Going global is definitely the next step for the businesses to expand themselves. The current international business system you see will be completely different in 2025.
The gaps between the economic wealth of the developed countries and poor countries will continue to narrow down exponentially.
As the scale of the business is different, so will the challenges.
This article will break down how companies looking to expand globally face different challenges and the benefits of overcoming the challenges.
What Is Globalization?
The term Globalization refers to the businesses developing strategies to expand their business in the international market.
If we put this definition in more simple words, it is the open flow of information, goods, and technology between countries and consumers.
This occurs through business relationships, geopolitics, cultural acceptance, and media. However, because the world has become so connected (thanks to the Internet), most people don’t realize the everyday working of globalization.
The company needs to understand that the world of business is changing rapidly. If they don’t embrace globalization, they risk losing their ground in the market.
Challenges For Companies Going Global
As we have already said, there are both challenges and opportunities that come with globalization. But, the benefits of globalization can only be enjoyed after you have overcome the challenges.
Here is an extensive list of challenges you will encounter while taking your business on the international platform.
Legal And Regulatory Compliance
Do you know the most difficult part of taking the business to the international platform? No, it is not establishing a business in foreign lands. Instead, it is complying with the rules and regulations.
The place you belong to has policies that you are already aware of. But, the rules and regulations might be different for the foreign lands.
This specific challenge comes under training regulation, employee legislation, taxation, and trading requirements. In addition, a few businesses might need approval from the local community and accreditations from the authority.
In order to overcome this challenge, you first need to acquire the relevant information on the laws and prepare the right documents before entering the foreign land.
Currency rates constantly changing pose a great challenge for the business to maintain the business profit. Overcoming this challenge needs monitoring of the exchange rates to mitigate the unpredictable fluctuation.
Since the significant fluctuations impact business expenses and profits, paying suppliers and the production in the same currency.
While the conversion rates can be confusing, you must use a crore to million converters to know exactly how much you need to pay in local currency.
In fact, you can also set up a forward contract and agree on a price in advance. This will help you pay for the products at the mentioned price in the contract. Moreover, this method can protect your sales from any currency fluctuation.
Understanding The political Risks
The political landscape is changing every day. Hence, you must consider the political risks that might come with globalization. Before you go global, you must ask yourself – Are the risks worth taking? Will the risk help you grow and expand your business?
Finding the answer to these questions is important.
To overcome this challenge, ensure that you are updated with what is happening in global politics and how it might affect your global expansion.
In addition, you must also understand the corruption level in the foreign market and how much extra you might have to pay. Knowing these things will help you mitigate the political risks.
Understanding The Marketing Strategy
Knowing the local market where you wish to expand your business is important. This can only be done by learning about your new consumer. Once you know what works for you in the market, you can then position your brand and promote it to the audience.
We have seen from our experience that Transcription is an important key to success. Through this process, you will be able to customize the products and develop an effective marketing strategy that drives sales for your business in a foreign land.
Competition is everywhere. Don’t think you will launch your products and services in a foreign land, and the local business will simply watch you take the market. Therefore, overcoming the local competitors is the most crucial challenge.
For example, think that you are a fast-food chain in India and want to enter the market of Australia. You might be well prepared to expand your business. But think about the local fast food business already present in Australia.
Without the right information on the local market, you will never know their strong and weak suits. Therefore, research on the local competitors must be done before entering the market. This will help you come up with a strategy to stop them.
Risks Associated With Supply chain
Every business has a separate department altogether for the supply chain management. It is this department that looks after the storage, logistics, shipping, imports, and exports. This is really a lot of work.
While managing the supply chain inside the borders is in itself a tough job to pull off. However, managing it across different borders can be a real challenge.
If you are shipping goods from India to the US or vice versa, you will have to consider the following.
- Cost and time are involved in the shipping process.
- Geographical distance.
- Taxation rules.
- Custom rules.
- Trading rules.
When thinking of the supply chain, you must be prepared for several risks. This includes delivery delays, custom impound on your products, and missing parcels in the transits.
All of these risks need a considerable amount of planning. You can move forward with your globalization only after you have all streamlined.
Understanding International Business Accounting
Business accounting is a sensitive matter. You cannot get wrong with it. Now, just think about international business accounting – Different tax systems, tax rates, currencies, and compliance requirements can make accounting extremely challenging.
The only way to overcome this challenge is to know the accounting rules for the country where you are expanding your business. Ensure that you are aware of the regularities and how they can affect your tax liability.
You must estimate the expense of accounting and ensure that the professional is working to have a good sense of foreign accounts.
Talent And Acquisition Onboarding
Finally, acquire talented individuals for your company. Talented individuals are important for your organization. They form the foundational base, influencing success in certain regions.
Without experienced employees acting as an anchor for your business, you might run out of momentum with your expansion process. This is especially true with any mergers and acquisitions.
Hiring staff is also a challenge. It involves so many complicated processes that you need a different department to handle that. This becomes extremely challenging when you are hiring overseas.
Benefits Of Globalization
Once you overcome these challenges, you will be able to enjoy the sweet fruits of your labor.
- Increased Flow Of Capital: The economic benefit of globalization is hard to ignore. Increased trade in international platforms generates greater revenues and increased gross domestic products. Globalization also helped the business to tap into markets that were initially untouched.
- Better Products At Lower Prices: Global competition in the market leads to both high-quality and affordable products. As consumers realize they have various options to choose from, they will go for something cheap and best. This makes the companies compete against each other with high-quality products. Offering at affordable prices.
- Cross-Cultural Exchange: Globalization of businesses is not only about business deals. Products, services, business expansion. There is something more as well that comes with globalization. The cross-cultural ideas, foods, music, media, language, and fashion are all just as valuable. Individuals who travel the world, try different cuisine, speak different languages, read different books, and have different perspectives to see the world.
- Spread Knowledge & Technology: Any experts will agree on the fact that globalization is the perfect opportunity to spread advanced technology worldwide. You are probably aware of the tech giants Google, Microsoft, and Dell. They all have a main office in each country. This is because they wanted to globalize themselves by sharing the advanced technology they had created.
- Increased Labor Mobility: Allowing workers to move to other countries for work can help the countries meet supply and demand. Countries that are excellent at educating certain professionals can export those professionals to other countries lacking relevant specialties. This also opens income opportunities for individuals.
Global expansion of the businesses comes with its own set of challenges. If your company wants to go global, you first need to overcome these challenges. While some challenges are unavoidable, there are some which can easily be resolved.
For instance, you can easily solve the Human resource problem by simply onboarding HR software and Payroll Management software.
If there is anything more, you want to know about taking your business to the international platform. Reach out to us. We will be happy to share our expertise with you and help you learn the ropes.