What are the typical goals of a business? Usually, sights are firmly set on achieving financial growth. However, in order to accomplish this, companies must consider their market share, delivery and human capital.
International expansion is often a key part of achieving sustainable financial growth and long-term commercial success.
As a strategic business move, expanding your horizons internationally should take your company to new heights and open doors to new markets, supply chains and top talent. For example, global hiring allows companies to capitalize on the world’s booming remote workforce.
Why Do Companies Expand Internationally?
Reason #1: Generating new business in new markets
Reason #2: Tapping into top talent
Reason #3: Diversifying supply chains and vendor footprint
These motivations largely remain the same but the global expansion playbook is rapidly changing in today’s evolving business landscape.
A look back at the legacy model for international business
Traditionally, business activity begins in the company’s home location and may branch out ‘nationally’ into other marketplaces within the same country.
Following local and regional successes, a company may decide to pursue international expansion to build teams and open up new business opportunities.
Notably, during the international expansion phase, the business usually establishes entities in other countries to gain new business, diversify supply chains and hire talent.
Understanding today’s model for international business
Cross-border activity is now a business imperative, with opportunities emerging for companies to tap into new consumer classes and growing talent pools.
Thanks to advances in technology and remote work opportunities, global expansion and hiring can now occur at any stage of a business’s life. It is not unusual for a nascent startup to employ a cross-border workforce and set sights on conducting cross-border business from the very beginning.
However, underlying risks in international expansion and hiring continue to challenge companies.
Comparing the Legacy Model with Today’s Model of International Business
Legacy Model of International Business
Today’s Model of International Business
|Business activity begins in home location.
|Expanding globally and hiring can now occur at any stage of a business’s life.
|Business footprint grows to other marketplaces within the home country.
|Cross-border activity is now a business imperative, with new opportunities emerging.
|Business establishes legal entities in other countries to gain new business, diversify supply chains and hire talent.
|Risks in international expansion and hiring continue to challenge companies.
Identifying pitfalls in expanding globally
Expanding globally can be tricky, with the path to success lined with potential pitfalls along the way.
The following are just some of the many challenges businesses face when conducting international business:
|Burdens of entity establishment
|Risks of permanent establishment
|Global tax liabilities
|Legal and regulatory compliance
|Intellectual property (IP) protection
|Localizing talent development and HR support
Employer of Record (EOR) hiring: the lynchpin for quick, compliant expansion
Expanding globally often means establishing a legal entity abroad in order to hire workers and conduct business abroad.
All of these options for global hiring come with bureaucratic delays, tax liabilities and compliance hurdles that can become major problems down the line.
The good news is that, for some companies, hiring through an Employer of Record (EOR) allows them to tap into foreign talent quickly and compliantly.
In the EOR hiring model, the EOR legally employs talent on behalf of the hiring company, rather than the hiring company directly employing the worker. The EOR then assumes the liabilities of operating a local business as well as the responsibilities of administering payroll and employee headcount in the country.
Here’s how the various hiring options compare:
|Mitigates compliance risks
|Reduces intellectual property theft
|Mitigates international tax liability
|Fast hiring and seamless HR management
|Setting up an
|Engaging independent contractors
|Hiring through an Employer of Record (EOR)
Will the EOR hiring model take your business to new heights?
No matter what stage of global expansion or hiring your company is in, choosing to work with an EOR partner is all about finding the right balance of speed and risk.
If you’re looking to make a significant investment and are expanding into a new market with dozens of new employees, then it might be worth going through the process of setting up a legal entity. In many cases, the EOR can serve as an interim solution.
If the goal is to rapidly hire and scale growth opportunities in a new market – while reducing costs and liabilities – then an EOR may be the right solution for you.