Mar 23, 2023
Market entry and starting a business abroad in 2023: What to know
In today’s globalized business environment, entering a new market or starting a business abroad calls for a rigorous strategy and a firm knowledge of local and international conditions.
This is especially the case as globalization involves numerous business lines that are vulnerable to volatile affairs such as political and socio economic issues. The recent pandemic and the Russia-Ukraine war are just some of the events that prompted a notable change in some aspects of global economies.
Businesses are compelled to be prepared for the opportunities and challenges in the following year ahead. Here are the top five market entry trends to look out for in 2023.
Top 5 market entry trends for 2023
Emerging markets
Though there is no official definition for the term “emerging markets,” the International Monetary Fund (IMF) described it as those who have achieved “remarkable progress in strengthening their macroeconomic policies since the turn of the century, which helped them more than double per capita incomes on average.”
With the current globalized business ecosystem, market participants are incentivised to drive their innovation efforts in emerging markets. Moreover, collaboration with enterprises and government units can be expected. For instance, governments in emerging markets assertively push and invest in the use of automation in local firms to drive their competitive advantage.
However, amidst the global inflation is seen to continue well into 2023, existing and entering businesses are likely to face rising costs.
Digital transformation
In recent years, digital transformation in business functions has augmented efficiency in areas such as transparency and compliance, to name a few. In our recent blog, we discussed Regulatory Technology (RegTech), automation in compliance checks and perpetual Know Your Customer (KYC) processes, which all involve the integration of digitalised solutions for compliance.
The pandemic brought about many changes in an organization’s work setup. Aside from the shift in a work setting, which will be discussed in the latter part of this article, the digitalisation of work processes has also emerged. With this, businesses will need to ensure that the right technological tools and talent are available for the organization to effectively integrate digital transformation into day-to-day and specialized business functions.
Moreover, market entrants will also need to prepare themselves for the risks associated with doing so. Digital security is a top concern in going digital, especially when dealing with various data and clients.
Sustainability and ESG
The concept of sustainability and the Environmental, Social, and Governance (ESG) framework are recurring themes within the business ecosystem. Both are previously mentioned in blogs discussing the anticipated trends for 2023 in family offices, fund administration and private equity.
Sustainability and ESG in market entry are no different. A report by Capgemini Research Institute found that eight out of ten consumers base their purchase decisions on sustainability. Moreover, 77 percent of the 7,500 consumers surveyed expressed concerns about an organization’s treatment of its workers.
The International Sustainability Standards Board (ISSB) was specifically created to carry out a global baseline of sustainability-focused disclosure standards. The board will assist in helping capital market players evaluate enterprise value and risks associated with ESG.
With investors and consumers placing much value on these concepts in their investments and purchasing decisions, organizations are compelled to align and position their business strategies accordingly. In addition, companies are urged to be mindful of their operations and how they affect both their internal and external stakeholders.
However, it is important to note that maximizing the value creation from sustainability comes with responsibility and commitment from the organization. A McKinsey survey) that the companies that have effectively created value from their sustainability programs manage this business area with the same dedication and discipline as with their other business initiatives.
Amplified regulatory environment
In prior years, the regulatory environment has become more stringent as several aggressive actions in policy making and enforcing regulations were made.
For instance, the United States Securities and Exchange Commission (SEC) reported that it had filed 760 enforcement actions in 2022, documenting a nine per cent increase from the previous year. According to Division of Enforcement Director Gurbir Grewal, “the Enforcement Division is working with a sense of urgency to protect investors, hold wrongdoers accountable and deter future misconduct in our financial markets.”
Market entrants have to keep track of compliance risks that may occur in various aspects of businesses such as digital assets, personal data, cybersecurity and reporting requirements, to name a few.
Those planning to start a business abroad should be mindful of the rules and regulations applicable to the country’s local and regional business environment, the industry that will be entered and the type of business to be launched, among many other factors.
Adjustments in work setup
Over the past years, the flexibility provided by the remote and hybrid work setup became a significant factor in the employment decisions of employees. This trend is seen to continue in 2023 and beyond.
In a 2022 U.S. survey by the Pew Research Center, 78 percent of the respondents that were working from home most at the time of the survey or all the time conveyed their preference for continuing their current work setup even after the pandemic. This figure indicated an increase from 2020’s 64 per cent.
In addition, flexible hours and shortened workweeks also became a sought-after aspect for employees and will continue to do so in the years to come.
With this, market entrants are encouraged to adapt and accommodate such changes in the work setup moving forward. With the right policies in place, organizations may still ensure employee productivity even without the traditional work conventions.
Moving into a new market in 2023 can be challenging, especially with external factors that can be hard to control. However, having the right market entry strategies and team to support your business functions can help position your business on the path to success…