Some questions related to internationalization process
Question: What advice would you give to companies that want to open new markets?
Auxadi: Local knowledge, preparation, partners who support this process, responsiveness, resilience and flexibility to adapt to the challenges that internationalization poses to organizations.
Q: Should the analysis of the potential and risk of a new market, before the start of expansion, be done internally, externally by a consultant, external supplier or a mixed formula?
Auxadi: Auxadi currently accompany more than 1,200 customers in their internationalization process. Our model of collaboration with these clients is based on becoming the international extension of their accounting department abroad. We do this by relying on our value proposition, our international presence (we have 22 international subsidiaries) and a network of partners who share our methodology, all through a single point of contact from our HUBs in Madrid, Miami and
Q: When moving towards a new territory or launching into a new market, how long should companies take to analyse the success of the operation?
Auxadi: Internationalization processes should be a natural extension of a company’s business and production strategy. It is true that opening a new market requires additional investment and that the first two or three years are the most critical, although it all depends on each company and sector. Most sources agree that, after the ten-year barrier, only a third of companies which initiated internationalization processes continue to develop their activity outside their borders.
But beyond that time barrier, it is essential to carry out the necessary analyses to determine whether that investment is successful in strategic terms; deciding, to cite two examples, whether investment in that market is beneficial in the future mix of an international presence, or whether it will allow continuity in other regions. In short: internationalization processes must be analysed in a strategic way, prioritizing the long term.
Q: What are common errors or errors to be avoided when entering a new market?
Auxadi: In processes as complex as internationalization, there are numerous errors that can be made. It is essential to know idiosyncrasies and local legislation, and that includes being very aware of key aspects such as taxation and labour regulations. We must not underestimate the complexity of the market in which we are going, because even in the European Union which aims to move towards regulatory harmonisation and is defined as a single market, there are big differences. For example, the recent incorporation in Spain of the European directive on hybrid asymmetry, which may have consequences for companies operating in different jurisdictions.
The positive thing is that, in the face of these challenges, there are equally numerous solutions or tools we can use. In any case, planning and advising by solvent professionals helps prevent errors. Sometimes cheap comes out expensive and rushing is not always good.
Q: How should the relocation of our industries be balanced with the current interruptions by the pandemic? And, moreover, when the bulk of global consumption in the future will be located in Asia and Emerging Countries…
Auxadi: If something has been taught to us by the pandemic, for example with the disruption we suffer with supply chains, it is that we live in an interconnected world, where trends and expectations can change easily. The debate on the need for re-industrialization has been reviewed in recent months so as not to be as exposed to situations as we experienced in 2020.
Each case requires detailed analysis and may lead to large investments where governments and public-private collaboration address issues under a country-wide strategy. The balance between short-term interests and long-term interests will require both courage and judgment, seeking strategic objectives and results, which must necessarily be expected in the long run.
Internationalization and investment abroad will again offer opportunities for growth and wealth generation.
Local Knowledge – International Coverage
Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.