Business Localization
Business Localization
Company localization or, rather, the choice of how to manage the business at the new territory from organizational, cultural and legal points of view. Localization strategy is taking into consideration the diversity of foreign markets structure, cultural aspects, specific needs of the local customers and how to address them.
Developing business on a foreign market increasingly requires a stable presence in the country. Even when managed through the 3rd-party (e.g. agents and distributors), the subsidiary requires control and support from the parent company for being successful in the medium term. The organizational and legal form of the presence abroad can vary considerably, and it is important to make the right choice. It depends on the local juridical scenario and the chosen strategy, with consideration of further growth.
In over 10 years of our activity, we have been advising international companies on different steps of their localization activities. Below you can find a full itinerary that we offer.
Localization process entails three phases:
1
Preparatory activities
● Analysis of the organisational formula
● Definition of activities
● Definition of legal and compliance aspects
● Business plan/budget
● Definition of activities
● Definition of legal and compliance aspects
● Business plan/budget
2
Constituent activities
● Constitution of the legal form
●. Identification of the location
● Organisation
●. Personnel selection
● Capacity building
●. Identification of the location
● Organisation
●. Personnel selection
● Capacity building
3
Management activities
● Administrative management
● Control activities
● "Market occupation" activities
● Control activities
● "Market occupation" activities
Preparatory Activities
Analysis of the organizational formula
From a legal perspective, the presence on a foreign market may be direct or indirect depending on whether such presence is guaranteed by the company employees, its local subsidiary or third parties like agents, distributors or incubators.
Definition of activities
According to the formula adopted, local activities must be defined: they can pertain representation and negotiation support, commercial development and trading, technical assistance, assembly, and production. The presence can also pivot on sourcing activities, if it is created to improve the supply-side value chain.
Definition of legal and compliance aspects
The organisational formula is not independent of the legal and compliance framework. In many countries, activities such as participation in public procurement tenders are open to local legal entities; in other cases, it is necessary to create a formal legal entity for certification and product liability reasons.
Business plan/budget
After defining the three aforementioned aspects, it is necessary to develop a business plan to factor in all start-up costs and set-up times, up to the moment in which local turnover can cover operating costs.
From a legal perspective, the presence on a foreign market may be direct or indirect depending on whether such presence is guaranteed by the company employees, its local subsidiary or third parties like agents, distributors or incubators.
Definition of activities
According to the formula adopted, local activities must be defined: they can pertain representation and negotiation support, commercial development and trading, technical assistance, assembly, and production. The presence can also pivot on sourcing activities, if it is created to improve the supply-side value chain.
Definition of legal and compliance aspects
The organisational formula is not independent of the legal and compliance framework. In many countries, activities such as participation in public procurement tenders are open to local legal entities; in other cases, it is necessary to create a formal legal entity for certification and product liability reasons.
Business plan/budget
After defining the three aforementioned aspects, it is necessary to develop a business plan to factor in all start-up costs and set-up times, up to the moment in which local turnover can cover operating costs.
Constituent Activities
Constitution of the legal form
The legal status in many countries is essential to be able to carry out certain activities (e.g. participation in tenders), to employ people, or to certify products. The choice of the "legal box" to operate with and the internal organisation must be part of the strategy.
Identification of the location.
The location reflects two strategic decisions: the geographical (where?) and the organizational (how?), in addition to satisfying specific constraints in some foreign markets.
Organization
Organizing a foreign presence implies deciding on which activities to carry out in the country, but also those to be guaranteed by the parent company. It is about "make or buy" logic and the pinpoint the activities to outsource, also via start-up projects and an internalization agenda.
Personnel selection
The selection of staff and their placement either as internal or external professionals are key strategic elements. The selection must limit to hired personnel, but to all the individuals who directly or indirectly form the local team.
Capacity building
Development and team building are necessary to improve the effectiveness of the organization, especially when the latter is physically present in several locations (e.g. parent company and foreign branch). Particular attention must be paid to the team-building of all the personnel (internal and external) that make up the company's projection force in foreign markets.
