Successful Domestic Company Goes Global!

Introduction 

Participation in the global marketplace has become a reality for businesses. Such participation can be rewarding for both the company and the employees. Companies that export grow faster and their employees earn more. The local domestic market can be huge for almost everything but it necessary to expand to other countries in order to seek more opportunities for the company’s products. Foreign markets present several advantages to the company in many ways. The foreign markets can extend the sales life of the existing company products because the products will be new to the markets. As such, the company’s revenue will grow as a result of the new markets. Foreign markets will also reduce the company’s overdependence on the domestic markets. As such, the company will have an opportunity to invent new products based on the needs of the new foreign markets as well as facilitating further growth. Additionally, expanding globally protects the company from the effects destabilizing fluctuations in the domestic market as a result of changing demand cycles (Cheng & Yum, 2000). As such, the global markets can provide countercyclical fluctuations which will enable the company to stabilize its revenue stream. Generally, going global will improve the potential of the company for growth and expansion. 

Therefore, the company will identify two countries with good market potential for the company’s products. The company will also send expatriates to the two countries so that they can run the businesses established. As such, the company will explore different ways of leveraging the expatriates so that they can perform well in the new markets. The company will identify two countries for expansion and prepare the expatriates accordingly so that they can take up the challenge of expanding the company into such new markets. Therefore, the necessary arrangements will be made in order to ensure that the company benefits from the expansion. 

Factors Influencing the Choice of the Foreign Countries for Expansion 

There are several factors that influence the choice of the global markets that the company may select for expansion. The factors that will influence the international market selection include economic factors, socio-cultural factors, and political and legal factors. 

Economic Factors 

The economic factors that influence the choice of a global market include per capita income, stage of economic development, infrastructure and exchange rate stability. Setting up the distribution and marketing system of the company in a small foreign market may not be justified because the potential is very low. As such, the expansion will not create an impact in terms of growth on the company despite the huge initial set up costs (Benassy-Quere et al., 2007). Because the company will be selling consumer products, it is important to ensure that the per capita income of the host country is significantly higher. High per capita income indicates that the consumers have enough disposable income to generate the demand for the company products. Additionally, the infrastructure development in the foreign market should be well established. Good infrastructure reduces the cost of business operations significantly hence increasing the potential for business growth. The infrastructure includes transportation structure, energy supply, and communication systems. Poor infrastructure may hinder the ability to manufacture, advertise and effectively distribute the goods produced. The company should also provide adequate service backup hence the need for good infrastructure. The selected foreign market should have a stable exchange rate in order to reduce the risk of doing business. 

Socio-cultural Influences 

Socio-cultural differences between the home country and the host country play a significant role in influencing the success of business. The expatriates need to identify themselves with the social and cultural beliefs and practices in the host countries. Differences in social perspectives, language and attitudes affect communications. As such, communication is an important aspect in international business. Effective communication facilitates the development of successful business relationships between the consumers and businesses in the host country. Therefore, the company will consider geographically close countries where extreme socio-cultural differences will not exist. As such, the identified expatriates will have to learn and understand the socio-cultural beliefs, attitudes and practices of the identified foreign markets. 

Political and Legal Factors 

The company will take into consideration the general attitudes of the foreign governments towards foreign direct investments and imports. Additionally, political stability as well as the trade barriers should be taken into consideration before making a decision to invest in a foreign market. Willingness to grant subsidies to overseas countries and imports indicates a positive attitude from foreign governments and it encourages entry of foreign businesses (Benassy-Quere et al., 2007). Therefore, the governments of the selected foreign markets should display positive attitudes towards foreign establishments. However, negative attitudes towards foreign companies by host governments discourage investments and imports due to the risk of protectionism and expropriation of assets. Additionally, countries with a history of political instability will be avoided by the company because of the uncertainty of their future. Therefore, the countries selected should be supportive and encouraging toward foreign investors. Moreover, the countries should have political stability as well as relative peace so as to encourage growth of business. 

