Brexit: A Silver Lining for Companies Expanding Abroad?
Whether for the right reasons, or the wrong ones, voters in the United Kingdom rocked the world's business and political status quo on June 23 when they voted to pull out of the European Union. At CSA Research, we waited for reaction from the global companies we work with to gauge the impact. We think there may be a silver lining for organizations considering expansion into the E.U. following the Brexiteer win. The same applies to European and Asian companies making the choice for where to ramp up their operations beyond the E.U.'s borders.
Why? The decision to exit compels organizations to perform proper due diligence and to make better decisions when considering where to open their headquarters, regional sales offices, and support centers. Rather than choosing London to enter the E.U. by default because "it feels like home," companies now face the challenge of doing business multilingually earlier in their global journey. This is a good thing because it forces them to:
- Deal with language and cultural barriers now rather than later. Locating your headquarters or other major office in a country whose official language is different than that of your domestic market puts pressure on all areas of your organization to integrate "global" into "customer experience" - and into their overall vision, mission, strategy, and planning - much sooner than they normally would. Making this choice also encourages the hiring of local talent to run the operation, thus avoiding the mistake of appointing a temporary - and often monolingual and mono-cultural - manager.
- Clearly identify their decision-making criteria, based on a long-term vision and strategy for global expansion. We still observe companies that allow executives to make the final decision for international office locations based on where they personally prefer to live or feel the most comfortable. Avoid this scenario by selecting criteria that directly support your corporate and globalization strategies. In addition to linguistic choices, these goals may include local talent recruitment, moving closer to your largest potential markets, and integration of an acquired company, among others.
- Analyze possible moves that their industry - and its target customers - may make in the wake of Brexit. One thing is for sure: Almost every industry and market will react in some way to the decision taken by British voters. Will the U.K. pursue direct trade agreements with countries like China and India? Do any of the Commonwealth nations figure prominently in your plans for global growth? If so, what does Brexit mean for them - and you? And what about Japan, with its large investments in the U.K. intended to facilitate doing business with other E.U. countries? How will data protection play out? Select those areas and trends that may affect your expansion strategy and do your research before deciding where to put down your roots.
If you're looking to expand into the E.U., or to grow your presence there, you can still choose to locate your headquarters in an English-speaking locale such as Ireland to avoid the uncertainty of its Brexiting neighbor. That's fine - as long as you have examined your options on the continent and do so for the right reasons. There is also the possibility that the U.K. will manage to hang on to its Common Market status, though there are no guarantees, as other E.U. leaders talk tough for now.
In any case, Brexit opens the door for companies to take additional time to examine the pros and cons of opening their headquarters, regional sales offices, and support centers in continental Europe, rather than across the Chunnel in what is shaping up to be an ex-E.U. member. Firms that were considering European entry via the U.K. will now either postpone or change their decision. The rationale for choosing this route has evaporated for now. Organizations that have felt uneasy about going farther afield than English-speaking markets must now consider multilingual options if they want to gain or maintain access to the European Community. In the end, they will benefit as their employees overcome their fear of supporting customers who don't speak their language. Once companies have done it for the E.U., they can apply the same strategy to the APAC region, bypassing Australia to set up their main office where it makes the most business sense, rather than where it feels most comfortable.
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