Stronger economic conditions are driving businesses to look at international expansion. However, there are many potential hurdles to consider…
Research commissioned by TMF Group, a leading global provider of high-value business services, has found that almost three quarters (74%) of European businesses are looking to expand abroad in a bid to access new markets for their products and services, while seven in 10 seek to gain market share.
Published by the Economist Intelligence Unit (EIU), the study ‘Corporate overseas expansion – opportunities and barriers’ also asked senior decision makers to state reasons for company expansion It additionally finds that almost half of European businesses wish to move into foreign markets in response to increasing competition at home. This may be partly driven by a desire to differentiate products or services, as Jose Papa Neto, CEO of global fashion trend forecasting company WGSN, explains: “Our clients – large and small – are impacted by the global marketplace, and the more we can be experts internationally the more value we can provide to help our clients grow.”
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Juraj Gerzeni, Regional Director of TMF Group EMEA said: “An increasing number of European businesses are looking to expand abroad as part of their growth strategy and to attract new talent. However, moving into new territories can be a time-consuming and expensive process – whether it is sourcing the right people or understanding the local regulatory, tax and compliance environment.
“Even once established overseas, firms continue to face fresh challenges as they attempt to manage the many local nuances that influence their business strategy. Businesses should pay careful consideration to local practices and customs or they risk commercial and reputational damage.”
On resources for expansion, the report reveals that while half of European businesses opt to undertake the various components of international expansion in-house, around a third look to external service providers to complement their own knowledge and expertise. James Kidd, CFO at AVEVA, comments: “It is important to provide service and support in local language and in accordance with local culture.”
Nearly a third of respondents use both in-house and external advisors for HR admin and payroll services. Meanwhile, a quarter might exclusively seek external help in the area of legal or accounting and tax compliance. Excessive bureaucracy in local tax systems was rated by respondents as the biggest accounting issue for expanding business.
Finding new talent and skills is also a high priority for European companies, with 46% of them citing this as a key motivation for international expansion. Hiring local employees, rather than transferring staff abroad, is a highly effective way to ingrain a business in the local culture. According to the research, 63% of EU respondents rely on resources provided by the local government and/or the Chamber of Commerce to assist with HR admin & payroll. At least half seek external help in the areas of legal compliance and accounting and tax compliance.
| Percentage of respondents equally using in-house and external service |
% |
| Legal compliance |
44% |
| Physical location & set up |
28% |
| HR admin & payroll |
33% |
| Accounting & tax compliance |
40% |
|
Percentage of respondents relying on resources provided by
the local government and/or chamber of commerce
|
% |
| Legal compliance |
50% |
| Physical location and set-up |
54% |
| HR admin & payroll |
63% |
| Accounting & tax compliance |
52% |
- ENDS -
About TMF Group
TMF Group is a leading global provider of high value business services to clients operating and investing internationally. It focuses on providing highly specialised and business-critical financial, legal and human resource administrative services that enable clients to operate their corporate structures, finance vehicles and investment funds in different geographical locations. TMF Group has operations in more than 80 countries across the Americas, Asia Pacific, the Middle East, Africa, and Europe, and has more than 20 years’ experience in Central and Eastern Europe.
www.bjfrht.com
About The Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. The EIU helps executives make better decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies. More information can be found at www.eiu.com or www.twitter.com/theeiu.
About the survey
In August-September 2015, the EIU surveyed a number of senior level decision makers from EU-headquartered organisations that have a good knowledge of the issues involved in their company’s expansion into overseas markets. The organisations came from a range of industry sectors including manufacturing, professional and financial services and IT and technology.
Respondents were drawn from senior roles closely involved in the day-to-day management of territorial expansion: chief financial officers, senior HR executives, chief operating officers and senior legal officers.
For further information, please contact:
Harriet O’Reilly or Justin Griffiths
Powerscourt
Tel: +44 (0) 20 7250 1446
tmf@powerscourt-group.com