One of the greatest joys of running a business is watching it grow and adapt to the world around it, especially when it takes a brave leap across the ocean to try and set up shop in a foreign land.
While the potential rewards of a successful international business expansion can be huge, glittering and glorious, there are a whole host of legal, administrative, technological and cultural obstacles that need to be vaulted.
Just like when moving to another country to live or study, you cannot expect to just turn up and fit right in. Your business needs to have an appreciation of how things are done in its new home, while retaining a clear grasp of its own identity and purpose.
So what do you and your business need to consider and plan for when you have set the European market in your sites? Also, what extra challenges will social enterprises face?
Why expand into Europe?
The simple answer is that the EU taken as a whole is one of the largest markets in the world, one that accounted for 25.8% of the global GDP in 2010. The EU is also the largest exporter of goods and services in the world and since 2008 has also been one of the largest importers of these crucial trade fundamentals as well.
Taken altogether, it should be pretty clear that Europe is a hive of business activity where companies from all over the world clamour to buy and sell, and that any company with international ambitions would be foolish not to get involved.
As a company that originates from a country that is already an EU member, UK businesses already have a number of potential structural advantages when it comes to doing business in Europe. The Single Market is based upon the free movement of people and goods between member states, making your business’s life potentially much easier.
But these benefits are not immediate and guaranteed, and despite the Single Market there are still a number of possible pitfalls.
Cloud Computing and European expansion
In recent years the move towards cloud computing has emerged as a possible way of dramatically lowering the costs and logistical complexity of internal business expansion. The key features of cloud computing that international businesses are beginning to really grab hold of are the pay for what you use model, the ability for rapid scalability and the short-term savings in hardware and software costs.
Cloud computing makes it a much less tricky proposition for you to support and collaborate with remote workers connected through remote servers and the internet, which is of particular value to social enterprises – dependent as they are upon co-operation and maintaining close ties and close collaboration.
If you’re operating across multiple countries, another potential advantage is availability, which, with cloud computing, can comfortably reach the magical “five nines” threshold. On tight deadlines, five nines of reliability can be vital.
Potential challenges of European expansion
Setting yourself up in Europe requires some serious planning. Where are you going to go and why? How is that choice likely to be affected by the following factors which are all definitely capable of bringing your whole European adventure grinding to an unprofitable and expensive halt.
Different legal and administrative environments
It is a long term goal of the EU to create a homogenised legal environment for business from member states, but at the moment each individual country has its own distinct legal and administrative environment for you to consider.
You are going to need to work out which aspects (if any) are governed or protected by international treaties (such as those of the WTO) and which are purely governed by the domestic legal system. An example of this would be Germany’s very strict personal privacy laws which have lead it to clash repeatedly with Google and Facebook.
The diverse tax regimes that you are going to be facing in different countries also need to be considered, especially when it comes to corporation tax. To give some idea of the potential discrepancy between different member states, Malta’s current rate of corporation tax is 35% while Irelands is 12.5%.
Different cultural environments
The 500 million inhabitants of the EU speak a huge range of different languages, with 23 official ones and a huge array of regional dialects. While this is obviously going to be an important factor if you are planning on setting up offices in particular European countries, but you are also going to need to think about this when considering your website, promotional and sales materials, instruction literature, legal documents etc.
Another important variable, and one that can be difficult to judge accurately, is the skills makeup of the EU. In exactly the same as each individual domestic economy will have a geographically uneven distribution of skills, the EU does not have a uniform level of ability or labour resources that you can just plug into. While the current financial malaise has created a certain degree of uncertainty, it is generally thought that the number of workers with medium to high level qualifications and that young people will tend towards having better qualifications then their retired parents.
Special challenges for Social Enterprise expansion
Social enterprises face two main challenges when expanding to any other country, technical and cultural.
The technical challenges arise due to the loose definition of a social enterprise in most parts of the world. This holds especially true for Europe, where the ‘main’ definition is descriptive rather than prescriptive. This results in huge variation in whether the term is even legally protected or recognised from country to country, even ignoring the specific rights and responsibilities a social enterprise must uphold.
Generally, you should expect to research the status of social enterprise in your target country thoroughly and carefully, liaising with helpful local authority figures wherever possible.
The cultural challenge is obvious. Different ethical standards, a different culture, and a community which may be hostile to outside help – you absolutely need at least a small team of people who are actively involved with the roots of your community.
Of course, any good social enterprise should be doing this in any case, but once any business is large enough to expand it can become rigid, centralised, and inflexible. If you allow this attitude to persist, it could prove to be poisonous.
Only innovation and good business can save Europe
This whole conversation has up until this point to a large extent avoided the elephant in the room that is the on-going ‘Eurozone crisis.’ While this unfolding drama may be putting off some businesses from taking the leap across the pond, the truth is that many are still investing and doing very well from having a place in the largest market place on the planet. Throughout all of the recent turbulence the EU has retained its status as the premier exporter of goods and services.
But what is good business?
It is a key tenet of the social enterprise ‘movement’ that good business is more than turning a profit. Good business is turning a profit while helping the community to grow and develop – and it is in taking such a long-term view that social enterprise avoids the short-term money-grabs which caused the current recession in the first place. Good business is good in both senses of the word; well-crafted, and ethical.
Ultimately it is impossible that any other factor other than businesses like yours providing products, services and innovation is going to be the thing that gives Europe the spring back in its step.
What do you think about the possible benefits versus possible pitfalls of trying to expanding your business into Europe?
James Duval is the business, finance and technology editor for GKBC, an online magazine dedicated to celebrating and encouraging great online writing and design.