International Market Expansion: The Benefits of Global Expansion

Benefits of global expansion

Expanding internationally brings many advantages for businesses ready to take the leap. Consider the following benefits of going global:

• Brand-new markets: You can generate additional revenue streams from a new market to reduce your dependence on your current market. Companies that expanded internationally generated 1.9 percentage points more annual total shareholder returns than their industry peers, according to McKinsey research analyzing 5,000 of the world’s largest companies.
• Business growth opportunities: Growth opportunities may be limited at home, but you can take much of the knowledge and experience you’ve gained in acquiring market share and apply it with a local spin abroad.
• Access to new labor markets: To recruit new employees, you can make your hiring process easier by opening premises close to a talent cluster in another country. In some cases, you may wish to shift some production elements from your home country to overseas facilities because of lower costs. These benefits are particularly valuable for tech companies.
• Localized shipping: Retailers and wholesalers opening overseas locations can offer more competitive pricing to local customers because of reduced transportation costs and the lack of import tariffs.
• Improved overseas service: A presence in another country localizes your support offerings, allowing you to develop excellent customer service relationships with clients abroad.
• Increased cost efficiency: International expansion can help you achieve greater economies of scale, improving your company’s cost efficiency. Additionally, access to new resources can lower costs overall.
• Potential financial incentives in new markets: New markets often bring new opportunities and incentives for growing businesses. Companies that expand to a global market may find more investment opportunities.

Downsides of international market expansion

While global expansion offers significant benefits, it also comes with substantial challenges. Keep these downsides in mind when considering a global launch:

• High startup costs: The costs of launching a business in a new territory extend well beyond leasing commercial premises and establishing infrastructure overseas. There may be a significant time lag between establishing a presence and generating enough revenue to cover costs.
• Risk of hefty retreat fees: If your overseas expansion doesn’t go according to plan and you must close operations, there will be significant detachment costs, including those related to closing premises leases, terminating employees and exiting supply agreements.
• Reliance on local contractors: You may have to rely on expensive local contractors for a prolonged time before and after launch to deal with legal and HR compliance challenges. You’ll also need to work with local organizations to process payroll, launch localized sales processes and marketing plans, recruit management and staff, and more. (Fortunately, an international PEO can help with much of this.)
• Exchange-rate fluctuations: Overseas profitability may suffer if your new operating country’s home currency rate falls.
• Complex performance oversight: Although it’s possible to monitor overseas performance by tracking key performance indicators (KPIs), it’s harder to see where issues may be developing because of distance and differences in cultures and time zones. This is a common drawback of geodiversity.
• Linguistic and cultural obstacles: If a company wants to win customers in a new market, its staff must literally speak the language to be considered. People are looking for a localized customer experience.
• Compliance and regulatory issues: Different countries have different legal requirements. Companies must comply with international laws and regulations to ensure success. For example, a pharmaceutical manufacturer may have to apply for local certification to sell their medicines. Learn more about regulatory considerations below.

Questions to ask yourself before expanding internationally

Overseas expansion will test everything about your business to the limit. The rewards are significant, but the risks we highlighted are real. Ask yourself the following questions before you and your C-suite team commit to expanding internationally:

Do you really need a physical presence overseas?

Are you sure you can’t serve international customers well from your current base? If you sell products, could you partner with a local wholesaler or distributor instead of investing in physical infrastructure in a new country? You don’t have to go all out to go global, especially at first.

The Uppsala model, a recognized academic framework for international expansion, suggests that companies progressively increase their international involvement over time, initially focusing on their domestic markets before expanding into foreign markets through sales and production activities. This staged approach helps minimize risks by gradually building market knowledge and commitment.

Do you have the cash to go global?

Expansion always costs more and takes longer than you expect. This effect can be more pronounced with global expansion. Examine your cash flow management and ensure you have the funds for international expansion before investing any dollars.

Can you afford to neglect your home operation?

When expanding business globally, you and your C-suite team may have to neglect your home country operation for months at a time. Setting up an overseas presence takes an enormous time investment, and you may need to send senior managers to the new location for long stretches. Are you confident in your home team’s management capabilities during this transition?

Have you considered the cultural factors involved in international expansion?

