Advantages of Expanding Your Existing Business into another Country

Rapidly advancing technology has made our world more connected than ever. It allows businesses to expand into other countries once they set a strong foothold in the domestic market. Although global expansion is a huge step, its clear-cut advantages are worth everything you invest in the process. 

Countries like Germany, France, Netherlands, Spain, and Portugal are experiencing notable economic growth after a long halt caused by the pandemic. This is an excellent time to take your business to a global level.

Advantages of Global Expansion for Businesses

Global expansion is becoming a core focus of numerous firms in different sectors. 

According to the EY – Attractiveness Survey of Europe in May 2020, foreign-owned firms accounted for a quarter of business R&D in France, Germany, and Spain; between 30% and 50% in Portugal and Sweden; and more than 50% in Austria, Belgium, and Ireland. 

But what do businesses get after the hassle of expanding into another country? The answer lies in the benefits explained below.

1. Widened Customer Base and Increased Revenue

Market competition has significantly increased over the past few years. Consequently, the domestic market for your product is likely to become saturated after some time. Hence, you shouldn’t restrict your sales to just one market. In such circumstances, exploring a foreign market is a great idea. 

Setting up a business unit in a foreign country helps you connect with millions of potential customers and secure a more extensive customer base. This includes people who haven’t seen or heard about your brand before. The more customers you gain, the more sales and profits you can enjoy. You can even develop a new product or service for the international market to create new revenue streams. 

The relatively high purchasing power of people in developed countries like Germany, France, Italy, and Spain makes them a lucrative market for all commodities. Researching the feasibility of doing business in these countries can be highly profitable. 

2. A Diversified Workforce

Human resource is one of the most critical business assets. Growing your firm without the support and effort of the right people is impossible. Expanding abroad requires adding natives from varying backgrounds and cultures to your workforce. 

Businesses can access specialized talent abroad, sometimes at much lower costs than in their home country. A globally diverse workforce benefits your firm through enhanced productivity, unique skills, and distinct educational backgrounds. 

A diverse talent pool also helps you innovate and improvise by providing fresh ideas and perspectives. Local expertise and experience give you an edge over the competition back home. The people you hire in a foreign country are a first-hand source to better understand and serve a new market. 

3. Financial Incentives for Foreign Businesses

Countries like Germany, Spain, France, and the Netherlands offer multiple financial incentives to attract foreign businesses. 

They often lower corporate tax rates, set lenient rules for the permanent establishment, and offer tax exemptions and deductions to foreign firms. These countries also provide grants and loans at lower rates, making it easy and cost-effective for entrepreneurs to set up a business unit in their country. 

Let’s take the example of Germany.  One of its initiatives to help businesses is GRW (Gemeinschaftsaufgabe “Verbesserung der regionalen Wirtschaftsstruktur” – Joint Task for the Improvement of Regional Economic Structures). It is an investment program that promotes overall economic development in the country by offering grants to manufacturing and service firms. These grants help the firms cover a proportion of their costs incurred in the establishment phase. 

The Netherlands is also one of the most welcoming economies in the world. It ranks high amongst most European and Central Asian countries for providing lucrative economic opportunities, thanks to its clear focus on innovative technology and a competitive tax regime. 

The Dutch tax system in the Netherlands provides several tax incentives to promote innovation and business activities. It has lower corporate income tax rates than most European countries. Firms can benefit from a far-reaching tax treaty network that avoids double taxation. 

Moreover, they can leverage a reduction of withholding taxes on dividends, royalties, and interests. Without a tax treaty, they get double taxation relief via the Unilateral Decree on Avoidance of Double Taxation.  

Such financial incentives can be complex for a business expanding into another country for the first time. If you are in the same boat, the experienced professionals at Start Formations can inform you and explain the different incentives offered by a country. They can help you through all the stages of expanding abroad. 

4. Diversification 

You may currently earn significant profits from your domestic market, but things constantly change. What if the government passes a new law that makes production more costly for you?

The world’s political, economic, and social conditions are highly dynamic in today’s era. With such environmental uncertainty, it’s crucial to consider different ways to diversify revenue streams.

Global expansion is an excellent method to diversify. It may sound risky to enter an utterly foreign market, but a properly planned expansion can protect you from risk. For example, if sales are going down in your domestic market, you can offset the potential losses from sales in other regions. You can also offer new products and services to your target audience in the new location.

5. First-Mover Advantage

Expanding into a country where competitors don’t operate gives you the first-mover advantage. This means you can spread brand awareness on a large scale, making it harder for latecomers to get known and liked over your brand. 

More precisely, it gives you time to build a loyal customer base before others arrive. Plus, you have the time to test new technologies or processes that improve your growth and productivity. 

The global expansion also helps you improve your brand image and credibility in your home country. People trust a business more if they know that people in other countries also use its products and services. 

Plus, establishing your brand name before others gives you an edge over many other business activities, like contract negotiations, marketing campaigns, or further expansion.

6. Foreign Investment Opportunities

Expanding a business abroad opens up several opportunities to invest in foreign markets. Earning profits in foreign currency allows you to explore and leverage different investment avenues abroad.

 Find investment mediums that don’t currently exist in your home region or have more lucrative terms. 

Some countries offer a wide range of incentives to attract foreign investment. These incentives can help you create additional revenue streams and meet the expansion cost. 

The European Attractiveness Survey issued on May 31st, 2022, established France as the most attractive European country for foreign investors for the third time. One thousand two hundred twenty-two foreign investment projects were identified in 2021, an increase of 24% from 2020. Comparatively, investment projects grew by 2% in the United Kingdom. 

Spain also welcomes foreign direct investment. The Spanish government follows a pro-free trade and pro-investment posture by easing business regulations and extending various incentives to attract foreign investment across all levels. These steps helped Spain to rank amongst the top ten countries in terms of foreign investment in 2019, as per the UNCTAD World Investment Report.

Other safe destinations for foreign investors are Germany, Italy, Portugal, the Netherlands, etc. Start Formations can help you weigh the benefits and limits of investing in a potential new location. 

7. Reduction in Operational Costs

Global expansion can be more cost-effective than expanding into your home country. This is because labour, material, and other costs are often lower in foreign regions.

Moving a core operational function (like manufacturing, research, development, customer service, etc.) or a back-office function (human resources, finance, payroll, etc.) to a foreign country can reduce overall operational costs. 

For example, working on research and development may be more cost-effective in Germany than in your home country. This is because Germany provides several incentives to businesses that promote research and development. But remember to consider its taxation laws before making such a move. 

Reducing costs through global expansion requires proper knowledge and calculations, so it’s better to take advice from a professional international expansion service.

Plan Your Expansion into another Country with Start Formations

Global expansion extends several lucrative business opportunities, but establishing a business in a foreign country is difficult. You will require extensive knowledge about paperwork, tax requirements, employment laws, and other business specifications of different countries. But don’t worry; Start Formations has got your back.

Start Formations is a UK-based team of business formation specialists with extensive experience helping firms venture into new markets with ease and caution. From preparing legal documents and choosing a strategic location to setting up an office and ensuring tax and legal compliance, our experts can handle every step of expanding into another country and city. 

To establish your business in a new location in the UK or expand into other countries like France, Germany, Netherlands, Italy, and Spain, contact us or call us on 0204 504 1544.

You can also read more about the 8 Benefits of Starting a Business in Europe.