3 Common Reasons Global Expansion Fails (& What To Do About It)
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What does the ideal version of global expansion look like to you? Do you picture a seamless global operation and a unified brand? A standardised go-to-market strategy for your products and services? Centralised and streamlined decision making that crosses all regions??
Such a unified approach to global expansion is a worthy aspiration - and it’s vital that you and your company’s leadership team never takes its eye off the big picture as you grow across borders.?
But of course, the reality of global expansion is much more complex. And it’s not without its challenges.?
Companies often start the process of expanding globally with good intentions and grand ambitions. Enter new markets. Expand their customer base. Grow their global brand.?
So why do these global expansion strategies fail??
In short, it’s because companies fail to think globally, but act locally.?
Let’s look at the example of a US company expanding into Europe. It’s too easy to see Europe as one homogenous economic area - after all, the single European market and the single European currency means that Europe is a market that does have some unified regulatory frameworks.?
But a recent conversation with David Bates, a partner at Taylor Wessing in San Francisco, had us thinking about some of the reasons why a global expansion strategy might fail.?
So let’s take a closer look at the challenges faced by a hypothetical US company expanding into Europe. We’ll briefly examine three common reasons why global expansion fails - and how a company might go about fixing these problems.??
Taking a one-size-fits-all approach
A U.S. company expanding into Europe risks failure if it assumes that a strategy successful in the U.S. will work across all European markets. As David explains in our upcoming interview, Europe is not one market - it’s an aggregate of 27 markets.?
The diverse consumer behaviours, cultural nuances, and market dynamics in different European countries mean that a one-size-fits-all approach is unlikely to be effective.?
To succeed in Europe, our hypothetical US company must tailor its strategies to fit the specific needs and expectations of each market.?
By maintaining flexibility and testing strategies on a smaller scale before full implementation, a US company can ensure its approach is relevant and effective across diverse European markets.?
Specifically, they need to be aware of regulatory hurdles and they need to aware of cultural divides.?
Regulatory hurdles
Different countries have varying laws and regulations, especially regarding employment, data privacy, and product standards. A one-size-fits-all strategy might run afoul of local laws, leading to legal challenges, fines, or delays.?
For example, unlike the U.S., where "employment at will" is standard, European countries tend to have more employee-centric regulations. For instance, mandatory severance packages, extended notice periods, and higher employment costs are just a few of the legal considerations companies must navigate
Then there are the differing privacy and data protection laws. The European General Data Protection Regulation (GDPR) has set a global standard for data privacy, influencing legislation worldwide, including in Asia and various U.S. states like California. For a US company expanding across the Atlantic, understanding GDPR's implications and how they compare to U.S. regulations would be vital.?
Here’s why engaging with experienced local legal experts is vital.?
Legal experts in your local markets are better placed to conduct comprehensive compliance audits to identify all relevant laws that will affect your business. Investing in compliance training for key employees ensures awareness of legal obligations, while partnering with reputable, licensed third-party providers like EORs and tax advisers reduces risk.?
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Cultural disconnect?
A global brand will fail to expand internationally if it doesn’t align with the local values and cultural norms of the market they're moving into. Whether it’s marketing communications or workforce management, what works in one region may not be fit for purpose in another, leading to a cultural disconnect.
Successful global expansion means understanding that legal compliance is just one part of the equation.
Equally important is understanding and respecting cultural differences across the European workforce. From accommodating regional work habits, like the long summer holidays in Southern Europe, to adapting communication styles, cultural awareness is crucial for building a cohesive international company and a unified brand.
As David mentions in our upcoming interview, France has established the "right to disconnect," which legally allows employees to refrain from engaging in work-related communications during off-hours. Ignoring such cultural and legal nuances can lead to employee dissatisfaction, legal challenges and will ultimately slow your company’s expansion.?
The differences between the USA and Europe serve as a great case study for how global expansion rests on so many cultural, economic and regulatory factors. Whether your business crosses borders or oceans, the keys to success are remarkably similar.?
Stay tuned for our interview with David Bates on an upcoming edition of The Global Workforce Podcast.
The Omni-Outlook
Expanding into Europe: Why using an Employer of Record is not always compliant
Are you a US company that’s thinking of expanding into Europe?
The Employer of Record market is expanding every year. But not all solutions are built the same way. Using a non-compliant EOR can create significant long-term reputational and financial problems for your company.??
In our upcoming webinar in partnership with HR.com, Stan Broome, Co-General Counsel & VP of Litigation and Risk Management at Omnipresent, will explain the key EOR compliance issues in key European markets.
How to Stay Compliant When You're Employing in Italy with Carlo Majer of Littler Italia
As businesses cross borders, mastering international employment law is key. Carlo Majer, Partner at Littler Italia, discusses the opportunities and challenges of hiring in Italy and explains what to look for a compliant EOR partner when hiring in Italy.
Listen to the podcast on our website, via Spotify or Apple
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About us
Global Team Trends is brought to you by Omnipresent, the global employment platform that allows you to employ anyone, anywhere, without having to set up an entity.??
Designed, built and supported by global employment experts, Omnipresent takes care of your international employees and contractors. You don't have to worry about payroll, HR, or compliance issues, making it easier, faster, and safer to expand your business internationally.
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