Cultural intelligence is crucial to the success of international expansion and should be a primary consideration when selecting target markets. Understanding cultural nuances can mean the difference between effective market penetration and costly failures. Key cultural factors to analyze include communication styles, business etiquette, decision-making processes and religious customs. Companies that invest in cultural intelligence training and conduct thorough cultural assessments of their overseas targets are far more likely to avoid missteps and build sustainable international operations.

Will your product sell in an international market?

Your product or service might be in constant demand in your home market, but you can’t take that for granted overseas. Invest in focus groups and a market segment analysis to get customer feedback and assess demand. This will give you a better chance to establish and maintain a strong foothold.

Try to select a country whose markets are similar to those at home. Prioritize lower trade barriers, proximity, currency and cultural similarities. Canada ticks many of these boxes, while McKinsey reports that India “could gain up to $0.8 trillion to $1.2 trillion from trade-flow shifts by 2030,” making it an attractive destination for many businesses.  

Emerging markets may offer great opportunities, but they come with bigger risks. For specific guidance, you can consult the Country Commercial Guides from the Department of Commerce’s International Trade Administration, which provide market-specific insights for over 70 major markets.

Can you price competitively and still make good money?

China and other Southeast Asian countries dominate international goods exports with enormous economies of scale. Even if you open a factory and produce locally, will you be able to compete with the established powerhouses on prices and still make money?

Are well-known brands already in your target country?

Your international digital marketing strategy must include brand advertising and positioning that directly takes on competitors in your target countries. But if these rivals already have an extensive market share, you’ll have to carefully consider whether you can get a foothold.

Are you prepared to work under different regulatory regimes?

International expansion involves navigating complex regulatory environments. The U.S. Department of Commerce’s Bureau of Industry and Security administers export controls that companies must understand before expanding globally. Other common regulatory considerations include tax compliance (see below), employment laws, industry-specific licensing and data protection requirements. 

The European Union is unusual because its member countries share many government- and industry-specific regulations. If you’re expanding to the EU, you’ll need to become very familiar with those regulations and get the necessary approvals, certifications and licenses. You’ll almost certainly have to invest in localized labeling and language adaptation for your brand, packaging and advertising.

Are you clear on how to maximize tax efficiency and compliance?

Planning a tax-efficient structure and local operation includes complying with local tax codes and applicable double-tax treaties with the U.S. and any intermediate overseas entities that are part of a tax-optimized structure. Be aware that many foreign banks are reluctant to deal with U.S.-owned or connected companies because of the high cost of complying with U.S.-dictated reporting rules, such as those established under the Foreign Account Tax Compliance Act. In any case, because of know-your-client rules, it might take months to open an account.

How to expand business globally

The International Monetary Fund projects global economic growth to decline to 3.0 percent in 2026, significantly below the historical average of 3.8 percent, citing the impact of escalating trade tensions and elevated policy uncertainty. This slower growth environment means companies must be more strategic about international expansion timing and market selection.

If you’ve determined that you’re ready to expand your business globally in the current economic climate, the following steps can get you started.

1. Establish your overseas infrastructure.

Establishing your overseas infrastructure and teams can be challenging. Take these actions before, during and after your launch:

• Get communication systems in place: Establishing clear communication within your company and with the outside world is essential. Does your organization have the communication skills to compete in a globally interconnected economy? While technologies have made it easier for smaller companies to become multinational, your global firm must adapt to different communication methods and remote team meetings. Your company may gain from the communication advantages of digital connectivity, but the business may also sacrifice some of the coordination and interconnectedness of face-to-face interaction.
• Familiarize yourself with local resources and customs: Learn as much as possible about cultural differences before expanding overseas, and ask for local employees’ help post-launch. Follow international business etiquette and adapt legal, commercial, and human resources policies and procedures for differences in language, business practices, social customs and regulations.
• Cultivate local talent: Most overseas teams rely on home country leadership early on, but this drains time, money and resources. Consider international recruitment in your new location; look for experienced or developing leaders there who can eventually be responsible for strategy and direction.
• Train managers who will be transferred overseas: Most companies train managers at home and then move them abroad. Whether you train managers in-house or in the new location, they must be able to adapt to the foreign country’s culture and be effective leaders in this different environment. Investing in employee training is essential.
• Consider local partnerships to mitigate risks: Whether your international business model is distribution, joint venture, franchise or manufacturing, you can cut business expenses and reduce financial exposure and infrastructure costs by partnering with local enterprises. Don’t rush into making this arrangement; your local partner choices can make or break your success.

