Article
Written by Nick Driver
Posted on 09/07/2014

Why globalisation furthers the need for due diligence

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An expansion into global markets is the goal for many firms with high ambitions, but with such progression comes a host of new obstacles, and none more important than due diligence and compliance. 

 

Existing business models need adjusting
Put simply, expanding a successful business model involves duplicating the processes and operations set by the initial venture in new locations, but it’s not so clear cut when growth is occurring across international borders. 

Due diligence should be the first step towards global growth, as it helps you to highlight the obstacles ahead in terms of business law, taxation, political structures and economic health. With this knowledge, more informed decisions can be made when it’s time to adjust your business model for the new market. What’s more, an understanding of the target nation’s cultural practices can be gained, which presents many advantages when developing marketing strategies.  

Growing markets a particular challenge 
No matter how much you strategise, it’s difficult to avoid the negative side of globalisation, which is particularly true of developing economies. These nations are typically the most attractive for companies looking to grow, but their fledgling nature also means less structure and greater risk. Weaker government influence can bring with it corruption and terrorism, two issues which threaten the financial safety and operational capabilities of multinationals. 

Companies based solely in developed countries mostly avoid these pitfalls, and at worst experience supply chain disruption if their vendors are located overseas. Once a presence is set in a volatile country, however, any instability has a far greater impact. 

Compliance vital in new territories
Full compliance must become a priority if your firm is to prosper in a new location, as the harm to your reputation by not doing so could be catastrophic, just as you try to steal market share.  Appropriate due diligence underpins success in this area by establishing precisely where you need to be compliant, and it also ties into risk management by minimising the chance of overlooking any regulations. 

The opportunities available to firms willing to look beyond domestic buyers is huge, but gaining a foothold in new markets must be approached with necessary planning and a full understanding of the hazards ahead. It’s wise to remember that with an international presence, damage abroad is also felt at home.

 

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