About a third of Ukrainian entrepreneurs have thought about creating their own business abroad in modern conditions. However, not everyone dares to implement such ideas. The reasons for this are both objective (lack of resources for investment, low competitiveness of the product) and subjective (lack of necessary knowledge, partners, free time, unwillingness to take risks and start everything from a “clean slate”).
For those who still decide to start a business in a “new” territory, a difficult initial period opens up, which involves the need to quickly master new business conditions and promptly make the right management decisions.
The start, as a rule, is difficult. By “start” we mean the period from the moment the company is founded to the time when the business reaches the stable level of work and profitability planned by the owner.
The problems that Ukrainian businesses face “at the start” are, for the most part, common. Most often, they are associated with the difficulty of adapting to new conditions and successful work in such conditions.
Let’s try to summarize the most typical of them:
- “Environmental risks”.
1.1. Jurisdiction.
The key problem, undoubtedly, is the problem of business functioning within the new jurisdiction. The legal system of any foreign country determines its own rules for conducting business activities. This applies to the terms and procedure for obtaining permits or licenses, the features of concluding and executing business contracts, hiring and firing employees, taxation of business activities, accounting, etc. It is fair to note that in general terms there are many similar features of the legal regulation of business in Ukraine and abroad. However, an indispensable condition for normal business in a particular country is detailed knowledge and understanding of the specifics of the relevant legislative requirements.
Practice shows that ignorance or misinterpretation of the regulations of a foreign legislator often creates unexpected problems for business, and in some cases can have catastrophic consequences.
It is usually practically impossible for an entrepreneur starting work to immediately understand the key requirements for the procedure for doing business in a “new territory”. Therefore, a necessary condition for a successful start is the presence of reliable professional consultants, primarily an accountant and a lawyer.
There is no need to dwell in detail on the importance of proper accounting, timely submission of reports and proper payment of taxes. An accountant must work with the company constantly, and this is relevant for any system. It is important when working with an accountant to understand the nature of the processes taking place in the company’s accounting and to receive the information necessary for paying taxes in a timely manner.
The situation with a lawyer is somewhat different. His constant presence in the life of the company is not mandatory. However, you should always have the opportunity to promptly receive professional clarification on a particular legal issue. It is best when the firm’s activities are handled by the same lawyer (or company). This will reduce the risk of confidential information being leaked, and will also allow you to provide legal assistance taking into account the history of development and the specifics of your business.
1.2. Market.
Some of the problems that arise at the initial stage of doing business abroad are related to an incorrect understanding of the needs of the market to which you are trying to introduce your product, as well as the place that the product will occupy in this market. Quite often, the realities do not meet expectations.
Therefore, before organizing a business in a “new territory”, you should conduct a thorough study of the foreign market, find out the real opportunities and prospects for selling your product. In this context, it will be useful to seek help from marketing specialists.
1.3. Counterparties.
Separately, it is worth paying attention to the problems that arise due to ignorance of the mentality of a foreign counterparty, in particular, its cultural or even religious features. Thus, the ways of doing business among Germans, Italians, Poles or Turks are radically different.
This factor must be taken into account at the stage of agreeing on the scheme of relations with the counterparty and concluding a business agreement with him.
The above list of risks of the new business environment is not exclusive and may vary depending on the sphere and country in which this business will be conducted. However, not taking into account the so-called “environmental risks” in the process of planning economic activity will not make it possible to understand the structure of business costs and develop a concept for its development.
2. “Subjective factor”
A separate group consists of problems that arise in connection with the peculiarities of the behavior of the business manager in a new business environment, his ability to make the right management decisions in unfamiliar conditions.
The following reasons for these problems can be distinguished:
2.1. Self-confidence.
When faced with new game conditions, it is not uncommon for business leaders to show undue self-confidence when making decisions. Key phrases: “I know everything,” “There is nothing complicated here,” “Everything is organized the way it is in the Ukraine”.
Of course, the manager’s confidence in his actions is a necessary component of a successful business. However, excessive self-confidence does not allow to adequately assess the objective reality, to weigh all the “pros” and “cons” of a particular step.
2.2. Euphoria
A similar situation is also observed in the case when the business manager has the opportunity to conclude a “big” contract and get good earnings. Often, the euphoria that arises on this basis negatively affects the ability to correctly assess one’s capabilities and the risks of cooperation with a counterparty.
2.3. Lack of strategy
An extremely common problem at the start is the lack of any strategy for business abroad. The key phrase: “We register a company, and then we’ll see..”. Practice shows that the start of such a business is protracted, and it is not always possible to reach the next level.
2.4. Mistakes in the organizational structure of the company.
It is also not always possible to properly organize the internal work of the company in new conditions. This applies to the adjustment of the production process, the construction of a management system, etc. Incorrectly organized and motivated personnel are unable to work effectively in the interests of the business.
Separate attention should be paid to the situation when a business manager tries to carry out operational management of production processes simultaneously in Ukraine and abroad. As a rule, the effectiveness of such a manager decreases in both directions at once.
In conclusion, it is worth noting that entering any new foreign market is undoubtedly a marathon. And only those who know how to successfully calculate their strengths and achieve their goals can successfully overcome it.
