Starting To Grow Across Borders? Don’t Underestimate The Power Of Local Nuance

Rising confidence amongst UK SMEs is leading to a surge in firms looking to new international markets for the first time in order to grow sales. However, a lack of understanding of their target market's local nuances can create unwelcome headaches, says regional Managing Director Michael Adams.

Expansion into new overseas territories is exciting and often hugely rewarding for a company. It can create new opportunities, increased sales, new clients, new products and much more, but it is also a time-consuming and expensive process, fraught with commercial and reputational risk.

As business confidence continues to improve after several years of cost-cutting, an increasing number of corporates are now looking to the horizon to grow operations. In the past year alone we have noticed a real anxiousness, amongst SMEs in particular, to be part of this big international push.

All very well and good. However, some businesses are quickly learning the hard way that overseas expansion places a huge administrative burden on them which not only distracts from the day job but also makes life very difficult when they fail to fully understand such things as local regulatory and cultural differences.

Companies based in developed Western economies, especially the UK, often take for granted the familiarity of established and transparent legal, tax and regulatory frameworks as well as the open, fair and business-friendly cultures that underpin them.

However, when looking to set up in a new country for the first time, especially an emerging economy, firms are often shocked by just how complex and highly nuanced the environment is. For example, in a recent study we conducted of 81 countries, Argentina was found to have the most complex corporate regulatory regime in the world. This is, to a large extent, the result of there being a civil law rather than a common law framework, as in the UK and Hong Kong for instance.

In many instances, the local regulatory and legislative landscapes are constantly changing, particularly relating to things such as employment, tax, real estate and environmental law. Depending on the territory, there can often be issues around transparency and predictability of pricing and the ability to enforce contracts, which can often prove costly when things don't go according to plan.

Forgotten laws

There can also be a host of regional variances within one country, or odd local bylaws that are not immediately apparent, where companies are often...

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