Over an extended historical timeframe, shifts in the distribution of output (GDP) among global markets have largely been subtle. Yet as the modern world has changed, and we have witnessed substantial changes.
Two millennia is a long timescale to view any nation, region, or economy. For centuries the Roman empire was near its peak in terms of size, inhabitants, and output (what we would today call GDP) around AD 117.
One of the largest empires in the ancient world, the Roman empire comprised 50 to 90 million inhabitants. This would amount to about 20% of the world’s population. It covered around 5 million square kilometers (nearly 2 million miles), stretching at times from northern Africa to Britain and eastward to Asia Minor. Rome was a powerhouse that dominated its economic and geographic world.
Today, a great many companies focus on expansion in key global markets that have long controlled a large share of the world’s GDP, such as China or India. What are typically called emerging markets may instead be called reemerging markets when we look back at the historical record. However, the situation remains complicated by recent events.
What’s Old is New: International GDP Among Global Markets Rebalanced
Today when companies look at development, expansion to high-growth markets is often the top priority. New technologies mean even small- and mid-sized businesses (SMEs) can now look abroad for their next step. In fact, often it has become essential for companies to expand to compete in an ever more integrated world.
Despite current changes and the continued effects of the COVID-19 pandemic on international markets, according to the world bank, global expansion is widespread and growing faster in countries with the largest shares of global GDP. This article looks at current macro trends within global expansion and explores one particularly useful solution. This is especially useful for companies looking to make the most of their expansion strategy.
Original Source attributed to Visual Capitalist
Adapting to Changing Macro Trends in Global Markets
It’s a natural part of a company’s evolution; to expand beyond an initial market and branch out overseas. For those businesses fortunate enough to make this leap, the complexities that international expansion represents can make or break future plans.
Macro trends appear to show some signs that the era of a single dominant global economy is over. Rather, opportunities abound in many smaller markets going forward. With the rise of remote work and the lessons learned about decentralized supply chains, companies can look to a variety of markets for the next step in their global journey rather than simply the US or China.
Typically, the best markets for expansion represent those with continued positive growth. This is true whether that means an emerging market or something with greater long-term stability. You will, however, need to adapt to fit with the regions or countries you wish to operate in.
Internally, this development may require a rethinking of a company’s marketing strategy and goals. It may also require new personnel with skills matching the needs of a new market, language, or clientele. Externally, it may mean considering new company structures that better fit the shape of foreign markets or industries.
No country or region is safe from change, and companies must be ready to adapt and look beyond existing customer bases. A company may have to prepare to exit somewhere familiar or try to win in a new niche market.
One obvious example of this has been the damage to Russia’s standing as a potential market for expansion due to the war it began with Ukraine. Russia has suffered dramatic losses in foreign investment, business, and GDP. It’s likely that it will not return as a power anytime soon, regardless of the outcome of the war.
No matter the changes driven by global trends, having the right support in your target market can be the quickest and simplest way to ensure a smooth landing.
Developments in the World’s Biggest Markets in 2023 (According to GDP)
China
Attempting to control the spread of the COVID-19 virus in China was done with strict rules. However, these created major obstacles to continued business relations with foreign companies and global markets. Now that restrictions have loosened, the country is eager to reopen and many forecasts predict growth in China in 2023. However, a lot remains to be seen in the long-term.
Manufacturing orders alone in China were down 40% in 2022. This represents a huge loss for a country that was set to reclaim its historical dominance of global GDP. Additionally, many large companies are actively exiting China and transferring their operations elsewhere.
It seems likely that China will hold on to a significant proportion of a global market’s potential business in the next few years. However, forward-thinking companies are redirecting their expansion to neighboring countries in South-East Asia such as Vietnam.
However, this leaves some opportunity for companies wishing to enter China now and make the most of what remains. Simply put, with the situation changing weekly due to the lingering effects of COVID-19 and its aftermath, it’s too early to predict the future of this historical powerhouse with any certainty.
India
Considered a good bet to replace China as the world’s biggest market in the coming years, India represents the best opportunity for international companies looking for a large country with a substantial and educated workforce.
Estimates put India’s GDP growth at 7% in 2023, slightly down from 2022, due in part to slower growth in worldwide manufacturing and mining.
At the same time, India’s tech sector has grown at an astonishing rate and now pits itself as a rival to Silicon Valley. The country is aiming to streamline data protection and digital security regulations to accentuate its place as a rival to China in tech. However, in the future India will likely see the biggest competition from other emerging markets such as Nigeria.
Japan
Once the greatest of the “Asian tigers”, Japan has suffered in recent years from a problematic combination of demographics and competition with neighbors. COVID-19 hit the country hard, and with worldwide problems around energy and inflation, Japan will likely continue to struggle to grow.
That being said, with a historically stable economy, Japan now has lower inflation than the US or the EU. Additionally, there are signs that changes in the country regarding workers’ pay and women’s economic power could go some way to restarting growth while the rest of the world struggles.
Japan is likely to experience further problems in the long term as the population continues to age. However, the potential for stable growth remains in several key industries and the demand for skilled young people going forward is evident.
EU
Predicted to be most heavily affected by many of the world’s problems, GDP growth in the EU in 2023 looks unlikely. Already, it is expected to fall to 0.5% in the Eurozone over the next year.
After a surprisingly strong bounce back from COVID-19, the EU is set to slow economically. However, to counteract this, EU countries are making moves to boost their economies, and the EU itself has announced a “Year of Skills” in 2023 to build long-term prospects. The types of skills that this may build should be perfect for international companies looking to benefit from cutting-edge technology and ideas going forward.
