BOSTON & ANNAPOLIS, Md.--(BUSINESS WIRE)--American businesses are aggressively pursuing international expansion to drive sales and win new customers, according to a new CFO Research survey of CFOs and other senior executives at companies with annual revenues of $50 million to $1 billion. The findings of the report, entitled “Pushing the Boundaries of Overseas Expansion,” indicate that with growth still sluggish in certain U.S. market sectors, executives have set their sights on overseas markets to achieve the growth they desire, with 65% of the executives reporting more aggressive growth targets for revenues from international customers in 2013 as compared to 2012. And in three years, 95% of respondents expect to have customers in at least two foreign countries. Overall, these executives see the upside, but acknowledge the challenges that come with international expansion.
Of the 161 executives surveyed (from companies already operating overseas or considering international expansion), two-thirds expect international markets to be among their company’s top priorities over the next three years. Of the respondents, 20% currently serve customers in more than 20 countries, and 32% plan to have customers in more than 20 countries in three years. For three-fourths of the executives surveyed, their interest was in growing revenues and expanding their customer base, with only 8% of respondents reporting a goal of reducing expenses.
“Expanding overseas is no longer a luxury. In today’s global market it is a necessity,” says Larry Harding, founder and president of High Street Partners (www.hsp.com), which partnered with CFO Research on the study. “In the past, international expansion has been associated with outsourcing or lowering operational overhead, but that’s no longer remotely the case. Today, international expansion is about being where your customers are, opening new markets, and realizing as much growth potential as you can.”
“Given the sluggish pace of U.S. economic growth, these small-and-mid-sized companies are clearly looking to diversify their mix of customers,” says Josh Hyatt, associate director, CFO Research. “And they want to establish themselves in those markets where they can do it quickly, and with potentially less risk.”
The report offers candid insights from the CFOs and senior executives about how they met – or in some cases did not meet – the challenges involved when operating overseas. Of the respondents surveyed, the three biggest hurdles cited are ensuring compliance, managing tax implications, and aligning their goals with the local culture. One of the consistent themes to emerge from the survey is that executives frequently elect to enlist outside experts when expanding to and operating in foreign countries.
“The executives acknowledge an increasing interest in emerging economies,” says Harding. “As the risk-reward equation of international expansion evolves, companies must learn they need to embrace the many challenges associated with operating overseas. Some will discover the hard way that they simply don’t know what they don’t know. Finding a partner with the requisite expertise is critical for managing and mitigating risk and closing the knowledge gap.”
The research also finds that American executives continue to feel more comfortable expanding into developed economies like the United Kingdom, continental Europe, and Australia. Outside of North America, respondents had the most experience doing business in the European Union (EU), where only 13% considered themselves unfamiliar with the business environment. They also found the EU to be the smoothest place to do business outside of North America.
However, developing economies are the growth hotspots, as they grab an ever-larger share of the world’s wealth. While Europe is relatively comfortable/familiar to those surveyed, Asia and Europe offer tremendous upside given recent market trends. Purchasing power is shifting to Asia, while the resource wealth of Africa — where an overwhelming 85% of survey respondents either find doing business difficult or don’t know the local terrain — will make these territories important frontiers for business expansion. Accordingly, a majority of respondents, 57%, indicated that entering new markets in emerging economies would be moderately important or critical for them in the next three years. And the number of businesses looking to expand in those parts of the world will only grow.
“Survey respondents say that hard-to-understand rules and regulations make the risks associated with overseas expansion difficult to evaluate,” says Hyatt. “To gain an understanding of the local markets, cultures and regulatory environment, many of them advocate linking up with business partners who can serve as knowledgeable guides.”
A great example here seems to be exemplified by expansion into China. Surprisingly, survey respondents report they were most familiar with China as an emerging market, but nearly half (44%) went on to describe it as the world’s most difficult place to do business. China’s rapidly changing regulatory environment is of major concern and necessitates constant monitoring and adjustment. Where the highest profile growth market is also the most challenging one, solutions are clearly needed.
“The legal, financial, and reputational risks you take on when you expand overseas are significant, but not insurmountable, even in emerging economies,” Harding points out. “American businesses need to understand going in that things are very different from country to country, and ever-changing laws and regulations need to be monitored very closely to ensure compliance. Companies must seek out partners with the expertise they need, because the risks can be enormous.”
Harding continues, “High Street Partners provides the expertise, technology and integrated systems to help our customers consolidate processes and make their operations more efficient, while at the same time mitigating risk. We’ve helped more than 600 customers in 98 countries ensure that they have command and control of their financial, human resources, payroll, expense, treasury, and tax filing operations in all the countries in which they do business.”
About High Street Partners
High Street Partners is a premier provider of international business software and services. Its mission is to help companies capitalize on their international growth opportunities by simplifying the management and control of international expansion and operations. HSP’s signature solutions include HSP OverseasConnect®, cloud-based software for the aggregation and management of accounting, finance, HR and legal operations across multiple geographies and lifecycles. OverseasConnect complements HSP’s operations-focused Managed Services and suite of custom Advisory Services. HSP provides a single point of accountability for customers spanning a range of industries and sizes: from those making their first overseas hire, to larger, publicly traded companies managing multiple subsidiaries on several continents, to top universities and research institutions operating in dozens of countries. HSP now has 15 global offices, including Annapolis, Boston, Dallas, New York, San Diego, Silicon Valley, Hong Kong, London, Munich, Shanghai, Singapore and Tokyo. For more information, call 1-888-881-6576 or visit www.hsp.com.