Every week I have a client ask me my opinion on the best countries for international expansion. They are looking to grow overseas, so it makes sense to ask what locations are the best for international business. We all know that some countries have better reputations than others in terms of convenience, entity set-up requirements, and business-friendly cultures, but we also need to take into account the general economic strength of each country when considering expansion.
Depending on the type of business and the number of employees you will have working for you in a new country can determine the ‘type’ of setup that you have. Is it best to setup a full entity because there will be anticipated growth there? Maybe a certain country allows for an easier route to register as a foreign employer. Either way, you must first determine what country should you expand into.
That takes me back to the original question “We are looking to grow our international presence, where should we go next?” Before I answer that, let’s take a look at some of the largest (by GDP) and most stable countries, as they would most likely be the safest bet for expansion.
United States: We are the largest and most stable economy in the world, right? So it should be an easy decision to expand INTO the US as a foreign company. But let’s take a look at the US from an outsider perspective. Our stock market has been somewhat volatile over the last several months, we are locked in political turmoil, and we recently experienced the longest government shutdown in our history. Wow, maybe a company should hold off on expanding into the US!
Germany: While Germany has the 4th largest GDP in the world and may seem like a good bet, this past Fall the elections there were a landslide against the current SPD Party. Germany’s Chancellor Angela Merkel is under fire, has said she will not seek reelection in 2021, and under her watch the party suffered their worst defeat in 70+ years. They too are marred in political upheaval and unrest – maybe it would be better off to wait until they get that all figured out as well.
UK: Number 5 on the GDP list, we can count on the UK to be a stable environment for business for sure. Except for one word: BREXIT. Remember back in 2016 they voted to leave the European Union, and it will now take place at the end of March this year. What does this mean for the UK, how does it impact business there and in the EU, and how will the separation work? Truthfully, no one knows, so maybe we should cross them off the list too.
France: Moving down the list France comes in at number 6 on the GDP list. Let’s settle here – wait…not so fast. The President of France, Emmanuel Macron, has had some hurdles in the labor market, which he deems as a deterrent for foreign investors and expansion. Basically once you hire someone in France, it can be extremely difficult to terminate them. He feels that this will make outside companies hesitant to come into France, so he is trying to loosen up the restrictions in the labor market. That sounds great, but he is meeting extreme resistance from the courts and labor unions. Who wants to be stuck with a bad employee? So, maybe France is off the list too.
Spain: We can move down the list a bit to Spain, the world’s 13th largest GDP. Things are better here for sure. However, as I write this all of the taxi drivers in the capital of Madrid are on strike. Worse yet, they are actually blocking streets and highway exits to try and shut down the city to some degree. Why on earth are they doing this? Uber. They are upset at the expansion and use of Uber. Surely other cities have experienced growing pains of Uber and how that affects taxi drivers, but to block exits? Seems like you may want to wait this out before expanding into Spain.
WOW! We just eliminated the world’s number 1st, 4th, 5th, 6th and 13th economies! If that doesn’t seem to make much sense, that’s because it doesn’t. I think it’s obvious at this point that I am trying to show that no matter where you look to expand, there are going to be hurdles, uncertainties and concerns. Even among the largest and most stable economies in the world, there isn’t a specific country that I, or almost anyone can point to and say “expand here, this country is the best for you”.
My advice and my real answer is that you need to expand based on your business needs, and based on where you are finding the right talent. Maybe you find two great candidates in 2 countries for your engineering needs, or programming – great! At that point let’s have a conversation about each of those countries specifically and talk through which might better match your agenda. There is no magic answer, but our support and consultative approach CAN help guide you through that process, through the hiring and country setup…even helping with compliance and of course, payroll in each country.
Are you planning on expanding? Let’s chat – I am happy to learn more about your company’s needs and to help in any way I can!