Servicing Clients in Emerging Markets
Whether you have clients in the BRICs, Eastern Europe, Asia, MENA or South America there is the ongoing issue of servicing these clients locally. If you’re not able to provide at least a skeletal local presence then you’re handing your competitors a distinct advantage.
We’ve recently been working with a major international banking software development company in Dubai, Switzerland and China. They didn’t have a local presence in any of these centres but had been trying to serve their clients remotely and had subsequently lost market share in these regions. The issues weren’t just in terms of being able to provide ‘hands on’ assistance but were also cultural. Clients in places such as China like to have a ‘face’ to place to the organisation; relationships are built on trust over some time, not by email or over the phone.
If you do decide you need at least a small local presence in these countries then that leads to several issues; do you send staff from your office or hire locally? Do you set up a local entity? If so, how? How do your payroll and employ the locally based staff?
Generally from a hiring perspective, you’ll need at least a smattering of your staff mixed in with local hires, depending on the industry and the country. For instance, in China, you’d need local hires, whereas for Switzerland it wouldn’t be such an issue with English widely spoken and the cultural differences not as pronounced. Crucial to get the balance right.
In terms of setting up a local entity to employ and payroll your locally based staff, this can be rather difficult. In some countries a company would need to be 51% owned by a national, in others, the local language will prove to be a serious impediment and in all, you’ll have the idiosyncratic nature of each country’s employment law, taxation (both corporate and personal) and compliance. In short, if you’re planning on moving a large number of people then it may well be worthwhile but if not then you should consider another option.
You can utilise the services of a Professional Employer Organization (PEO) or Managed Service Solution. They can employ, payroll and sponsor (on local work permits if required) all of your staff, meaning that you don’t have to set up anything locally. The process can be set up in a couple of days and will ensure that you don’t have to involve yourself with any local administration.
These services do come at a cost, generally around 5-10% of an employee’s salary (charged on top of the cost to business of employment) but for a small workforce the costs (and hassle) are markedly reduced in comparison to setting up an entity yourselves. Obviously, at some point, the ongoing costs will become higher than the effort and cost required to set up a local entity but in the short term, it is generally the most convenient and cost-effective strategy.
These issues are only going to become more prevalent as businesses look to expand into new territories ever more rapidly to meet the changing face of the global market.