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Expanding globally is a strategic move companies undertake to extend their reach into international markets. However, it’s a complex journey. Differences in cultures, languages, regulations, and managing a diverse workforce can pose significant challenges. With a solid understanding of these complexities, businesses can navigate new markets with lower risk and maximize global opportunities more effectively.
To help you better understand the complexities of global expansion, we’ve drawn insights from our recent podcast, Let’s Talk Business Episode 2, featuring Eric Chin, Chief Business Development Officer at Inco Group. In this episode, Eric breaks down the key considerations businesses must evaluate when planning to enter new markets, particularly in Southeast Asia and beyond. He also offers valuable advice for Singaporean companies looking to expand overseas.
The podcast’s main takeaways include understanding local regulations and business environments, strategic considerations for expansion, and the significance of cultural nuances and market readiness. Speakers also highlight the critical role of thorough market research, strategic partnerships, and local hiring.
Understanding the diverse legal entities and regulatory landscapes across countries is crucial for businesses looking to expand internationally. Eric highlights that each country, including those in Southeast Asia, has vastly different regulations, which can significantly impact business operations.
Consequently, a successful strategy in one market, like Singapore, cannot be replicated in another. Eric notes that sticking to a one-size-fits-all approach and ignoring local insights can lead to failure. Therefore, he advised companies to collaborate with local legal experts to ensure compliance with local laws and regulations.
He also stresses the need to have local legal experts review all contracts with local entities. Additionally, he points out that financial audits are often mandatory in certain jurisdictions and must be adhered to.
When discussing expansion strategies, Eric highlights that the first crucial step is to define your business objectives. If you want to offer significant local services and establish a stronger presence, then having a legal entity is the right choice. This allows the company to hire local staff, operate more effectively within the local regulatory environment, and provide services that cater to the specific needs of their local clients. On the other hand, if your expansion goal is merely to send teams periodically for client meetings, setting up a legal entity might not be necessary.
Eric further discusses scenarios involving temporary projects. For projects with a defined timeline, such as those lasting one to two years, companies can choose between establishing a subsidiary or exploring alternative staffing solutions. A subsidiary offers a well-organized way to hire local staff and build a strong presence in the area. Meanwhile, exploring alternative staffing solutions can help businesses operate without setting up a permanent legal entity.
Moreover, Eric discusses the case of a maritime engineering client executing a project in Indonesia. The client required a significant workforce of approximately 100 personnel for a two-year project. Eric highlights the challenges of establishing a legal entity for such a short-term endeavor, citing concerns over costs and labor management. To address these concerns, Eric suggests the utilization of an Employer of Record (EOR) as a viable solution.
An EOR provides a streamlined approach by assuming the legal employer responsibilities, including payroll, benefits, and compliance with local labor laws. This enables client companies to focus on project execution while the EOR handles the administrative and legal complexities.
In this podcast, Eric also highlights the importance of understanding local culture and the ability to adapt effectively to local ways of working. He emphasizes that companies must consider local nuances such as tax structures, HR policies, and operational practices in new markets.
Moreover, He highlights the importance of relinquishing ego, encouraging individuals to view themselves as part of a diverse team rather than as outsiders. This perspective fosters collaboration and enhances the ability to build strong relationships with local stakeholders.
Regarding business strategy, Eric emphasizes that it should be flexible, that can be tailored to different markets and cultures. He provides an example of the necessary adaptations for small businesses or startups, especially those beginning with minimal teams. These companies often require their founders to handle different functions and responsibilities. However, as businesses grow and secure more funding, they can recruit specialized talents such as CFOs, HR, and business development professionals. With a larger, more experienced team, companies can implement more comprehensive and structured planning and management.
Another topic discussed in the podcast is the importance of conducting thorough market research before expanding. Eric stresses that companies should avoid rushing into new markets, before validating the market’s readiness and potential.
This validation process involves developing a clear business case for the product or service in the target market, conducting field research, collaborating with local market research firms, and making on-the-ground visits to gain a deeper understanding of the market dynamics. Eric believes that by following this process, companies can approach new markets with greater confidence and a higher chance of success.
However, Eric acknowledges the existence of a more aggressive approach, often adopted by startup founders. These leaders may be confident in the market fit, that they enter the market without extensive upfront research. While Eric acknowledges that this approach can be successful, he also highlights the inherent risks. He says that a lack of market understanding can lead to unexpected challenges and costs, leading to investment failure.
Continuing the discussion, the speaker delves into the potential of partnerships and local hiring as alternative approaches to market expansion. Eric explains that the choice between these approaches should be aligned with the business objectives and the nature of the products or services offered.
In cases where a physical presence is unnecessary, companies can consider utilizing local distribution networks or partnerships to sell their products and services. But, for businesses that necessitate a strong domestic presence and direct client interaction, local hiring or sending personnel to the market may be the most effective strategy.
Eric further emphasizes the critical role of local insights in navigating complex business environments effectively. He cites an example of a large Chinese pharmaceutical company that invested substantial time and resources in conducting extensive field research across Southeast Asia. While acknowledging the significant costs associated with such endeavors, Eric asserts that such investments can be invaluable for gaining a deep understanding of local markets.
However, he also acknowledges that the pace of business often necessitates a more rapid approach. If the companies face time constraints, such as those with a pipeline of ready customers, a more expedited market entry strategy may be necessary.
Towards the end of the podcast, Eric provides valuable advice to Singaporean companies considering overseas expansion. He stresses the importance of having a clear and focused business objective as a prerequisite. Furthermore, he recommends companies engage in extensive consultations with a diverse range of local business leaders, advisors, government officials, and industry associations to acquire a thorough understanding of the target market.
He also suggests companies hire local talent with extensive knowledge of the country’s culture and business environment, rather than deploying Singaporean staff to lead operations. This approach facilitates smoother interactions with clients, vendors, and partners, ensuring operations align with local conditions.
Additionally, he cautions companies seeking to enter new markets to be mentally prepared for unfamiliar and complex business environments, including legal regulations, compliance requirements, and taxation. He notes that success in such markets requires a willingness to learn and adapt to local conditions that may differ significantly from those in Singapore.
In the podcast “Let’s Talk Business Episode 2,” Eric Chin explores the complexities of global expansion. He highlights the importance of flexibility, adaptability, and thorough preparation when entering international markets.
The discussion also highlights the value of local partnerships, strategic resource deployment, and hiring local talent to ensure successful and sustainable growth. Eric also points out the risks associated with underestimating the complexity of new markets and the importance of a well-researched and tailored approach. For a more comprehensive understanding of this topic, we recommend watching the full video on our YouTube channel.
Are you ready to expand your business into Southeast Asia? Navigate the complex journey by partnering with Glints Talent Hub! We offer Employer of Record (EOR) services to help you manage local employment, compliance, and payroll.
This strategy will ensure you save time-to-hire twice as traditional methods, reduce hiring costs by as much as 70%, and gain a competitive edge in new markets. Contact us today to learn more about how we can support your expansion goals!
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