Expanding a business into new countries and markets is a strategy that often helps businesses grow and become more profitable, but is not a risk free strategy. Differences in Government regulation and cultures in other countries can pose a number of traps and pitfalls for any business that is not well prepared.

So what makes a business look beyond it’s own borders for new markets and opportunities?

Traditionally, businesses have expanded globally through a series of discrete and clearly understood steps. The steps generally consist of exporting products; appointing sales agents; and finally, establishing through direct investment, subsidiaries for production and sales. Technology has changed this process by lowering the barriers to entry into international markets and making it easier to market and sell products abroad. Businesses can now link a whole range of functions that work in separate locations by online management .

This technology means businesses can now face competition, not only from competitors in their own country, but also from competitors in other countries. No market is too distant and no customer too remote.

The globalisation of the market place provides opportunities as well as threats. Businesses should be looking at being first to market, not only in their own country, but in potential markets in other countries as well to create the most value from new products or services before their competitors catch up. The faster a product can be sold in a particular market and the greater the number of markets that a business can penetrate, the greater the chances are of staying one step ahead of the competition. Global brands are also created that can increase the value of the company. So how do you expand your business abroad and what are the questions you should ask?

Technologies, such as the Internet, are powerful business tools that have the potential to transform the way we do business. Technology has not replaced the human element yet! A software package might operate on the same hardware platforms, use the same operating system and perform similar, if not identical, tasks in all the countries where it is sold - this does not mean that every user of the software in every country is the same.

In some countries it may be sufficient to have someone, somewhere in the world who can talk to the customer. In other countries, it may be important to have a presence on the ground, not only to provide a local customer support function, but also to ensure that the business understands the market and maximises sales in that country. Answering the questions about why and how you are going to enter a new market before you start are vital, this can result in pitfalls being identified, planned for and avoided.

The world may be getting smaller, but it is not getting any simpler!

Whatever the reason for expanding abroad, it is vital that companies consider their expansion strategy before they take the first step into new markets. The answer to ‘Why are we expanding? ’ is often as important as the question, ‘How are we going to do it?’

There are a huge number of issues to consider from thinking about what you are selling and where you plan to sell to the accessibility of the new market and the potential barriers to entry?

Complex commercial decisions need to be taken from deciding on the most appropriate commercial structure to whether this will create a taxable presence for corporation tax, what the potential transfer-pricing issues of trading between a parent company and its subsidiary are and of course the VAT implications.

Not everything is about finance and technology – you will almost certainly have to recruit from the local market and potentially use current employees to help set up the new operation. How and what type of people will you need to recruit? What benefits should you offer, what are the tax implications of international assignments? As with every decision, there will be legal issues to consider. How will you protect your intellectual property, such as trademarks, copyright and patent protection?

Remember, the difficulty is not just in understanding the local business environmentbut in successfully project managing the entire process. Cultural issues should also be born in mind as they will impinge on all aspects. For example, there are at least five differences in culture between the US and Europe regarding ‘vacation’. If all of these issues are identified at the start, the time it takes to set up an operation abroad can be dramatically reduced and the risks substantially reduced.

Once strategic aims for expansion have been established and understood, companies must then decide how they will go about expanding across borders. Of course, this will be different for each company, it will depend upon their objectives. Expanding abroad demands careful forward planning to define exactly how trade will be undertaken and to avoid the risk of getting it wrong – mistakes are expensive. The full commitment of the company, especially its key decision-makers, is therefore of great importance.

Cyveillance Inc. , a US company that provides 100 Percent Relevant Intelligence ™mined directly from the Internet, were looking to expand their business into Europe. The company decided that locating in the UK best suited their business needs. This was after investigating the economic climate for Internet companies across continental Europe and the UK and researching the potential market for the company’s unique Internet intelligence offering. The entire process took just 5 months from the initial stages of finding office space to putting the sign above the door. Their first step was to hand the project management of the whole process (from registering the company with the appropriate authorities to opening a bank account and choosing the most appropriate method of financing) to PricewaterhouseCoopers’ Our Pathfinder Service ™, under the direction of the MD of Cyveillance International, Andrew Muir. PricewaterhouseCoopers then provided local people on the ground to co-ordinate and manage everything involved in setting up a new operation in a different country. Here are some of the issues they faced. Deciding what type of entity the UK company should be and how it should be structured, as well as registering it with the relevant authorities in the UK, were top of the list in enabling Cyveillance to begin trading in the UK. Organising relevant permits and identifying the potential tax issues of moving US staff to the UK enabled the company to have two highly experienced staff on the ground to jump start the operation in the UK, saving them up to three months worth of activity. Recruiting senior executives at the height of the dotcom boom proved to be one of the major difficulties. Stock options at this time were a key issue for senior executives choosing to work in start-ups. PricewaterhouseCoopers helped Cyveillance set up an Enterprise Management Incentive scheme for new employees which helped pull a number of highly qualified executives away from other companies. Setting up a share option scheme in the UK proved far more complicated than Cyveillance’s experience in the US. In the US it takes up to 5 days to get one operating, in the UK it took nearly 5 months. To support their recruitment drive, benefit packages needed to be designed to look at everything from company car schemes to private health care. Salary issues between employees in the US and the UK also needed to be reconciled. The third and final step involved setting up another operation in Antwerp Belgium to help cement their operations in Europe. Even though many of the issues faced in Belgium were similar to those experienced in the UK, the regulatory environment in Belgium meant the structure of the operation was very different to that in the UK or US. Cyveillance proved that by having someone on the ground with the relevant expertise and knowledge means that the set-up process is efficient, expedient and effective. Cyveillance provides 100 Percent Relevant Intelligence™ in the areas of brand management, partner management and competitive intelligence to help companies maximise their revenues from the Internet and minimise risk . Nearly 20 of the Fortune Top 50, are among Cyveillance’s client base, including De Beers, Dow Jones, Merrill Lynch, Bass Hotels and Resorts, Nintendo and many others. For more information, please call +44 (0) 1293455123 or visit www.cyveillance.co.uk

For a free step-by-step guide on international expansion visit www.pwcpathfinder.com.
The PricewaterhouseCoopers’ ‘Our Pathfinder Service ™’ operates in over 50 countries and helps businesses manage their expansion into new territories and markets.

Contact: Mark Donougher on 020 7213 3001
or Katie Marques on 020 7804 1147