An intermediate solution where companies can localize their business to step-in the market and start building up a stronger foundation.

Managing Markets: opening the door

”Getting Direct” will evolve your competence and capability to do business in the area
and OPEN THE DOOR to establish solidly your own subsidiary at a later stage.

Here are six headaches you can expect when you create, maintain, or dismantle your foreign subsidiary:

Initial Cost: A Foreign subsidiary is expensive to set up.  It may cost you between $30K and $40K to set up a Ltd company in Dubai

Maintenance Cost: Foreign subsidiaries cost to maintain.  For just one employee you can expect to spend $20/25K per year in hard costs, on average.

Dissolving Cost/Difficulty: A Foreign subsidiary is like the Berlin Wall when it comes to tear it down.  What happens if the person you hired doesn’t work out or the strategy shifts?Take both the start-up time and cost and multiply them by a factor of 3.

Ever-Changing Compliance: When you have a foreign subsidiary you must keep-up-to date on changes to national/regional/local tax laws, payroll withholdings, employment law changes, and banking regulations – just to name a few.

Local Directors: A foreign subsidiary often requires a local Director.  Are you going to let your one sales person be the Director?  Or will you outsource to someone you’ve never even met and give them the keys to the bank account?

Time Consuming: No matter how much you outsource, expect executives from your legal, finance, and HR team to invest HOURS of time coordinating a foreign subsidiary.
The legal team must review all documents, the finance team must sign off all the expenses and deal with the bank account set up, and the HR must team must review all the employment details.

It is time to “establish” yourself in your markets

The first logical thought is, “I need to establish a foreign subsidiary in this country now in order to gain a foothold and be able to start securing employees there”.

This thinking process was entirely correct 10+ years ago; you would need to go down this path, spend time and money, and ultimately have another company to manage.

In today’s volatile environment, does it really make sense to create another liability?

We say “No” for 9 out of 10 companies (at least when first entering a market), and can offer an alternative that is inline with the modern “Agile” environment and sharing economy.

Companies operate in international markets typically with two approaches
1 – REMOTE markets are remotely followed by the export commercial team
PROs: low costs, no direct exposure to local complexity
CONs: limited understanding of the territory and low level of control, limited basic network
2 – OWN SUBSIDIARY – opening a local company to localize the management of the market
PROs: develop local competence and direct relationships
CONs: cost of investment, full direct exposure to local complexity, time to build up expertise
The idea is to offer a “NEW SOLUTION” which leverages PROs and minimizes CONs of both approaches