Randall Castillo Ortega of RACO Investment outlines what companies should consider before expanding internationally following the COVID-19 pandemic.
There are many new risks to consider, including local compliance issues, intellectual property protection or infringement, fraud, corruption, and taxes.
Consolidated e-commerce to complement international expansion during the pandemic. According to the latest Global Business Pulse report by professional services firm Grant Thornton, conducted on 400 mid-sized companies with 50 to 500 employees, 66% of managers agree that the factor that most limits international expansion is economic uncertainty. A situation which, despite signs of recovery, is still showing the effects of the pandemic. The shortage of orders (58%) and the still excessive regulatory constraints (52%) are the other major factors that generate uncertainty among national managers for their leap abroad. Randall Castillo Ortega, entrepreneur and founder of Central American SME lender RACO Investment, details the evolution of e-commerce due to COVID-19.
The pandemic has made e-commerce one of the most widely used options for businesses to do business beyond their home country. Explains Castillo, Entrepreneurs recognize that during COVID-19, a period in which mobility between countries was severely restricted, e-commerce grew exponentially, consolidating itself as a parallel solution to internationalization. In concrete terms, over the past year, more than half of business leaders (54%) admit to having more or less increased their e-commerce sales since the start of the pandemic.
The need for diversification in a local market impacted by the effect of COVID-19 is pushing companies to focus their internationalization plans beyond a formula to increase turnover. Entrepreneurs are beginning to understand that creating a presence in new markets can benefit businesses by giving them access to favorable financing and tax regimes, as well as marking a territory for further expansion in the region. In addition, experts point out that, in the movement towards internationalization, the operational flexibility, typical of medium-sized companies, is configured as a clear advantage over large ones. They may not have the same financial resources as large companies, but they are able to see trends and adapt quickly to international opportunities, being able to ride the wave faster.
Using the latest innovations to extend international reach is also a differential. In this sense, technology appears as the new great ally of international trade and entrepreneurs recognize it. Although the forecast for technology-related investments is down nine points from the last half of the previous year, nearly half of entrepreneurs agree that they will continue to make an effort to increase spending on this item in the past. over the next 12 months.
According to research, several key elements must be taken into account before a company seeks to go international. They must first clarify their international strategy. Businesses need to quantify and qualify what the market opportunity is and where it is, get the intelligence and break it down into something tangible. They also need to learn from a previous international expansion. Managers need to consider their current international footprint and ensure that existing and future operations are aligned with strategy and aligned with the strengths and goals of the business.
Take stock of the risks with the opportunities. As a business grows internationally, Castillo explains, there are many new risks that need to be considered, including local compliance issues, intellectual property protection or counterfeiting, fraud, corruption and taxes. Understand the financing options and choose accordingly. Businesses need to assess the level of financial stability they have to expand into new territories and determine whether they can withstand new financial pressures. Take a close look at the costs of your international expansion project and how you are going to finance it.
Maintaining a consolidated economic fabric, a firm commitment to research and innovation and a tangible professional network are some of the characteristics that make large cities attractive places for international investment.
About RACO Investissement
RACO Investment is a financial investment company serving small and medium-sized businesses in Panama and Costa Rica. It was founded by Randall Castillo Ortega, an expert financial advisor who has his roots in the import and export industry in Latin America. The company has helped many startups find the financial support they need to get started, and has also provided bridging loans to help those looking to restructure or improve their operations.
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- Randall Castillo Ortega
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