Globalization and an increasingly digital economy are creating new opportunities for businesses. This is true of both developed and emerging markets. Yet companies are faced with an evolving regulatory environment, a rise in protectionism and worldwide economic uncertainty.
What's the smartest strategy for achieving your growth objectives – domestic or global expansion?
The Case for Domestic Growth
Choosing your home market means you can leverage existing suppliers and build on current supply chain processes. There are no currency risks or unfamiliar regulations and limited cultural or language barriers. Depending on your goals, options range from:
- Opening a new location
- Partnering with similar businesses
- Adding complementary products and services
- Targeting new markets "Ideas for Growing Your Business," Small Business Administration1
This is relevant to both home or international markets.
Regardless of which path you choose, expanding your business will give you access to higher potential profits and faster growth.
Why Go Global Now?
One reason companies consider international expansion is to reduce reliance on local economies. Where markets may be mature and competitive in the U.S., they could still be emerging in other countries.2 This is significant as the global middle class continues to grow. In 2015, there were approximately 3 billion people representing the middle classes who spent US$33 trillion – about two-thirds of global consumer spending. The middle class could reach 4 billion by 2021, making it the majority of the world's population.3
With this growth, more people will have disposable incomes for the first time, and there is likely to be an increasing demand for a broad range of goods and services. Tapping into new markets where the middle classes are rising may be the right strategy for achieving growth.
The Path to Successful Expansion
With either strategy, you need to lay the groundwork. Make sure your growth plan fits with your strategic vision and source data to inform accurate forecasting and realistic goals. Explore new technologies to help make your business more efficient as you grow, with faster payments and mobile solutions.
Moving into new global markets will add another layer of complexity. In addition to understanding the regulatory environment and cultural differences, there are challenges related to foreign currency exchange rates, and managing multi-currency liquidity. If you're establishing a physical presence in new countries, examine whether a centralized or decentralized approach is best for meeting your global cash management needs.
A centralized structure can make it easier to standardize processes and gain a clear picture of cash positions company-wide to maximize liquidity across geographies. A decentralized approach could give you access to better local expertise of business customs and culture. Do gain an understanding of what's involved in managing and monitoring an increasing number of banking relationships as you enter new markets – from a resource and cost perspective.4
Growing domestically now doesn't stop you expanding globally in future. That's why partnering with a bank that can serve you at home as well as internationally makes sense. The right partner will have:
- An on-the-ground presence in key global markets to help you limit the number of banking relationships to manage as you grow
- A firm grasp of existing and evolving regulations as well as geopolitical factors that could impact your domestic and cross-border business
- A global network connecting you to new opportunities across the country and around the world
A strong international banking partner can serve as a trusted advisor. This will help you determine which markets and opportunities will set your business for success, and provide support in funding this growth.5
Expanding your business will give you access to higher potential profits and faster growth. Contact your local HSBC Relationship Manager today to find out more.