5 international expansion challenges for businesses in 2023

5 international expansion challenges for businesses in 2023

5 international expansion challenges for businesses in 2023

28. Februar 2023

28. Februar 2023

28. Februar 2023

Despite the current climate of insecurity and volatility, expanding into new markets remains a key objective for many businesses. As a recent study by American Express reveals, 51% of UK SMBs that already operate in several geographies plan to enter new markets in 2023.


Global expansion is a challenge for businesses on many different levels. Setting up in a new market is a significant financial commitment and therefore requires careful preparation. But it’s not only the financial side organizations should keep a close eye on. There are many different aspects to consider when expanding into new geographies.

Here are five international expansion challenges businesses should prepare for when entering new markets in 2023.

1. Finding and attracting the right talent

Successful international expansion requires a strong, dedicated team. This holds true both for the expansion team and the in-country team that is in charge of building a local presence for the foreign brand.


The ongoing war for talent and the skill shortages that prevail in many countries make it increasingly hard for businesses to find the right talent to put their international expansion plan into action; especially as foreign organizations are usually at a disadvantage given their lack of knowledge of popular recruiting outlets.

2. Managing global benefits and compensation

Successful talent acquisition largely depends on the offered compensation and benefits package. But yet again, foreign organizations looking to build a team in a new market are likely to experience difficulties here because they are usually not familiar with local standards and customs.


What’s more, they have to make sure that their global compensation strategy is fair towards all their employees to avoid losing their best workers—while simultaneously respecting legal requirements concerning benefits, minimum wages and more.

As Flexible Working Index 2023 reveals, 81% of job seekers prefer to “work from anywhere”. That makes employee branding for hybrid and remote workers increasingly important to win best talents.


3. Hiring employees compliantly

After finding the right talent and convincing them to join the company, the next challenge the business needs to tackle is hiring them in a compliant way. Hiring employees abroad is a difficult endeavor that exposes businesses to various compliance risks.


In order to compliantly hire remote employees in new target markets, organizations need to ensure that they:

  • Offer all the legally required benefits

  • Draw an employment agreement that complies with local labor laws

  • Register as an employer with all the necessary local authorities

  • Either establish a local legal entity or register as a foreign employer


4. Navigating cultural differences


Globally expanding businesses shouldn’t underestimate the importance of cultural differences. Different markets mean different trade standards, consumer expectations, social norms, employee expectations, and ultimately also different rules for business etiquette.


For example, a US company looking to expand its business to Japan not only needs to adapt its market strategy, but also rethink customer communication, relations with business partners, and more.


5. Issuing global payments

Salaries, payroll taxes, service fees... Handling payments is a big part of any business’s daily operations. While payment administration isn’t an issue when conducting business in one jurisdiction only, managing cross-border payments definitely qualifies to be considered an international expansion challenge.


International payments are difficult to handle because:

  • They involve different currencies

  • They take longer than local payments

  • They incur additional transaction and conversion fees

  • It’s necessary to closely monitor exchange and inflation rates


Overcoming the challenges of international expansion with thorough preparation and the right support


Most international expansion challenges can be overcome through careful planning and preparation. But since there are many different aspects businesses need to consider before launching a new expansion project, it’s always good to have a global expansion checklist at hand to make sure not to oversee any important aspects.

Another decisive factor is local support. Many global expansion challenges stem from the fact that foreign businesses don’t have the necessary local knowledge and therefore open themselves up to different compliance risks. This is especially true when it comes to hiring employees in the new target market.

To compensate for the lack of knowledge and expertise, organizations looking to set foot into new markets should partner with local experts. One way of solving issues related to employment law, payroll, compliance, and more is to hire local employees through an Employer of Record (EOR). An Employer of Record simplifies global expansion in many different ways, from reducing the time needed for market entrance to enabling remote employee relocation.Jot something down