Why establish a subsidiary overseas?
Setting up a subsidiary overseas can prove decisive in establishing a company on a new market. However, this is a process that requires significant planning.
Establishing a subsidiary overseas requires meticulous planning. After determining the objectives associated with opening a subsidiary, companies should carefully consider the technical and cultural characteristics of the host market. Companies are advised to use market research to assess the potential success of setting up overseas.
Consider your company’s strategy
Before you begin, it is essential to ask the right questions about the operation of your company and the objectives you seek:
- Which country is important for my company and why?
- Does my SME have the financial and human resources necessary for international expansion?
- Who should I send? It is important to select the people best suited to operating in a global context.
Gather information about the host market
Knowledge of the market in which an SME wishes to establish itself is an essential condition for success of any expansion. There are two aspects to this knowledge of the environment:
- Technical aspects. Gather information about the laws of the host country, the economic regulations, the regulations on social protection, etc.
- Cultural aspects. Although sometimes underestimated, this point should not be overlooked. If ignored, cultural differences between countries can represent obstacles to the smooth progress of business. Customs, social practices and other cultural factors therefore need to be taken into account to optimize your activities. For this, it is important to be on site.
Market research overseas
Does your company really have the potential to establish itself on the market in question and to tackle local competition? To find out, companies are also advised to conduct market research to assess their chances of success and accurately set their objectives. This also makes it possible to determine the budget required for expansion. Switzerland Global Enterprise, for example, conducts this type of market research.
Type of global expansion
The form that globalization of the company will take depends on the type of expansion considered. Managing a subsidiary is not the same as managing a store or a factory. It is also possible to work with local distribution partners, a cheaper alternative to opening a subsidiary.
Select your partner countries
It is advisable to first assess your potential partners in the host country. To do this, it may be wise to draw up a short list of partners of interest.