Growing a company by international aquisition
A Davis Service Group case study

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Page 2: International expansion

Expanding into other countries can be a good way to grow a company. In particular, expanding into other areas of the European Union (EU) provides many opportunities for a UK business. The EU currently has 27 member countries. It is a huge potential market. Any business in the European Union has over 500 million customers on its doorstep.

Goods and services can flow freely in the single European market. This means it is much easier to do business in the EU. Trade within this area has risen by 30% since 1992. The development of fast transport links, for example, the Channel Tunnel, high-speed trains and cheaper air links, means people can travel to and across Europe more easily. The Internet and email enable companies to communicate instantly.

British firms locating factories and offices in the EU are able to benefit from a skilled labour force. Within Europe, most member countries use a common currency the Euro. This makes it easy to trade within this market place.

Barriers to international expansion

When a business decides to expand overseas, there are a number of factors which may present barriers that it needs to consider:

  • Language differences can lead to confusion. However, English is the main global business language spoken by many people within the EU.
  • Currency differences. Most countries within the EU use the Euro. The UK uses the British pound. The value of the pound can go up or down against the value of the Euro. This can make it difficult for a business to predict what its costs and revenues will be. If the pound has a lower value than the Euro, a UK business would pay more for imported materials but receive less for its exported finished products. This would mean less profit.
  • Cultural differences. Ways of behaving and doing things vary between countries and even within countries. In business, some behaviours such as buying decisions may be the same. In other cases it is important to respect local differences, for example, how you greet someone new for the first time.
  • Legal and administrative differences may vary across countries, for example safety standards for buildings. However, there are international standards that create common requirements.
  • Skill levels may vary between countries. In setting up a business that needs particular skills, it makes sense to focus activities in countries where those skills exist.

Davis Service Group | Growing a company by international aquisition