Many of the issues that concern the EU will depend on the outcome of Russia’s war in Ukraine. With the possibility of no quick end to the conflict in 2023, there is likely to be a return to more stability in terms of energy for global markets going forward as EU countries put massive amounts of investment (as much as €13.5 billion) into the energy industry.
United States
In general, it is difficult to see the US returning to the position of dominance it had on the world economy in the mid-20th century. In general, the expectation of recession in 2023 and slower overall demand for goods makes a GDP growth rate of as little as 0.5-1% seems likely.
However, the recent return of some industries, such as a growing manufacturing industry, and the growth of neighboring Mexico, mean that the US may benefit going forward. The right investment in skills and technology could allow the country to make the most of the “economic reset” that has followed the pandemic.
5 Common Issues Typically Related to International Expansion
Hiring and Recruiting the Right Team
The greater global talent pool represents a huge advantage over local recruitment resources, just based on finance. International employers will find themselves with access to a larger variety of team members with the specific skills they need at a fraction of the salary they would require in their home country.
Despite the benefits of international recruitment such as having team members in other time zones, the added challenges cannot be forgotten. Integrating potentially contrasting work cultures, hiring without physically being in the same location, and avoiding common work issues like proximity bias all have to be factored into an expanded recruitment process.
These problems are best managed by hiring professionals who are used to the complexities of the global talent pool. The right specialists can offer guidance to multinational companies when considering candidates from unfamiliar markets.
Managing Multi-Country Payroll
The variety of payment options, regulations, and requirements that an international company faces when hiring and managing employees abroad is often cited as one of the biggest challenges in global expansion. Within the next few years, the amount that companies spend on payroll services to overcome this challenge is expected to rise significantly.
Minor payment mistakes can cause major headaches, and handling complex issues such as tax and employer social security contributions in a foreign language may require new and expensive skills.
Being able to outsource these requirements to a third-party services provider can remove many of the biggest headaches related to overseas payroll while boosting employee security and confidence.
Adapting to Local Best Practices and Cultural Differences
Local languages, cultures, and business practices are often the last thing that companies consider when they are thinking about global markets. However, these typically represent some of the first problems that a company will face.
Even when setting up a new company abroad it’s essential to have a working knowledge of the local language and any workplace customs. Being able to navigate differences in the approach to hierarchy for example is key for companies looking to expand in Asia.
This will require support, typically in the form of local partners, to navigate the local market segments. They experts can help you define you target market and adapt your goals accordingly. In some countries, there may even be restrictions on how much a foreign company can do. In turn, partnerships made with experts in the new market can provide access to previously unforeseen resources or networks, providing companies with essential advantages over the competition.
Ensuring Regulatory Compliance
Knowing how to operate in new global market means knowing how to work around a range of new legal and regulatory challenges. The differences that exist between the labor laws of countries may outweigh the similarities.
Operating in multiple countries also means a multiplied rate of change in terms of new laws or requirements, all of which must be followed and applied as they appear. One such example from 2022 was a change to the Notification Act in Germany requiring employers to provide up-to-date contract information for every employee or risk €2,000 per infraction.
Being a responsible employer means protecting your business as well as your employees so they can work safely anywhere. Staying on top of legal and administrative requirements is simply the first step in doing so, but having a long-term agreement with an international HR specialist can be a quick and easy way to ensure complete compliance in every market.
Working Around Incorporation Delays
Opening a new business in your home country can be hard enough by itself. Extending that same process abroad adds a range of new challenges.
Company incorporation may take weeks or months on average, depending on the target market. Every mistake or missing document adds more time to the process, and the longer it takes, the more time your company isn’t working on growth targets.
Instead, studies find that companies finding inventive ways to avoid incorporation delays, such as the use of a PEO (Professional Employer Organization) service, grow 7-9% quicker on average and as a result enjoy 10-14% less turnover due to increased employee security.
What is a Global Employer of Record (EOR)?
An EOR is the quickest, safest, and simplest way to expand to global markets by allowing you to hire, operate, and profit without the need for a local company entity.
Whether scaling up, downsizing, or transitioning between countries, knowing how to retain the best employees or quickly adapt operations abroad can help many companies make an efficient transition to more positive markets in 2023.
In its simplest form, an EOR or PEO partnership allows you to hire or transfer employees to a local company entity in your market of choice. This local partner will manage all the responsibilities of legal employment on your behalf, while you retain full control over the way your workers go about their job.
Rather than the months potentially required to set up a new company overseas, Employer of Record services can have you up and running in as little as 48 hours. What’s more, this structure allows you to streamline every aspect of HR into a single point of contact, meaning you can benefit from the payroll, benefits, and tax management experience of a local expert for a single monthly fee.
How INS Global Gives You Global Markets Mobility Assurance and Support
For over 15 years, INS Global has been an expert provider of EOR and PEO solutions in more than 100 countries worldwide. With our technology-driven approach to global expansion services, you can pursue your growth goals and target audience in the APAC, EMEA, and LATAM regions immediately and fearlessly.
We merge an international approach to problem-solving through teams of experts on the ground around the world, with localized knowledge and expertise that comes from decades of experience as an industry leader and global collaborator.
INS Global offers 24/7 support so you always have the guidance you need. With teams of legal experts that are constantly watching for changes to global business and labor requirements, as well as following wider international trends, we ensure you and your employees are best placed to benefit from the global market.
Speak to our global mobility advisors today to see how you can benefit from INS Global’s international expansion services.
Preface with the fact that its had much stricter covid rules compared to other countries, which was an economic sacrifice for them.
SHARE