2. Take advantage of governmental assistance.

The Small Business Administration (SBA) offers specific support for international expansion through several initiatives:

• Export loan guarantee programs: The SBA offers three export finance programs that help small businesses finance international sales activities: Export Express (up to $500,000 for quick export development), Export Working Capital (up to $5 million for fulfilling export orders) and International Trade loans (up to $5 million for facilities and equipment to support export activities).
• State Trade Expansion Program (STEP): STEP provides financial awards to state and territory governments to help small businesses export their products and services, with most states receiving STEP support to assist local small businesses in reaching international markets.
• Growing Globally training: Ascent, the SBA’s online learning platform, includes modules that teach women entrepreneurs how to expand their small businesses into international markets. 

Companies can also contact the SBA’s International Trade Hotline for assistance with international market barriers.

3. Ensure legal and regulatory compliance.

Navigating international legal and regulatory requirements is crucial for successful global expansion. You need to: 

• Research tax obligations and structures: Understand corporate tax rates, VAT/sales tax requirements, transfer pricing rules and double taxation treaties. Consider establishing appropriate legal entities (subsidiaries, branches or representative offices) in the new country to optimize tax efficiency and liability protection.
• Secure necessary licenses and permits: Identify industry-specific licenses, import/export permits, professional certifications and regulatory approvals required in the overseas market. Some industries face strict regulatory barriers that can significantly delay market entry.
• Protect your intellectual property (IP): Register trademarks, patents and copyrights in the new country before launch. Research local IP laws and enforcement mechanisms, as protection levels vary significantly between countries.
• Understand employment and labor laws: Familiarize yourself with local hiring practices, minimum wage requirements, mandatory benefits, termination procedures and worker protection laws. Some countries have very different employment frameworks that can impact your business model.
• Establish compliance monitoring systems: Set up processes to track regulatory changes, filing deadlines and reporting requirements across multiple jurisdictions. Consider working with local legal counsel and accounting firms to ensure ongoing compliance.

4. Use PEST analyses to plan for the unexpected.

Companies that are growing or already trading overseas often carry out PEST analyses. A PEST (short for “political, economic, social and technological”) analysis helps you consider your business’s place in the world from the perspective of events you have little or no control over.

Carrying out regular PEST analyses will help you address hidden factors and provide the information you need to plan for unexpected events. We recommend that expanding businesses:

• Be aware of what’s happening around you: Monitor local and global legislative, regulatory and market developments via publicly available media and customized reports. Consider using in-house hires and consultants to watch for developments, or consult industry associations and advocacy groups.
• Respond proactively: When things change, adapt quickly. For fast-evolving markets, use scenario planning to formulate responses and contingency plans. Local political and regulatory changes can present opportunities or dangers.
• Understand each country’s risks: You are at risk on multiple fronts from political instability and the relationship between the U.S. and your new country. Local suppliers may be chosen over you. Your assets may be confiscated. Alternatively, the U.S. government may require you to withdraw for security or other reasons. You may be at risk of retaliatory actions. Consider every potential scenario, and develop ways to mitigate risks and protect assets and investments.
• Pay attention to political events at home and around the world: Political changes at home and abroad can affect trading conditions. Stay apprised of any potential or ongoing situations in your home base and your new country of operation, and be prepared to pivot if necessary.

Organic global expansion vs. overseas acquisitions

Starting operations in a foreign territory can be risky and challenging. You must find the right talent and target customers to bring in sales and revenue. An alternative option is to pursue an overseas acquisition. If you purchase a company in another country, you’re buying a business with an established market share, employees and revenues to offset your financing. You’ll also have access to the company’s advisors, lawyers and accountants, who will be keen to retain your business.

Both approaches demand thorough market research, financial planning and risk assessment to determine which strategy aligns best with your company’s resources, timeline and long-term objectives. Here are some of the factors to consider:

We recommend choosing organic expansion when:

• You have time to build market presence.
• Brand consistency is critical.
• The target market is unfamiliar with acquisitions.
• You want full operational control.

We recommend choosing expansion via acquisition when:

• Speed to market is essential.
• The target has valuable assets/relationships.
• Regulatory barriers favor local ownership.
• You need immediate scale.

Kimberlee Leonard contributed to this article.