The Impact of the PEO Industry on International Expansion
The principles of globalization lay out the groundwork for companies to develop their influence on the world stage. Whereas in the past expansions abroad were ventured mainly by large-scale companies, now, businesses of various types and sizes are bolstered to take such directions as well.
This opens up new avenues for reaching a wider and more variegated audience, and reaching out to an untapped region could mean an enormous increase in product sales. This could further open up to newer diverse business opportunities, and an influx of new ideas to invest on moving forward.
Consequently, an international expansion can bring positive exposure to a company and its merchandise. The more reach and influence a company has, the more it is able to evince an aura of credibility.
By and large, international expansion is the way to go to grow a thriving company, if not to withstand the squeeze of the competition locally and possible market saturation. Companies could either grow or remain small, vulnerable to being gobbled up by the advancement of its rivals.
The process of international business expansion, however, can be real challenging to fully implement. Before we point out the impact of the PEO (Professional Employers Organization) on that, let us first cover the obstacles to foreign expansion.
Common Reasons Why Some International Expansions Fail
One of the main trials companies face when endeavoring to expand abroad is how to deal with the political and cultural affairs of a targeted country for expansion. A certain product may seem hip and trendy to the local market, but may not be entirely enticing at all to a new location; a foreign country governed by factors unique to its own social milieu.
What if a company expands to a country that turns out to be politically unstable? What if it does not have favorable tax incentives to investors, or if cultural differences would define one’s product as unappealing or even offensive?
These are just some of the questions that ought to be pondered on prior to arriving at a decision to expand a business elsewhere.
The benefits of expanding business operations internationally may all be worth it for as long as the transition is well planned, structured, and properly implemented.
Think of how much money is involved to directly study a foreign market. The hiring process, finding the right people to employ and verifying their background, the usual red tape of dealing with government agencies, the filing of documentations and other similar requirements.
These tasks could take a year, or even more, to finalize. Chances are, when things are rounded up for completion, local governments of areas where you plan to operate on may already have implemented some policy adjustments, thus creating a non-compliance issue and a possible legal action.
It is practically impossible to keep track of all the aspects and changes that go on in a foreign land, especially when observing from afar. A lot of time and money is involved in branching out, not to mention the doubled effort and the potential for lack of efficiency still.
How the PEO Industry Smoothens Transactions
The strategy of the PEO industry makes all the aforementioned difficulties of expanding internationally seem less daunting, if not ironed out. How?
The Professional Employers Organization acts as a firm under which a client company can outsource certain tasks to that are not considered within its core competencies.
It covers for the hiring and management of employees, Human Resource training, payroll and benefits, etc. The PEO becomes the employer of record for the filing of tax and insurance purposes. It can also give advises and consultations to client companies on related matters.
The immediate benefit a company receives from hiring an efficient international PEO partner is that, with certain administrative tasks delegated, it can now focus on the things that drive their business. It is able to focus on building their brand so it can adapt in a new untested territory.
The Impact of International PEO
Branching out by partnering with an international PEO has lessened the risks of failure quite considerably. It also makes the endeavor less expensive and saves a ton of effort by putting the task in adept hands.
An effective international PEO will address local concerns in a specific country, such as tackling with the language barrier especially during negotiations stage, navigating around for permits and documents alike with the knowledge of how local agencies and governments work, dealing with labor and tax laws of the land (and its updates as well), hiring and firing process of employees, tackling disputes, and assuming certain liabilities.
Because of the services of the international PEO, companies are more confident in terms of expanding their services now, and they are able to reap its benefits to the hilt, such as:
- Cheaper costs compared to establishing a company directly in a new country
- Hassle-free implementation
- Quick installment of new branch and being totally compliant of rules and obligations
Imagine having to come up with all the requirements of moving or expanding without the help and guidance of a local, weaving through the complexities of dealing with people of different cultures. These are things the PEO is designed to handle.
Besides, deciding to staff foreign offices with locals, and with the help of an international PEO with a strong network or subsidiary in the area will definitely help you out in terms of getting the word out to the public; products or services introduction withal. That is marketing and indirect sales rolled out into one.
Compared to hiring contractors, partnering with an international PEO may be a bit expensive, but they give their client companies an access to a great pool of talents. This value is even more positively appraised considering how foreign labor might be relatively cheaper.
Also, historically, deals with contractors have proven to be more susceptible to legal disputes. Some cases stem from contractors not paying taxes properly, which in effect give a client company a bad image for technically being non-compliant to local regulations.
To ensure smooth relations between a company and an international PEO it is important that the long-term goals are formally discussed.
If the intention is to expand in a number of places within a country or in different countries, it is vital to choose a PEO that has already established subsidiaries in the area so it can perform its tasks with ease through a network already in place.
Bio:
Andrew Walker is a business analyst at Bradford Jacobs He has more than a decade of experience in the field of Human Resource and international business expansion, and has worked alongside many multinational companies as a trusted consultant to payroll and benefits.