The allure of global entrepreneurship is undeniably compelling. The prospect of market diversification, larger consumer bases, and increased revenue can be particularly enticing for companies seeking sustained growth and increased profitability.

However, expanding internationally is quite challenging. 60% to 74% businesses fail in global expansion and according to Harvard Business Review, few companies succeed at going global as it takes  “10 years to reach a modest +1% and only 40% of companies turn in more than 3%”.

Opportunities of Expanding Internationally

Diversification serves as a fundamental advantage, mitigating dependence on a singular market and bolstering businesses against economic volatility.

Accessing a broader customer base enhances revenue and global brand influence. For businesses with internationally appealing products or services, success in new markets is substantial.

Consider McDonalds. Since their founding in 1940, McDonalds has opened 38,000 locations in over 100 countries, including Lithuania, Japan, Brazil, and Guam.

McDonalds is known for their innovative menus, tailoring their menu items to align with the cultural foods of the restaurant location. McDonalds Japan sells a “Teriyaki McBurger” and “Hitokuchi Churros”. McDonalds Canada, Brazil, and France sell chocolate croissants while the Netherlands sells the “Stroopwafel McFlurry”. The diversification of the McDonald’s menu brings about a global consumer base, and McDonalds fans even cross borders to try global options.

Challenges in Global Expansion

Legal Considerations: Entrepreneurs must grasp and comply with the legal requirements of target markets, encompassing complex regulations and intellectual property protection, and other legal adherences.

The German taxation system necessitates value-added tax, meaning that a consumption tax is levied incrementally at each stage of the production chain. A company looking to expand towards Germany will need to learn how to navigate this and may consider importing supplies or raw materials to avoid value added tax.

In Brazil, employees are entitled annual paid leave, or “férias” in Portuguese. The standard annual leave period is 30 consecutive days and employees receive their regular salary plus an additional one third of their monthly salary.

Cultural Differences: Acknowledging and adapting to cultural nuances is crucial. Entrepreneurs must align products and services with local preferences, fostering cultural awareness and providing staff with cultural training.

The Dutch social psychologist Geerst Hofstede introduced Hofstede’s Cultural Dimensions to help individuals understand the values that shape different cultures.

Amongst the six dimensions is Individualism vs. Collectivism (IDV).

Individualism emphasizes individual goals, achievements, and self-expression, while collectivism prioritizes group cohesion, cooperation, and collective well-being. This has significant implications for how individuals in individualistic or collectivist cultures perceive their roles, relationships, and priorities in the workplace.

Understanding this dimension is crucial for effective management, communication, and team dynamics.

The high failure rates of international expansion underscore the formidable challenges. If you are seeking more assistance for potential global expansion,  consider joining AFEUSA for business, legal, financial advice and more. Learn more about Membership Benefits here.