HOW TO NAVIGATE THE INTERNATIONAL EXPANSION DESPITE STRONG WINDS

By on December 16, 2021 0


The global pandemic has reminded us all of how interconnected the world is. As countries emerge from the global health crisis and economies show consistent signs of recovery, companies with global exposure are increasingly optimistic about opportunities outside their home markets, despite a number of headwinds. .

Expanding a business beyond its home market requires long-term planning, the use of complex global supply chains, management of risk exposures, and sufficient agility to flexibly respond to changing business conditions. Marlet.

The results of JP Morgan’s 2021 Business Leaders Outlook (BLO) survey show how leaders are adjusting to this new environment and finding growth opportunities globally despite current challenges.

In the survey, most mid-sized US companies are bullish, even though they anticipate continued unpredictability. Having learned in 2020 how to manage remotely and manage disrupted supply chains, US business leaders are staying the course; global expansion plans remain at the same levels as in pre-pandemic years. Most forecasts have continued to grow sales steadily outside their home market. This indicates the confidence they’ve gained in pivoting throughout the year, including accelerating technology adoption, further digitizing core processes, and running global businesses with much less in-person travel.

Ultimately, the deployment of COVID-19 vaccines continues to be a critical element impacting companies’ global growth prospects. In addition, geopolitical events, new trade and investment policies and ever-changing trade regulations will continue to challenge business leaders seeking profitable and sustainable international growth.

Why develop globally in this climate?

With issues such as labor shortages, significant bottlenecks in global supply chains, and changing customer expectations, it can be daunting to consider international expansion at this time. However, according to the survey, leaders remain optimistic. Respondents cited access to new customers / markets (72%), better opportunities to serve domestic customers with global operations (37%) and access to suppliers / materials (34%) as the main reasons for expansion.

The pandemic will not de-globalize the business landscape. Business leaders have a proven remote workforce, have seen governments become more flexible with business applications, and have taken advantage of new approaches and technologies to move their businesses forward. In short, they have experience under their belt, take a long-term view, and see opportunities in international expansion – and aren’t letting the pandemic stand in their way. After all, adapting is the reason for doing business and recognizing that extraordinary environments require tailored strategies based on an accurate reading of market opportunities.

The world has changed: 3 key strategies for navigating international expansion

Develop strategic partnerships and understand trade policy

Trade barriers and tariffs were cited as the top international concern of middle market companies active globally in the 2021 Business Leaders Outlook survey. Complying with local regulations and the complex differences in policy between countries can be overwhelming and time consuming. Any small mistake can result in wasted time or resources, complications, and additional expense. Developing strategic partnerships with companies, banks, and suppliers (those who already have local information) go a long way towards effective global expansion.

The many cultural nuances and varying consumer preferences across countries also benefit from local expertise. In addition, an understanding of local competition and market opportunities is more easily achieved through these types of partnerships, especially when quick action is essential for success.

Growing global political changes in recent years that challenge the status quo require additional diligence in this environment. In addition, the economic reforms underway in many developing countries are having an impact on both the volume and direction of foreign investment. We see it particularly in China, India, Southeast Asia, Latin America, and parts of Europe. For companies wishing to expand in countries undergoing political and economic reform, it is important to consider the impact that these governments will have on fiscal, monetary, regulatory and foreign policy, and to what extent this can significantly affect or rapid foreign investment opportunities.

As a positive example for businesses in North America, the The United States-Mexico-Canada Agreement (USMCA) has brought timely improvements to trade relations in today’s volatile landscape. The USMCA has the potential to provide more certainty and a stronger safety net for trade and investment by promoting fairer trade and robust economic growth.

Investing in technology and digitization

To exchange finance is the core of the global economy on a daily basis. She supports every step of the global supply chain and ensures that buyers receive their goods and sellers receive their payments. Yet the world faces a massive and persistent trade finance gap. The World Trade Organization estimated that between 80% and 90% of world trade relies on trade finance, but there was a $ 1.5 trillion gap between market demand and supply before the pandemic. . This gap has only widened since 2020.

COVID-19 has accelerated a period of transformation for trade finance, mainly through digitization. The global trade finance challenge centers on rigid business models, tedious paper-based processes, regulatory constraints, and outdated legacy systems.

Technology can help reduce operational costs while increasing efficiency, encouraging new revenue opportunities, optimizing resources, improving the recruiting process… the list goes on. Companies are investing heavily in digital transformation, with cloud-based technology becoming the new operating standard. This brings immense benefits, including the ability to immediately access data and machine learning (ML) with virtually unlimited computing power, in a fraction of a second. The value of AI and ML is clearly visible in all functions of the business, including trading, risk management, marketing, and operations. It improves results by streamlining processes and increasing overall efficiency.

In addition, blockchain, a highly secure decentralized digital record of transactions, offers a multitude of applications related to international trade, bringing high security, automation and traceability to important financial functions.

Streamlining supply chains

More than ever, managing global supply chains has become an essential skill for companies expanding internationally. Growing demand with various bottlenecks has disrupted the transportation and logistics of goods globally. Gaining visibility into cross-border supply chains, while meeting profitability targets and changing customer needs, is a constant hurdle for most business leaders. Streamlining the global supply chain and focusing on visibility can lead to increased efficiency throughout the production / solution lifecycle. This involves optimizing processes by improving the accuracy of demand forecasts and schedules, and improving production lines to reduce costs. It can help make businesses more agile and profitable. Secure data integration is also essential, so that information can be shared across channels quickly and transparently.

As concerns over tariffs and trade barriers were once again at the top of the list of global concerns for business leaders in the 2021 survey, managing global supply chains has overtaken currency risk for second place. Instead of focusing on the next crisis scenario, be it a pandemic, natural disaster or cyberattack, business leaders need to continue to focus on resilient business chains. global supply in the face of future disruptions.

The way forward: optimistic global outlook for well-prepared business leaders

Overall outlook for global companies is optimistic, with 66% of executives in 2021 survey expect their international sales to increase over the next five years. Mid-sized American multinational companies know that sustained growth requires access to new customers in new markets. It won’t change. However, today’s increasingly complex landscape will require greater investments in digitized products and processes, more personalized local solutions in vastly different international markets, and harnessing the expertise of trusted partners to understand the nuances of operating in difficult foreign markets. Topping the list are effective market entry and supply chain strategies, supported by a solid understanding of trade and investment policy to help shape your expansion into the global marketplace.

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Morgan McGrath is Head of International Banking Services at JP Morgan Commercial Banking, where he is responsible for the global management of client relationships headquartered in the United States and overseas. Throughout his career, Mr. McGrath has worked with a wide range of companies, financial institutions and governments in Europe, the Americas and Asia-Pacific.