accessing new markets create new opportunities for business growth and revenue generation, but it also means accessing new talent pools and expanding the reach of your brand - to name but a few.
Expanding globally usually involves different expansion activities and strategies. While some businesses decide to go all-in and set up a subsidiary straightaway, other businesses first want to test the waters with a team of local freelancers or locally hire full-time talent with an Employer of Record.
There are several factors organizations that want to expand internationally should take into consideration to make their expansion project a success. These include:
Global expansion strategy: Going global is no small venture, but requires a carefully mapped out strategic plan.
Experienced team: The success of your international business expansion largely depends on your team. Therefore, you should make sure to build an experienced team of global expansion specialists.
Choice of location: You may think that a particular market could be a great business opportunity. However, some countries make it really difficult for foreign companies to set up shop. Do your due diligence and conduct extensive research before you decide where to expand. Or simply choose one of the top countries for international expansion.
Legal restrictions: It’s not only crucial to know the local customer base and market, but organizations also need to have bulletproof knowledge of local regulations with regard to trading, employment, payroll, incorporation and more.
Not sure where to start when preparing your expansion project? Find the complete global expansion checklist here.
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The factors mentioned above are crucial when it comes to making international expansion a success. Regardless of the industry, expanding your business globally requires careful planning and research. That being said, some industries are better suited for global expansion than others. We’ve taken a look at those industries and listed them below.
A few words on how we have selected the industries presented below. For our list, we have considered industries that have, by nature, certain advantages to succeed in global expansion as well as such industries that should consider expanding overseas because of a strong worldwide demand for their products and services.
Technology is a major enabler of global expansion. But technology is also one of the industries that have the best potential for global growth. Big names like Microsoft, Apple, Amazon, Netflix and Google are just some examples of that. While you might think that these are just a few rare exceptions of global success, there are several reasons why technology firms might find it easier to expand globally.
First of all, the tech industry has a long-standing tradition of hiring the best available talent based on their skills instead of their location. Most tech companies are used to hiring staff abroad to compensate for existing shortages in skilled labor in their home country and therefore don’t struggle to establish a local team in a new market.
Then, there’s the fact that in today’s increasingly digital world, technological solutions are among the most sought-after products. There are huge business opportunities, especially in emerging markets that have a lot of catching up to do. According to Statista, growth rates in the IT industries have been forecasted to be as high as 104% for certain tech sectors.
With the effects of climate change constantly making the news, the call for renewable energy solutions is louder than ever. Governments, organizations and consumers alike request the implementation of climate-friendly energy supplies, thus ensuring worldwide demand for companies involved in both the production and distribution sector.
The fact that different energy sources are distinctly well-suited for particular locations - e.g. African countries such as Algeria, Morocco or Yemen that have high solar energy potential - provides guidance for international expansion in the energy industry. What’s more, as technology improves, production costs go down, hence opening up new opportunities for replacing fossil energy sources with renewable ones.
The only hurdle energy companies might face on their way to international expansion are the special legal regulations which apply to the energy sector in many countries.
If there is one sector COVID-19 has had a major impact on, it’s definitely e-commerce. After the boom during the pandemic, many e-commerce stores find themselves in a position where they actually have the chance to expand into new markets. Business is thriving, the capital is available and opportunities are plentiful. And this doesn’t only hold true for e-commerce.
One might say that the retail industry is the industry that is by definition most poised for global expansion since accessing new markets and gaining new customers go hand in hand. Whether it’s opening physical stores or just setting up new distribution centers from which to conduct your online retail business, there are infinite business opportunities for retail and e-commerce overseas - provided companies carry out the necessary research to determine the best markets for their products.
No matter which country you travel to, it’s highly likely you’ll encounter at least some car brands that are also available in your home country. The automotive industry is one of the best-known examples for global brand success. In a world, where getting from one place to another is a key element of daily life, consumer goods such as cars can be sure to experience relentless worldwide demand.
Moreover, given the high production costs, the automotive industry is one of the industries where outsourcing the manufacturing process to cheaper locations can constitute a significant business advantage. Another aspect automotive companies should consider is shifting their research and development centers to countries which offer better conditions for R&D and have a significant pool of skilled workers in that field.
Where there are people, there is a risk of diseases. Where there are diseases, there is a need for pharmaceutical products. In other words: Among all industries, the pharma and biotech industry is probably the industry which is least likely to run out of demand for its products and services. While many pharmaceutical companies have their R&D and production facilities in Western Europe or North America - with Germany, Switzerland, Ireland and the US being high up on the list - it’s in emerging markets where they nowadays find the most lucrative opportunities.
As more and more regions in the world which were formerly cut off from the medical service network gain access to health facilities, the demand in medication increases. However, as with energy production and distribution, pharmaceuticals are highly regulated and companies intending to take their products global should make sure to do their research.
The five industries listed above are, of course, by far not the only industries that should be considered in the context of international expansion. As an analysis of the Fortune 500 companies revealed, the industry where companies have by far the highest number of international locations are the hotel, restaurant and leisure industry. Followed by the retail and apparel industry. Other industries to take into consideration for global expansion include telecommunications, travel, media and finance.
As we’ve seen, some industries have greater growth potential than others, or simply benefit from certain strategic advantages when it comes to expansion. However, this shouldn’t lead companies in other industries to think that they can’t succeed in taking their business global. Well on the contrary!
Regardless of industry advantages, global expansion success is primarily a question of preparation and expertise. With careful planning and the right partners, businesses of any industry can master the expansion into new markets.
At Lano, our mission is to support businesses through every step of their expansion journey. Whether you are looking to test a new market with local freelancers, hire your first employees without establishing a legal entity or take the leap and set up a fully fledged subsidiary, we offer you the support you need.
Our platform allows you to compliantly onboard and manage international contractors, hire remote employees with an Employer of Record and manage and consolidate payroll for all your entities via one single dashboard. Book a demo to see how Lano can help your business go global in full compliance.
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