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Given the economic slump in some countries, many businesses are facing challenges, particularly when it comes to international expansion. However, Global Consumer Brands Executive Jaimie Lowe believes that \u2014 even where this is the case \u2014 there are ways to enter new markets overseas.<\/p>\n
Why International Expansion Matters Now More Than Ever<\/h2>\n
When a country faces a temporary slowdown, CFOs face additional barriers as they seek strategies to keep international momentum rolling. Jaimie Lowe explains four reasons why \u2014 despite economic challenges \u2014 international expansion matters now more than ever:<\/p>\n
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- Diversification of revenue streams<\/strong>: Relying on a single market is far from ideal. By expanding into new geographies, a company will reduce its reliance on a shaky local market. This will prove essential to insulating the company against economic fluctuations.<\/li>\n
- Access to regions with growth potential<\/strong>: Regions like Southeast Asia, Africa, India, and the Middle East offer huge growth potential. Expanding into regions like these will allow companies to tap into new consumer bases and industrial opportunities, both while and after their country recovers.<\/li>\n
- A stronger ability to pivot and adapt<\/strong>: International expansion allows a company to better distribute operations, optimize supply chains, and mitigate risks associated with geopolitical tensions. As such, a company with a global footprint will find it easier to pivot and adapt.<\/li>\n
- Appealing to investors and stakeholders<\/strong>: A strong international presence bolsters a company\u2019s reputation. Businesses that navigate global markets effectively project stability and adaptability. These are essential traits when it comes to earning investor and stakeholder confidence.<\/li>\n<\/ol>\n
Although many CFOs are aware that international expansion will be of enormous benefit, they may need guidance on how to pursue this growth amid economic challenges.<\/p>\n
Jaimie Lowe\u2019s Four Steps to Pursue International Expansion<\/h2>\n
Jaimie Lowe has a clear four-part plan that can inspire CFOs to pursue international expansion:<\/p>\n
1. Prioritize The Best Regions<\/h3>\n
CFOs should start by prioritizing the best regions for expansion. They can do this by looking for the areas with the highest growth potential that align with the company\u2019s value proposition. They should consider factors like regulatory environments, consumer behavior, and competition.<\/p>\n
2. Get Clear on Tax Laws and Regulations<\/h3>\n
Foreign tax laws and regulations can have major implications for overseas expansion. Before developing a business presence in this region, it\u2019s essential to know the ins and outs of the local regulations and ensure compliance.<\/p>\n
Regulations to get clear on include:<\/p>\n
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- Tax regulations<\/strong>: These may be complex as they are affected by international laws, local tax codes, and intergovernmental agreements.<\/li>\n
- Transfer pricing<\/strong>: This accounting practice refers to the regulations for pricing transactions between and within enterprises under common ownership or control. CFOs will need to keep on top of the Organisation for Economic Co-operation and Development guidelines. They will also need to seek guidance from local tax authorities and invest in transfer pricing documentation.<\/li>\n
- Value-added tax (VAT) and goods and services tax (GST)<\/strong>: Regimes for these taxes differ by country. However, all CFOs will need to register where required, be aware of the registration thresholds, and file returns on time to avoid penalties.<\/li>\n
- Base Erosion and Profit Shifting (BEPS) initiatives<\/strong>: CFOs will need to abide by these non-negotiable anti-avoidance rules. They are essential to maintaining integrity in the global market.<\/li>\n<\/ul>\n
Once a CFO has familiarized themselves with a region\u2019s tax laws and regulations, they must stay abreast of these. Tax reforms can come about quickly, with major implications for corporate tax strategies and cross-border transactions.<\/p>\n
3. Monitor Currency Risks<\/h3>\n
As global financial markets are volatile, shifting exchange rates can dramatically affect financial results. Jaimie Lowe believes CFOs can create a clear strategy to monitor currency risks and protect a company\u2019s assets:<\/p>\n
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- Pinpoint currency exposures<\/strong>: CFOs should assess the currencies in which revenues and costs are denominated, examine the degree to which they are not matched, and take translation risks into account. These risks can become issues when converting financial statements of foreign subsidiaries back to the parent company\u2019s currency.<\/li>\n
- Employ hedging strategies<\/strong>: CFOs should use tools like forward, futures, and options contracts to hedge against disadvantageous currency movements. These contracts can help steady cash flow and protect a company\u2019s profit margins.<\/li>\n
- Monitor and report on foreign currency exposures<\/strong>: CFOs must stay on top of the currency to make well-informed decisions quickly.<\/li>\n
- Diversify investments and transactions across different currencies<\/strong>: Diversification, plus engagement in multicurrency banking, will reduce the risks that a single currency\u2019s fluctuations pose.<\/li>\n
- Develop internal expertise<\/strong>: CFOs should continuously train and upskill a treasury team in foreign exchange markets. Individuals in this team should analyze trends, predict impacts, and align currency management strategies with the company\u2019s overarching financial goals.<\/li>\n<\/ol>\n
Jaimie Lowe believes CFOs can collaborate with international tax consultants and invest in technology that provides real-time insights into their tax obligations in different jurisdictions. She explains that automation is a requirement, not a luxury, in global business.<\/p>\n
