The Process of Expanding a Business into a New Country

The Process of Expanding a Business into a New Country

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The Process of Expanding a Business into a New Country

The primary objective of setting up a business enterprise is to realize growth by generating excess revenue over operational costs. Some companies also establish non-profit driven businesses with the sole purpose of improving the general socio-economic well-being of particular groups in the society (Marinov, 2013). The technological advancements of the 21st century have changed the nature of business operations and activities globally. In particular, globalization marked a new beginning in the business sector by intensifying competition in many industries. Such stiff competitions have forced firms to consider exploring new markets (Dunning, 2010). However, given the importance of a business expansion process, there are a number of factors that must be taken into consideration for the process to be successful. Expanding firms must carry out infrastructural, socio-economic, and political analyzes to determine the suitability of the proposed market.

Baker and Kaynak (2011) stated that the success of the business sector is majorly dependent on the state of physical infrastructures within the economy. In particular, transport systems and telecommunication networks play a fundamental role in influencing the day-to-day operations of business enterprises. This is because these infrastructural facilities determine the ease with which goods and services get traded in a given environment. It has been observed that regions served with good transport and communication networks allow free and timely flow of essential commodities. In addition, communication systems in perfect conditions help in eliminating product information asymmetry that may exist in the market. According to Dunning (2010), well-developed and maintained air, road, water, and rail transport networks are favorable for both durable and highly perishable goods. Good infrastructural facilities reduce transport and carriage-related operational expenses.

The state of the economy of the proposed country determines the ability of a company to break-even in the market. Some of the economic elements that have been found to have a significant impact on the performance of the business sector include the rate of inflation, cost of capital, income stability, wealth distribution, and tax policies. Marinov (2013) asserted that equitable and economical tax policies are friendly for business expansion because only a fair proportion of business returns go to tax contributions. This leaves the business with adequate financial powers to expand its operations further as well meet other recurrent financial demands. On the other hand, relatively low rate of interest charged on investment goods reduces the costs related to day-to-day running of the business, hence favorable for business expansion (Dunning, 2010).