Technology has catalyzed globalization and Canadian businesses are wise to take advantage of the many rewards that a world marketplace has to offer. A global value chain is the process whereby a company (in this case a Canadian company) leverages global properties and partners to contribute to the processes that take a product from conception to its end users.
A global value chain enables businesses to take advantage of the best of every world: You can outsource to a highly efficient manufacturer, while leveraging an exceptional marketing team in another region. Entrepreneurs, small businesses and corporations alike benefit from the global value chain (GVC) as it enables them to provide their customers with higher quality products at lower costs. However, the rewards of a GVC come with a variety of risks that companies must be aware of.
Before moving ahead with globalizing your operations, you should work with a seasoned accounting professional to create a SWOT (Strengths, Weaknesses, Opportunities and Threats) of your company. Go through a thorough analysis of the strengths and weaknesses of your company as they pertain to the obstacles and threats presented by your potential global venture. Make sure that you have the finances, person-power, and know-how to venture into unchartered territory.
Remember that when you decide to do business with or within another country that exportation and importation each present unique obstacles. So, companies with operational models that leverage one or the other, or both need to be aware of the applicable rules and regulations. You need to investigate what tariffs, taxes and penalties your imports and exports will be subjected to. Dependent on the country that you decide to work within, taxes and regulations may vary.
Selling goods, more so than services, has a wide variety of complex considerations that both the buyer and seller must be wary of. You need to have clear, comprehensive contracts that protect you when your expectations are not met. Alternatively, you need to outline, in writing, the actions that will be taken when goods are wrongfully refused. Should there be any discrepancy between your home country and global partners, you must adhere to “proper law”.
When you invest abroad, you position your company to access all that a foreign market has to offer. You can invest in a foreign firm or set up a mutually beneficial partnership with a local company, taking advantage of pre-existing operations. This option may reduce the cultural, geographical and linguistic barriers that your company faces.
Alternatively, you can go it alone by purchasing a company outright or building a subsidiary. This option has several risks and benefits. You get to exercise greater control over your operations; however, you risk a large expenditure and forgo leveraging the cultural intuitiveness and client base of a resident partner. You will also have to transport employees to govern operations or rely on employees that you hire from the area surrounding your new property. There is some potential that your brand integrity may be compromised. But, if you set up your global value chain effectively, you should be able to trust that your global partners will adhere to your legislation.
The last that thing you want to do is expose your company to a legal, operational or accounting nightmare. It is important to leverage legal and accounting professionals who specialize in international trade, so as to protect your company and maximize your earning potential. Collaborate with firms who understand cultural nuances, as well as how to avoid the risks and reap the rewards of globalization. Above all else, work with a team of accounting professionals who will help you to achieve a profit without sacrificing legitimacy or corporate responsibility. If you are a Canadian company looking toward international operations, contact Hogg, Shain & Scheck for a consultation that will prepare you for success.