Market Attractiveness 

Market attractiveness is another essential factor that should be considered while determining the foreign country to invest in. Market size and growth rate, cost of serving the market, competition, market access and profit and market potential are some of the factors that influence the market attractiveness in a foreign country. Large and growing markets are very attractive particularly for export target market selection. Therefore, market growth is always an important factor that significantly influences the choice of a foreign market. As such, the expected future demand of a particular foreign market is considered a critical factor because it is more significant than the existing demand particularly for foreign direct investments. Foreign markets that are dominated by competitors are always unattractive because the cost of entry into the market. As such, markets where several competitors enter and leave are considered unattractive for investment. The cost of distribution and control in the foreign markets should not be costly. As such, it is important to choose foreign markets that are geographically close in order to minimize the cost of distribution. However, the distribution and control costs depend on the mode of entry. Use of foreign direct investment can only be influenced by the cost of labor and marketing expenditures (Cheng & Yum, 2000). As such, foreign direct investment is not significantly influenced by geographical distance. The company will use foreign direct investment as an entry mode to the foreign markets. 

The industry structure of the potential foreign markets significantly affects the profit and market potential. As such, if the consumers have a high bargaining power, they may push the prices of the products down hence decreasing the profit potential of the market. Therefore, the foreign market selected should have consumers with insignificant bargaining power. If the consumers have a low bargaining power, the company will be able to set the prices for its products depending on its revenue targets and the cost of production. Market access is also another important factor that influences the attractiveness of a given potential foreign market. Existence of informal ties between the current suppliers and distributors will make market penetration for the company to be difficult (Jarvocik, 2004). As such, it will be almost impossible for the company to overcome the entry barriers especially if it has no resources and competences necessary to establish new distribution channels within the new foreign market. Additionally, the existence of deep long term relationships between the current suppliers and customers can make the entry into the market difficult and costly. 

Selected Countries 

The governments in the foreign markets should exhibit a positive attitude towards foreign direct investments by supporting foreign business. As such, the governments of the foreign markets should create an enabling environment for foreign businesses to thrive. The countries selected for international expansion are Canada and Germany. The two countries presented attractive opportunities for the company and the markets in the countries have the potential of facilitating the growth and expansion of the company. 

Canada offers the best destination for investment. Therefore, the company will make the necessary arrangements to start business in Canada. Canada has a welcoming business environment and is also rated the best countries in the G20 to do business. Canada has a strong and stable growth rate of the economy (GAC, 2017). As such, the country’s market is progressively growing and it promises future market potential for the company. The company will also benefit from unparalleled market access to NAFTA and EU markets. Therefore, the company’s growth potential will be assured because of the vast market available for its products. The business tax costs in Canada are lower compared to other G7 countries including United States of America. The World Economic Forum has consistently declared the Canadian banking system as one of the soundest in the world indicating that Canada is economically stable. Additionally, Canada is a multicultural country and the expatriates will not have difficulty in coping with the environment. The Canadian government provides attractive funding programs and incentives for foreign businesses investing in Canada. Therefore, the cost of operating the business will be affordable for the company because of the funding opportunities and incentives available. 

The company will purchase land in Canada in order to establish the business. Interestingly, the purchase process in Canada is different from that in the UK and elsewhere. Realtors facilitate the purchase process and they cooperate in multiple listings. As such, one realtor may have access to information on all available properties in an area. Once a property is chosen by a potential buyer, the buyer identifies an independent realtor who will be his agent and represent his interests. The buyer’s agent will draft an Offer to Purchase that will be submitted with a deposit. The deposit is always refundable should the sale fail. The sale will proceed once the offer has been signed. 

Germany is a good foreign market that the company will invest in. Germany has an open and welcoming attitude towards foreign direct investment (Justin, 2017). As such, the legal framework for foreign direct investment in Germany favors the freedom of foreign trade and payment transactions based on the Foreign Trade and Payments Act. Germany is located centrally in Europe and it will give the company access to the entire market of the European Union. Additionally, Germany has a large population that will provide sufficient market for the company. Germany has also enjoyed long term political stability making it a good investment destination. Germany has first class infrastructure which will facilitate the operations of the business. It has sophisticated energy and communications infrastructure necessary for efficient business operations. Additionally, Germany provides attractive incentives to all foreign investors ranging from cash incentives and tax rebates. The highly developed economic and political framework in Germany provides the necessary security for the company’s investment. In terms of socio-economic influences, Germany is a modern, tolerant and cosmopolitan society that offers high standards of living. Therefore, the expatriates will not face challenges in terms of coping with the social life in Germany. 

