Key Considerations for International Business Expansion

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Table of Contents

• Formulating a Global Business Plan
• Navigating Cultural Differences
• Structuring the Entry of Your Business into the Local Market
• Understanding the Foreign Labour Market
• Intellectual Property Protections Overseas
• Employment Law for Overseas Employees
• Prepare for Legal and Tax Obligations
• Key Takeaways
• Frequently Asked Questions

There are a vast number of things to consider when expanding your business overseas. During a business expansion overseas, financial and business considerations are front and centre. It is natural to focus on the impacts that expansion will have on your business and the bottom line. However, many legal issues will affect your expansion. These considerations will ultimately influence whether your expansion is successful. This article sets out key legal issues to consider when you are thinking about expanding.

Formulating a Global Business Plan

If your international plan is not accurate on paper, it will not be accurate when you execute it. Your business must establish a plan for an easy expansion into new markets. You must plan your needs, goals, and commitment to operating abroad. It is also essential that company employees understand and know what international goals they are working towards. 

Before finalising your international business plan, you should research the foreign market and rethink your advertising methods. For example, more developed countries like Switzerland may fit digital marketing methods, but underdeveloped countries such as Zimbabwe may need different advertising methods. 

Your company must plan distribution methods, pricing, and financing while considering the new market’s cultural, social, and economic factors. You may need to consider current global issues as well, such as legal elections or pandemics, to ensure you have run an adequate risk assessment.

Navigating Cultural Differences

It may go without saying, but when you enter a foreign market, it is best to consider how the local market’s culture and etiquette may impact your business. Accordingly, you should familiarise yourself with the following:

• language barriers – ensure that you can communicate with your customers and avoid misstatements or linguistic faux pas that may cause offence or confusion;
• purchasing power – some cultures have a higher purchasing power than others, and you will need to research this to set an appropriate price for your products; and
• consumption habits – as an example, certain food markets, such as in India, may predominantly favour vegetarian options over meat.

Structuring the Entry of Your Business into the Local Market

There are several ways in which your business can expand into international markets. Choosing the right strategy is essential to maximise business opportunities while minimising operational costs. Some options for a market entry strategy are:

• exporting – your company can maintain production facilities in New Zealand and transfer products to sell in foreign countries;
• franchising – where you licence your brand to local operators who pay you to use it but otherwise run their own business; 
• licensing – you may choose to transfer the right to use a product or service to a foreign firm;
• joint venture – your business can share costs and risks with another firm based in your foreign target market through a contractual arrangement;
• partnerships – where you use a partnership structure; and
• acquisition – where you purchase the shares or assets of a local business.

Understanding the Foreign Labour Market

You should ensure you are sufficiently familiar with the rules governing the local labour market to minimise your liability. This means researching the laws as well as market features like:

• skills;
• average salaries in the relevant labour markets;
• education levels; and
• employee lifestyles. 

Your company must be flexible in its employee policies to fit the labour market and its cultural differences. You should try and distinguish your business from other employers so as to maximise your recruitment capabilities. Specifically, consider the following:

• developing policies and handbooks that comply with local requirements;
• offering competitive benefits and remuneration packages; and
• establishing efficient HR and systems to maximise employee engagement. 

Intellectual Property Protections Overseas

When competing in a new market, you will want to ensure you can continue to protect your brand and other critical intellectual property that you may have protected with:

• trade marks;
• copyrights; and
• patents.

A business expansion overseas can be crippling if you find that your name or key imagery is already trade marked by another business, particularly if they are a competitor.

Luckily, there are things you can do to protect your intellectual property in the new market. Importantly, you should conduct due diligence in the countries you are looking to expand to. As a starting point, there is a lot of research you can do from your browser in New Zealand. For instance, you can search: 

• company databases;
• trade mark databases;
• domain names, and;
• social media. 

By doing this, you can see if there are existing businesses that provide similar goods and services to yours. You can also see if these business’ are legally protected. 

Employment Law for Overseas Employees

When you are employing staff in your new office or branch abroad, you should understand different employment laws. Indeed, it would be best if you did not assume your templates from New Zealand will work overseas. In many circumstances, you may need to get new employment contracts and other documents from an employment lawyer based overseas. 

Other relevant factors to a business expansion overseas may be a problem if you are not aware of them. For instance, how do restraints of trade work in the new country? Are there protections if the employee is creating intellectual property? While you can usually include these in an employment contract, standards and practices differ for these matters worldwide.

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Prepare for Legal and Tax Obligations

Ensure you familiarise yourself with the local regulatory regime and any tax obligations arising from operating in the target market. Before you launch your business in another local market, you should consider laws that govern business incorporation and structuring. For example, incorporating certain businesses in Brazil requires filing dozens of documents and undertaking more than a dozen official procedures.

To minimise commercial risks, you should:

• create commercial agreements that comply with local laws;
• review industry-specific local regulations;
• obtain as soon as possible the relevant certifications and licenses;
• understand immigration, customs, and shipping regulations; and
• maintain company records and governance.

To meet tax requirements, you will need to research the relevant policies. This is essential as different regimes use different taxation methods. For instance, some use GST, like New Zealand. However, others, like EU nations, use value-added tax (VAT). 

Key Takeaways

It can be easy to focus on the business factors of a possible expansion, especially when you are calculating if it is viable or not. However, it is important to consider legal issues when planning. If you are not able to operate in the new country with your brand or the brands of key products and services, that can hinder your move altogether. You should also be aware of the legal dynamics in the new country and not assume that existing practices will always translate overseas. Getting local expert advice for employment law and checking your obligations as a foreign-owned business can help you avoid non-compliance.

For assistance with your international business expansion, our experienced startup lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page. 

Frequently Asked Questions