The rapid explosion of technology and communications systems has made our world smaller, more accessible, and has opened markets that did not exist even 10 years ago. Today more than ever, we think globally and are impacted by transactions taking place on other continents and in other countries which were not considered viable, or even practical.
Markets and opportunities have become available, and many organizations have taken advantage of this explosion to establish a foreign presence and capture market share.
Up until recently it has only been the larger organizations that took advantage of these opportunities; however, with technology and communication networks now available to mid-size and smaller organizations, all companies now have opportunity to enter foreign markets. Is your integration firm ready to expand?
Following the path of the U.S., many countries have mandated fire detection systems and have instituted programs to upgrade existing systems. As more U.S.-based retail and manufacturing companies expand abroad, they demand the same security and safety protection as they have in their home facilities.
In addition, the residential market abroad has been growing rapidly. As in the U.S., the wealthy and middle class are clamoring for not only security and fire systems but also for the extra protection and conveniences our industry offers.
Technology is universal, and there is a need to be filled by companies who can successfully install systems and monitor signals, as well as provide services in PERS, audio visual and other life safety areas. Unlike the United States, many countries do not have an abundance of installation companies with personnel who are well-trained, customer-oriented and provide monitoring as well.
In a general sense, foreign opportunities, for the most part, have not been explored by many U.S. companies in the security field. Only the large companies have opened branches in other countries and have been quite successful; however, a greater number of larger foreign companies are opening U.S. branches and subsidiaries, or new entities launched.
Some medium-sized U.S. companies located in border states have successfully opened branches or offices across their border. The options for success are plentiful. Do your research and adhere to time-tested management principles.
How to Start
In the past, only companies with a global reach and plenty of cash would have considered foreign expansion; however, now these opportunities are open to many more organizations.
The guidelines of how to approach expanding into a foreign country are really the same for large and small organizations – it is based on research, desire to expand, and how to eliminate as much risk and uncertainty as possible. In fact, these are the same principles any company would apply to opening a facility, a branch or a company in any location.
For the most part, opening a facility or branch in the U.S. is relatively easy, in that, language, customs and, for the most part, laws, are homogenous – or at least easy to navigate without much difference between states or territories. Opening in a foreign country requires a bit more investigation and steps that should be categorized as dos and don’ts.
Let’s look at the five most important things an integrator must do to build a foundation and eventually expand into a foreign market:
1. Do your research. Have you done your research? Not just talking to people in the same industry, but have you really investigated the details? You should check government publications, review economic and political information about the country or region, contacted the embassy of the targeted country, and open communication with the U.S. Department of Commerce for information.
There are many resources available to solidify your thought process or make you aware of whether expansion into that region is a good idea. As an example, find out if a foreign government may be pro-business, that the economic condition of the country is favorable, and that the labor force is adequate. This information is readily available and should contribute to your decision to enter the market.
2. Find a local partner. After the research has been completed, it is probable that you will need a local partner or advisor to help with this venture. Again, research is important. In many countries, a banking institution can be a partner or advisor, and they can help with real estate location, financial requirements, lines of credit and many other services. Law firms can also be of help, including U.S. firms with foreign affiliations.
Many countries require a local partner to be part of the business – a definition that can take many forms depending on the country. It can be as simple as being an agent that is listed for record purposes only, or as detailed as being part of the decision-making process of the company. It can also be a company that you have purchased that permits you to have certain rights and privileges in that country. Again, do research and eliminate risks.
3. Understand local labor laws. Without question, you will need to have a very good understanding of the rights of the labor force and the availability of labor. Many countries have rules that are quite liberal and should be considered as part of the decision process to locate in that country.
Additionally, resident visas, and other documentation for those employees who may relocate should be investigated. For example, foreigners who work in Brazil and who are present in the country for 183 days (consecutive or not) during any 12-month period (counted from first day of entry) are considered Brazilian residents for taxation purposes.
In several Latin American countries, an employee is granted 30 calendar days holiday after 12 months of employment, which must be taken within that set 12 months.
Labor is most likely going to be your largest investment – be sure you have a supply, understand it and have properly computed your cost of labor and its hidden costs.
4. Understand the culture. One of the biggest mistakes companies make when entering a foreign country is not fully understanding the culture of that country. Culture is vitally important, and you may want to make several trips to the area you are looking to enter to be sure you have a good grasp of how the culture will impact your way of doing business.
Make sure you know the “ways of doing business” in that location. For example, in Peru, relationship building is more important than competence. Things get done by who you know and not what you know. Relationships are the cornerstone to success in that culture.
Other countries may rely on perceived bank accounts, or size of the company you represent, but one rule to keep in mind no matter what country or culture you are in, is to be careful not to moralize or appear to imply that local customs are inferior, unethical or not to your standard. Essentially, you will be insulting their history and way of life.
5. Get ready for taxes. No matter what country, territory or hamlet, taxation will rear its head and outstretch its palm. This is a very important “do” – understand the tax structure before you even think of moving into another country.
While anyone can list the type of taxes prevalent in foreign countries, rest assured you will have to deal with the tax structure as soon as you decide to move into a country. The list of possible tax obligations is likely to contain taxes you have never heard of and may not be something you are used to paying or even thinking about. Other taxes will be quite familiar.
Additionally, be sure to research to see if the country you are entering has a tax treaty with the United States, so you can avoid double taxation on income tax. Tax knowledge is very important, which is why a partnership with local accountants and attorneys is especially important.
Communications and technology have created a vast number of opportunities and options to grow in foreign lands. Markets in many of these countries are vibrant, understand technology and are willing to pay for the latest devices to protect their valuables, detect fire and have personal protection at their fingertips.
The Global Life Safety Alliance (GLSA) is here to help integrators make such expansion plans, with an ongoing “Doing business in…” series that highlights much of the initial research needed to expand into certain foreign countries. So far, the series has covered:
- Doing business in Brazil: https://globallifesafetyalliance.org/2021/04/12/doing-business-in-brazil
- Doing business in Argentina: https://globallifesafetyalliance.org/2021/05/20/doing-business-in-argentina
- Doing business in Canada: https://globallifesafetyalliance.org/2021/08/05/what-to-know-about-entering-the-security-industry-in-canada-2
- Doing business in Peru: https://globallifesafetyalliance.org/2021/11/11/doing-business-in-peru-exclusive
Learn more about GLSA at https://globallifesafetyalliance.org.
Peter Raymond is a founding member of the Global Life Safety Alliance and is an expert in fire systems, business strategy, private investigations, and business consulting, with more than 25 years of experience in the security sector. Reach him at firstname.lastname@example.org.