The legal status in many countries is essential to be able to carry out certain activities (e.g. participation in tenders), to employ people, or to certify products. The choice of the "legal box" to operate with and the internal organisation must be part of the strategy.
Identification of the location.
The location reflects two strategic decisions: the geographical (where?) and the organizational (how?), in addition to satisfying specific constraints in some foreign markets.
Organization
Organizing a foreign presence implies deciding on which activities to carry out in the country, but also those to be guaranteed by the parent company. It is about "make or buy" logic and the pinpoint the activities to outsource, also via start-up projects and an internalization agenda.
Personnel selection
The selection of staff and their placement either as internal or external professionals are key strategic elements. The selection must limit to hired personnel, but to all the individuals who directly or indirectly form the local team.
Capacity building
Development and team building are necessary to improve the effectiveness of the organization, especially when the latter is physically present in several locations (e.g. parent company and foreign branch). Particular attention must be paid to the team-building of all the personnel (internal and external) that make up the company's projection force in foreign markets.
Management Activities
Administrative management
The establishment of a formal legal entity means that all administrative activities to comply with local regulations must be performed. Depending on the strategy and organisational model, these activities can be completely outsourced, kept in-house or balanced with an internal-external mix. On smaller structures, outsourcing management allows total concentration on commercial and strategic activities, delegating the problem management to others.
Control activities
The control must always be very careful when operating in a foreign market often with different regulations and norms. It must be performed with instruments that can avoid direct recourse to the parent company in case of problems or emerging responsibilities. Suitable control and governance model has to be designed in advance and implemented to ensure strategy success.
Business intelligence and compliance activities
Italian and European legislation is becoming very attentive to compliance issues. Illegal activities such as corruption, environmental and labour rights offences can be prosecuted in Italy even if committed abroad and by related third parties. In addition, the local legislation of the host country has to be contemplated. Needless to say, it is also appropriate to assess and monitor the activities of customers and suppliers or distributors who act for the benefit of the company. This limits potential risks with the judicial authorities both locally and at home. Local stakeholder analysis is also vital to manage the financial, performance and reputation risks implicit in the business activity.
"Market occupation" activities
Foreign presence cannot be limited to commercial initiatives, but must be supported by branding and communication activities: the brand needs to become more and more recognizable, at least within the target cluster of local customers. Commercial activities must have continuity and not be occasional: in other words, the market should acknowledge your presence and your intention to remain long-term.
The establishment of a formal legal entity means that all administrative activities to comply with local regulations must be performed. Depending on the strategy and organisational model, these activities can be completely outsourced, kept in-house or balanced with an internal-external mix. On smaller structures, outsourcing management allows total concentration on commercial and strategic activities, delegating the problem management to others.
Control activities
The control must always be very careful when operating in a foreign market often with different regulations and norms. It must be performed with instruments that can avoid direct recourse to the parent company in case of problems or emerging responsibilities. Suitable control and governance model has to be designed in advance and implemented to ensure strategy success.
Business intelligence and compliance activities
Italian and European legislation is becoming very attentive to compliance issues. Illegal activities such as corruption, environmental and labour rights offences can be prosecuted in Italy even if committed abroad and by related third parties. In addition, the local legislation of the host country has to be contemplated. Needless to say, it is also appropriate to assess and monitor the activities of customers and suppliers or distributors who act for the benefit of the company. This limits potential risks with the judicial authorities both locally and at home. Local stakeholder analysis is also vital to manage the financial, performance and reputation risks implicit in the business activity.
"Market occupation" activities
Foreign presence cannot be limited to commercial initiatives, but must be supported by branding and communication activities: the brand needs to become more and more recognizable, at least within the target cluster of local customers. Commercial activities must have continuity and not be occasional: in other words, the market should acknowledge your presence and your intention to remain long-term.
Strategia & Sviluppo Consultants supports companies on their internationalization and localization initiatives, from strategy definition, organisational structure and capacity building to compliance and control activities, also assisting with local authorities' permissions and necessary licenses obtainment.
Discover other solutions that we offer
Discover other solutions that we offer