The process of purchasing land in Germany involves four steps. The buyer makes an offer though his agent who can convey the buyer’s bid to the seller. When the seller accepts the offer, the buyer asks his Notar to draw up the contract. An English speaking Notar is preferable. Thereafter, financing arrangements are made as well as seeking for a priority notice in the land register. The priority notice will protect the buyer from other unexpected sales. The buyer and the seller will then agree on the notary public date of signing the contract. The actual signing of the contract is then done upon which change in land ownership occurs. 

Sending Employees Abroad 

In order to accomplish the objective of the expansion, the company will send its employees to Canada and Germany. There are several criteria that will be used to determine which employees will be sent abroad. The employees that will be sent abroad will be selected based on their background, flexibility, and attitude. Based on their background, the employees who have lived abroad before will be considered for selection because they may have the appropriate language skills. The employees who will be selected should be flexible enough to see the big picture as opposed to living within the confines of their letters of assignment. The employees who will be selected should have an attitude characterized by open mindedness. Open minded employees will be able to sufficiently accommodate other cultures, religions and races. 

The company will employ several incentives to encourage the selected employees to become expatriates. The company will provide language and cultural training, facilitate outbound transition and family adjustment during the assignment, and address compensation and repatriation issues. The language and cultural training will familiarize the selected employees with foreign countries hence reducing their anxiety. Facilitating outbound transition and family adjustments during the assignment will eliminate worries from the employees. Moreover, addressing compensation and repatriation issues help to motivate the employees. 

The strategy that will be used to ensure that both the Executive Committee and the Board of directors are committed to the expansion is by ensuring that they participate in the expansion plan. Having the Executive Committee and the Board of Directors participate in the process of expanding the business will enable them to see the bigger picture and own the vision of the company. As such, they will be committed to be part of a noble course. 

GenXpat by Margaret Malewski and Moving without Shaking by Yelena Parker are the two books recommended for the employees moving abroad. The books offer useful insights regarding how to become successful expatriate. Therefore, the books will not only provide them with guidance but they will also inspire them to discover new ways of making the best out of the opportunities presented by life abroad. 

The following is a simple guide for the employees who will be travelling abroad for the expatriate assignment. 

Travel 

The company will cater for all the costs of the travel and settlement in Canada and Germany. The company will provide further advice regarding the necessary requirements of the travel. 

Family 

The company will facilitate the movement and settlement of the employee families to Canada and Germany. The employees will be required to travel with a maximum of four family members. 

Vehicles, Furniture and Moving Pets 

The company will make shipping arrangements for vehicles and furniture and moving pets. Therefore, employees who will prefer to have the above items shipped to either Canada or Germany will be requested to make formal applications. Moreover, the company will make the necessary arrangements to ensure that you settle and live comfortably in your foreign destinations. 

Conclusion 

Growth and expansion are the main objectives of every business. Therefore, it is important to explore opportunities for growth not only in the domestic markets but also in global markets. Sending expatriates to foreign expansions is a good idea as opposed to hiring foreign labor because the company’s own employees understand the culture, mission and objectives of the company. As such, the expatriates will help significantly in accomplishing the mission of the company. 

References 

Benassy-Quere, A., et al. (2007). Institutional determinants of foreign direct investment. The World Economy , 30(5), 764-782 

Cheng, L., & Yum, K. (2000). What are the determinants of the location of foreign direct investment? The Chines experience. Journal of International Economics , 51(2), 379-400 

GAC, Invest in Canada 2017 Retrieved from https://www.international.gc.ca/investors-investisseurs/ 

Jarvocik, B. (2004). Does foreign direct investment increase the productivity of domestic firms? In search of spillovers through backward linkages. The American Economic Review , 94(3), 605-627 

Justin, K. (2016 January 27). The definitive guide to investing in Germany. The Balance Retrieved from https://www.thebalance.com/the-definitive-guide-to-investing-in-germany-1979023