What is the Impact of Covid-19 on International Business Expansion?

By Team Writer - Last Updated on August 10, 2020
Innovative Companies Outperform the Market, Despite Headwinds in Global Economy

By Nicole Sahin, CEO, Globalization Partners

COVID-19 has placed businesses under huge pressure, and the economic impact is still unfolding as strategies shift to manage the short- and long-term effects. One area of activity to watch closely as a barometer of business health, confidence and ambition is an investment in global expansion.

This is because it raises interesting questions: Are businesses delaying or abandoning plans to increase their international presence? How confident are business leaders in pursuing existing international expansion plans, and what obstacles stand in the way of successful global growth?

Newly published research conducted by Globalization Partners in conjunction with CFO Research has shed an optimistic light on the growth strategies of US-based senior finance executives.

Looking specifically at organizations with more than $100 million in annual revenues and focusing on current international expansion plans, the data found that most businesses are undeterred by the impact of COVID-19 and are still moving forward with plans for new or expanded international operations.

In particular, interest in the Asia-Pacific region is growing as a target for more than half of all respondents.

Despite the pandemic-induced economic crisis, 45% of respondents are either currently expanding globally or only slightly delaying their expansion and will do it within one year. Another 9% maintain the intent to expand internationally but remain in a year-long holding pattern.

After North America at 71%, the Asia-Pacific region (excluding China), targeted by 65%, was the most popular region for new or expanded operations. Capturing market share was the top-cited reason for expansion into these specific regions, followed by the desire to expand sales, diversify investments, and acquire top talent.

Accelerating Change

Against that positive backdrop, COVID-19 is also accelerating the pace of change across organizations everywhere. Homeworking, for example, has become a feature of how businesses have responded to the pandemic, and the research findings certainly back up the idea that it’s a trend that will endure.

Indeed, 83% of respondents are now looking to a remote, global workforce model as a solution to the changes brought about by COVID-19.

The trend is increasingly evident as major corporations announce sweeping cultural changes, informed by the recent experience and the prospect of a healthier future. Tech giant Fujitsu is one of the most high profile businesses making a permanent change, having just announced a major shift in its flexible working strategy to offer its 80,000 workers in Japan flexible hours with working from home becoming the ‘new normal’ for its employees.

The company said its strategy, “is not only a concept of ‘work,’ but represents a comprehensive initiative to realize employee well-being by shifting pre-existing notions of ‘life’ and ‘work’ through digital innovation.”

Obstacles and Concerns Remain

Looking more broadly, the research found that employee health and safety was a top concern related to global expansion, citing nearly twice as much as the other leading issues, including new business strategies, increasing sales pipeline and revenue and reducing organizational costs.

Looking at other obstacles to growth, 83% of executives expressed concern about managing multiple third parties and stakeholders in a foreign environment during a volatile economic climate. And 74% of CFOs showed concern with navigating foreign banks and international employee payroll in these challenging times.

The time and cost involved with establishing legal entities or subsidiaries, followed by ensuring compliance with international laws and agreements add to the significant challenges of embarking on international growth.

The operational challenges, particularly around local legal rules, recruitment, and compliance can take months to navigate. Removing these barriers to success will determine how easily businesses can establish new international teams and revenue generation.

As a result, CFOs view international expansion as a slow process with 86% reporting their global expansion as having taken— or anticipated taking—at least five months. That figure included 42% who put the time required at more than one year.

It’s perhaps not surprising, therefore, that dedicating resources to global operations was the top concern for executives planning international expansion.

Going Global Quickly

In today’s agile business environment, any established business that takes a year to spin up a new territory is moving too slowly. Businesses without the experience and expertise to deliver effective international expansion are at serious risk of missing out on game-changing opportunities.

Lack of in-house resources must not be allowed to stand in the way of ambitious businesses with the potential to turn domestic success into global growth.

A lot of companies are turning to a global employer of record to help navigate operational challenges around international legal rules, recruitment, and compliance that would normally take months to navigate in just a few business days.

As a result, companies can avoid these complexities and establish new international teams and revenue generation quickly and easily.

This data shows that the economic crisis caused by COVID-19 has not derailed international expansion plans for most businesses that were already on this path. Those that stay the course will be ready for opportunity when the rebound arrives.

Team Writer

Team Writer | TechFunnel.com is an ambitious publication dedicated to the evolving landscape of marketing and technology in business and in life. We are dedicated to sharing unbiased information, research, and expert commentary that helps executives and professionals stay on top of the rapidly evolving marketplace, leverage technology for productivity, and add value to their knowledge base.

Team Writer

Team Writer | TechFunnel.com is an ambitious publication dedicated to the evolving landscape of marketing and technology in business and in life. We are dedicate...

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