It will come as no one’s surprise to learn that growing a business can be challenging for business owners and entrepreneurs. Depending on the country your business is in, you may experience many difficulties related to government regulations, taxes, and local competition.
The good news is that it is possible to expand your business and boost your profits by setting up or expanding your business in multiple countries. In this guide, we have compiled eight great advantages of setting up multiple international entities.
Access to a More Favorable Economy
One of the best reasons to set up a business or expand your existing business to another country is to get access to an economy with more favourable conditions. We live in a more globalized society thanks to international trade and increased connectivity in the digital era. However, each country’s economy still varies in terms of performance.
This could be due to a number of reasons such as the number of corporations that exist in each industry, the relative wealth levels of the local population, or the international prices of the different natural resources.
In either case, if your country’s economy is currently in a downturn, you can definitely benefit by setting up or expanding your operations in a different country.
For example, certain South American countries such as Ecuador and El Salvador have economies that are currently in decline. The people in such countries are reluctant to spend money on goods and services due to this uncertainty. As a result, businesses in these countries are suffering.
Business owners in Ecuador and El Salvador should therefore attempt to set up businesses in countries with more favourable economic conditions. This includes EU nations such as Germany, France, and Italy. Doing so will give them access to a new set of potential customers with greater spending power.
Offering Goods and Services in a More Politically Stable Country
Many countries across the globe have unstable political climates. This instability may be driven by the political parties or the electoral structures that exist in these countries. Either way, running a business in a country where the local government’s makeup changes each year can be difficult.
Business owners and entrepreneurs must operate their businesses without any assurance the next government won’t pass laws that make their operations more difficult or even illegal. This prevents them from making any long-term investments or commitments that would be necessary for growth and expansion.
Such business owners and entrepreneurs can avoid these issues by expanding their existing business or opening up a new business in a different country with a more stable political climate. European countries such as Switzerland and Finland are known for their political stability and are therefore great choices for people who wish to move or expand their business to a region where the future is more predictable.
Gaining a Competitive Advantage
No two countries’ economies are ever alike. This is because each economy has a different makeup in terms of industries. For example, Canada’s biggest industries are banking, oil and gas, and automobiles. This is very different from a country such as France whose biggest industries are energy, manufacturing, and transportation.
Understanding the major industries in different countries is important because it offers information about how saturated each industry is. Opening or expanding a business to a country where the local industry is saturated is a bad idea because there is likely to be high competition and low profits.
Conversely, setting up or expanding your business to a country where the local industry is still growing is a great idea. Business owners and entrepreneurs may be able to gain a competitive advantage in such industries due to their experience and speciality product or service knowledge from running their business in their home countries. They can therefore take advantage by expanding or setting up shop in a different country.
For example, you may benefit by setting up a retail outlet for a streetwear store in Europe due to the limited number of existing streetwear manufacturers in the country. If you already have an established streetwear brand in your home country, expanding your business and selling your products in Europe could be a smart move.
Getting Access to a New Labor Pool
One of the biggest advantages of setting up a shop in a different country is getting access to a different labour pool. Business owners and entrepreneurs operating businesses in their home country typically need to rely on locally sourced staff. Such staff may be difficult to acquire if the business requires specialized skills that are rare in the country.
For example, a company that builds artificial intelligence software may find it difficult to find software engineers with experience in this cutting-edge niche. Such companies may have to pay a high wage rate to get a few software engineers with this specialized knowledge to come work for them.
If this company set up operations in a country with more AI software engineers such as the United Kingdom, German, or France, they would have access to a wider labour pool. This higher supply of engineers means each one could be hired for a lower rate than in the company’s home country. Therefore, business owners and entrepreneurs could find specialized staff and save on labour costs by expanding or setting up in a different country.
Experimenting With Different Ideas
Setting up multiple entities in different countries also gives business owners and entrepreneurs a chance to experiment with different ideas. This can be advantageous if the business has already established a name for itself in its home country and is reluctant to offer wildly different products or services.
For example, a company that is known for producing fertilizer might be taking an unnecessary risk by introducing ice cream products in its home market. After all, people are likely to be sceptical about trying an ice cream product from a company with a reputation for producing fertilizers.
In this scenario, the company may benefit by trying its hand at producing and selling ice cream products in a foreign market where people are unaware of its reputation as a fertilizer company.