4. Develop A Route to International Expansion<\/h3>\n
Having chosen the best region(s) for expansion, researched local tax laws and regulations, and monitored currency risks, a CFO will be ready to plan their route to a successful expansion. Jaimie Lowe believes taking the following steps will help:<\/p>\n
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- Analyze the market<\/strong>: CFOs should research market trends, local competition, and customer demographics. This will be key to identifying where and how the company\u2019s offers will serve an audience.<\/li>\n
- Explore cultural nuances<\/strong>: Effective strategies in a company\u2019s home market may not work as well in an international market. The culture might be different in this new region, with varying consumer behaviors. As such, a company may need to adapt its go-to-market strategies so they resonate locally.<\/li>\n
- Explore legal and economic nuances<\/strong>: Cultural differences aside, the legal and economic landscape might look different, too. CFOs should analyze the stability of and receptivity to foreign businesses in the area.<\/li>\n
- Allocate resources<\/strong>: CFOs should use their research so far to allocate resources effectively. For example, they\u2019ll need to portion out funds for capital, technology, and human resources to facilitate market entry.<\/li>\n
- Establish local partnerships and joint ventures<\/strong>: CFOs should pursue strategic acquisitions and\/or collaborations with local entities. Both can accelerate market entry and provide on-ground expertise.<\/li>\n
- Implement scaling operations<\/strong>: CFOs can set up scalable business processes and tech platforms so the company can respond to evolving global market demands. These processes and platforms should also block the need for constant reengineering and additional investment.<\/li>\n
- Track performance<\/strong>: CFOs should set key performance indicators (KPIs) to monitor growth progress. KPI examples could include return on investment, revenue growth in new regions, and market share increase. As CFOs track performance, they can adjust the strategy in line with international expansion goals.<\/li>\n<\/ol>\n
Expanding on an international scale is a challenge at the best of times. It\u2019s an even bigger feat amid economic turbulence. However, as Jaimie Lowe emphasizes, with the right approach, a CFO can guide a company into new markets despite the local conditions.<\/p>\n
Why CFOs Are Critical to International Expansion<\/h2>\n
CFOs\u2019 expertise spans beyond traditional accounting to advanced forecasting and financial risk analysis. Their currency management strategies protect against fluctuating exchange rates. Without a CFO, a company will struggle to procure financing for overseas ventures, pitch to investors, or secure capital for expansion.<\/p>\n
CFOs are experts in local economies, gauging the ease of market entry and examining market conditions. As compliance specialists, they provide companies with peace of mind that they are meeting all international and local standards.<\/p>\n
They also nurture essential relationships with stakeholders as they negotiate with partners, suppliers, and government entities. Their ability to communicate about finances strengthens alliances, regardless of cultural differences.<\/p>\n
Without a strong CFO, international expansion would be impossible. With them, international expansion is possible even in times of economic uncertainty.<\/p>\n
While short-term economic challenges may seem daunting, Jaimie Lowe reassures companies that a robust international strategy can allow a company to expand overseas anyway. A well-versed CFO will be able to identify diversification opportunities to future-proof the company and maintain a competitive edge in the global economy.<\/p>\n
About Jaimie Lowe<\/h2>\n
Commercial Finance Executive Jaimie Lowe has dedicated over two decades to leading companies in an array of sectors. These range from FMCG, food and nutrition, and health and beauty to retail, global shared services, and the digital market.<\/p>\n
She is now the SVP of corporate financial planning and analysis, investor relations, and treasury and risk at Tyson Foods. She previously led the company\u2019s International Finance function as the SVP and CFO of international markets.<\/p>\n
Previously, she held high-profile CFO and other leadership positions at Danone and Unilever. Her expertise includes market development, mergers and acquisitions, digital transformations, sustainability, and profit and loss management.\u00a0<\/p>\n
An impressive range of qualifications backs her extensive experience. These include a Non-Executive Director Diploma from the Financial Times and an MBA and a Bachelor of Business Accountancy degree from Queensland University of Technology. She is also a Certified Practicing Accountant.<\/p>\n<\/div>\n
- Explore cultural nuances<\/strong>: Effective strategies in a company\u2019s home market may not work as well in an international market. The culture might be different in this new region, with varying consumer behaviors. As such, a company may need to adapt its go-to-market strategies so they resonate locally.<\/li>\n
- Employ hedging strategies<\/strong>: CFOs should use tools like forward, futures, and options contracts to hedge against disadvantageous currency movements. These contracts can help steady cash flow and protect a company\u2019s profit margins.<\/li>\n
- Transfer pricing<\/strong>: This accounting practice refers to the regulations for pricing transactions between and within enterprises under common ownership or control. CFOs will need to keep on top of the Organisation for Economic Co-operation and Development guidelines. They will also need to seek guidance from local tax authorities and invest in transfer pricing documentation.<\/li>\n
- Access to regions with growth potential<\/strong>: Regions like Southeast Asia, Africa, India, and the Middle East offer huge growth potential. Expanding into regions like these will allow companies to tap into new consumer bases and industrial opportunities, both while and after their country recovers.<\/li>\n