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What a postpandemic future means for business expansion

Diane Albano, Chief Revenue Officer - Globalization Partners

Expanding overseas can be a tough call for businesses at any time, but the current economic climate is adding to the decision-making pressure leaders face. To understand the impact of COVID-19 on international growth strategies, Globalization Partners in conjunction with CFO Research, quizzed CFOs in organisations with international expansion plans to understand the challenges they face. 

Most businesses with existing expansion plans are moving forward, undeterred by COVID-19
The research revealed that a majority of CFOs are undeterred by the impact of COVID-19 and are persisting with plans to build new or expanded international business territories. Specifically, 45% of respondents are either currently expanding globally or are only slightly delaying their expansion plans and will move forward within one year. Another 9% maintain intent to expand internationally but remain in a year-long holding pattern. 

Looking at location, after North America at 71%, the Asia-Pacific region (excluding China), targeted by 65%, is the region most often identified as the place for new or expanded operations. Capturing market share was the most cited reason for expansion into these specific regions, followed by the desire to expand sales, diversify investments and acquire top talent.

COVID-19 is accelerating the pace of change across organisations
COVID-19 is also accelerating the pace of change across organisations everywhere, with 83% of respondents now looking to the remote, global workforce model as a solution to the changes brought about by the pandemic.

Home working has become a defining business trend of the crisis, as businesses adapted quickly and effectively to lockdown. For many, change will be permanent, with corporations such as Fujitsu offering its 80,000 workers in Japan flexible hours, with working from home becoming the ‘new normal’. They join the likes of Twitter, Facebook, Barclays and Shopify, among many others, who have also made long-term home working commitments, with others including Amazon, Google and Salesforce allowing employees to work from home for several more months, and even into 2021. 

Employee health and safety is top priority in global expansion strategies
Looking more broadly, the research found that employee health and safety is a top concern for CFOs focused on global expansion. It is cited nearly twice as much as the other leading issues, such as new business strategies, increasing sales pipeline and revenue, and reducing organisational costs.

Managing third parties, banks and payroll are among the biggest challenges in getting a new region up and running
Looking at other obstacles to growth, 83% of executives expressed concern about managing multiple third parties and stakeholders in a foreign environment during business expansion. And 74% of CFOs are concerned about working with foreign banks and managing international employee payroll.

The time and cost involved with establishing legal entities or subsidiaries, followed by ensuring compliance with international laws and agreements add to the significant challenges of embarking on international growth. The operational issues, particularly around local legal rules, recruitment and compliance can take months to navigate. Removing these barriers to success is key to helping businesses establish new international teams and kick-starting revenue generation.

CFOs view international expansion as a slow process, risking competitive advantage
Eighty six percent of CFOs say their global expansion would take, or is anticipated to take, at least five months. That includes 42% who put the time required at more than one year. It’s perhaps not surprising, therefore, that dedicating resources to global operations was the top concern for executives planning international expansion.  

Taking a year to establish operations in a new territory is simply too slow, and risks losing competitive advantage. Engaging help that has the expertise required to deliver effective international expansion on the ground is absolutely key. A lot of companies are now opting to use a global employer of record to establish new international teams and revenue generation in a matter of days vs. months. This alleviates complexity making it easy to meet ambitious businesses goals and replicate success in new countries.

Despite these various challenges, the key takeaway is that many businesses remain optimistic and determined that the disruption caused by COVID-19 will not stand in the way of the opportunities offered by international expansion. That’s an important message for businesses to take forward in the challenging months ahead.

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