Business owners and entrepreneurs can therefore try wildly different ideas in foreign markets without worrying about a failure impacting their home business’s reputation. If they find the move yields success, they can then attempt to bring such ideas to their home market and boost their profits even further
Setting up a business in different countries can be beneficial for the collaboration opportunities it opens up. Business owners and entrepreneurs with limited collaboration opportunities in their home country may find plenty of businesses willing to collaborate with them in other countries. This could be mutually beneficial for both businesses.
For example, fashion brands Alexander Wang & H&M collaborated in 2014 and produced a line of shoes. Alexander Wang is based in New York and is known for creating high-end fashion products. H&M, on the other hand, is a Swedish clothing and accessories company that makes more affordable fast fashion products.
The cross-country collaboration was successful because it offered H&M customers on a budget access to an affordable offering from a high-end fashion brand. Alexander Wang was also able to expose its products to a new generation of customers with this move.
For this reason, business owners and entrepreneurs can take their businesses to the next level and unlock untapped potential by setting up operations in other countries and collaborating with the businesses there.
It’s no secret that business tax rates vary greatly from country to country. For example, businesses in the UAE with annual revenues exceeding 5 million AED or $1.5 million must pay a corporate tax rate of 55%. By contrast, the Republic of Georgia in East Europe has a modest corporate tax rate of only 15%.
Business owners and entrepreneurs who are tired of their profits being reduced due to high corporate tax rates could therefore benefit by starting operations in countries with lower corporate tax rates. In this situation, they may find it is more profitable to expand their operations in a different country than in their home country.
An Easier Incorporation Process
Many countries are notoriously difficult to incorporate a business in. For example, Brazil has many complicated regulations and laws governing its business environment. The lengthy bureaucratic process makes it difficult for entrepreneurs to start new businesses in this South American country.
Prospective business owners and entrepreneurs in such countries may find it easier to open up businesses in other countries with easier incorporation processes. For example, it is possible to open a limited liability company in Hungary in just two or three days. This is possible because businesses don’t have to complete the lengthy process of applying for an EU VAT number, as this number is provided to them automatically.
Maximizing the Benefits of Opening Multiple Entities in Different Countries
As you can see, there are many potential benefits of opening multiple entities in different countries. However, business owners and entrepreneurs will need to be careful in their approach for a few reasons. This includes:
Choosing the Country With the Right Combination of Benefits
Choosing the right country to expand your business to can be tricky because there will always be a tradeoff between advantages and disadvantages. For example, a country with a low corporate tax rate and a speedy incorporation procedure may have an unskilled labour force that doesn’t offer the type of labour you require for your operations. Similarly, a country with an unsaturated industry may not have a sizable customer base for the type of products or services you offer.
For this reason, business owners and entrepreneurs should carefully weigh up the pros and cons of each country before deciding which one to set up operations in.
Setting Up the Right Number of Entities
Business owners and entrepreneurs may have high hopes of setting up a shop in another country. However, they will need to determine the optimal number of entities to set up. The safest option is to stick with one brand and outlet before gradually expanding and increasing locations. This approach helps minimize potential losses if the initial outlet fails.
More mature companies may be able to risk a more aggressive approach in which they set up multiple outlets in major cities across the new country. This allows them to make an impact in the industry and muscle out existing businesses that can’t keep up.
Knowing Whether to Change the Subsidiary Name
As mentioned earlier, some brands may set up businesses in other countries to experiment with new products and services. This approach sometimes works because consumers in the new country aren’t familiar with the original brand and what they are known for.
Business owners and entrepreneurs setting up a business in a different country also have the option of setting up a subsidiary under a different name. This allows them to completely separate their new venture from their existing brand and take more risks. This approach may be useful if people in the new country are already familiar with the original brand.
Establish Entities in Other Countries With OpenAEuropeanCompany.com
Setting up multiple entities in other countries can be challenging to do on your own. You will need to familiarize yourself with the business environment and incorporation processes in each country you decide to do business in. This is where hiring professionals such as OpenAEuropeanCompany.com can be beneficial.
Our experts understand the ins and outs of setting up several businesses at once throughout Europe. We can help you in setting up multiple international entities and find success. Contact us today to learn more about the benefits of doing business in different countries.