Expanding a business internationally is more than a growth strategy; it’s a shift in perspective.
For companies aiming to succeed in new markets, US-based consultancy Global Class, founded by Klaus Wehage and Aaron McDaniel, underscores a critical need for adopting a global mindset. Drawing on years of experience, they argue that companies must go beyond the entrepreneurial mindset that defines early growth.
Instead, thriving in diverse markets requires an openness to cultural nuances, a keen awareness of local regulations, and the ability to navigate complex bureaucracies.
According to Klaus and Aaron, the journey to becoming a global business mirrors a pyramid of mindsets.
At the foundation is the entrepreneurial mindset, which fuels innovation and resilience. Next is the company mindset, essential for navigating internal structures and building buy-in. Finally, at the top, sits the cultural mindset—an attitude marked by curiosity and a genuine desire to understand and adapt to new cultural contexts, both within the team and in each target market.
Yet, failing to prioritise this global mindset remains a primary reason why many companies falter in international expansion. Here, we explore the three critical areas—regulatory challenges, cultural awareness, and operational complexities—that companies must master to thrive in foreign markets.
Here’s how Klaus & Aaron explained it to us
“If you imagine a pyramid, in the bottom, we have the entrepreneurial mindset, people who are iterative, resilient, growth-focused. In the middle of the pyramid, you have what we call company mindset, people who can navigate bureaucracy, building a coalition and buy-in. But the tip of the pyramid is that cultural mindset, cultural curiosity, cultural mindedness, and really being interested in learning about other cultures to understand how you need to adapt in a given market, but also inside a company culture as well.”
But this is the first and most foundational mistake that expanding companies make: failing to adopt a truly global mindset.
Let’s look at the three key barriers that businesses face.
Businesses expanding internationally encounter regulatory hurdles
Different countries have varying laws and regulations, especially regarding employment, data privacy, and product standards. A one-size-fits-all strategy might run afoul of local laws, leading to legal challenges, fines, or delays.
For example, unlike the U.S., where "employment at will" is standard, European countries tend to have more employee-centric regulations such as mandatory severance packages, extended notice periods, and higher employment costs.
Then there are the differing privacy and data protection laws. The European General Data Protection Regulation (GDPR) has set a global standard for data privacy, influencing legislation worldwide, including in Asia and various states in the USA like California. For a US company expanding across the Atlantic, understanding GDPR's implications and how they compare to US regulations would be vital.
Here’s why engaging with experienced local legal experts is vital.
Legal experts in your local markets are better placed to conduct comprehensive compliance audits to identify all relevant laws that will affect your business. Investing in compliance training for key employees ensures awareness of legal obligations, while partnering with reputable, licensed third-party providers like EORs and tax advisers reduces risk.
Internationally expanding businesses risk a cultural disconnect
Successful global expansion means understanding that legal compliance is just one part of the equation.
Equally important is understanding and respecting cultural differences across the European workforce. From accommodating regional work habits, like the long summer holidays in Southern Europe, to adapting communication styles, cultural awareness is crucial for building a cohesive international company and a unified brand.
Internationally expanding businesses create operational inefficiencies
A failure to account for local tax, payroll and benefits obligations can create significant operational inefficiencies. This can lead to delays, increased costs, and challenges in scaling the business effectively.
Each country has unique requirements for employee benefits, payroll, and workplace regulations.
For example, in Germany, payroll requires careful compliance with local rules on social security contributions, which are significantly higher than in many other countries and include payments for health, pension, and unemployment insurance
Likewise, in the USA businesses must navigate a patchwork of federal, state, and local payroll taxes, each with its own specific rates and deadlines.
Failing to adapt to these can result in administrative errors, non-compliance with local laws, and employee dissatisfaction.
For example, not offering legally mandated benefits such as health insurance or pensions can lead to penalties and high turnover rates, while mismanaging payroll can cause payment delays and tax issues.
These inefficiencies not only increase costs but also damage employee morale and the company’s reputation, making it harder to attract and retain top talent in the local market.
What do businesses get wrong when expanding internationally?
Let’s go back to Klaus & Aaron again. In their diagnosis of why companies fail to take a global mindset, they identify a number of factors.
Overestimating market opportunity
You’ll likely have some idea as to which markets you want to expand into. But in order to have good global capability, choosing the right market is about more than identifying a country and planning a go-to-market strategy accordingly.
In order to expand successfully, it’s important to think about the sequence of markets you’re going to scale into.
Poor organisational capability
We’ve touched on this already. Do you have the team members, local knowledge and infrastructure to expand internationally?
Team members
At the core of any successful expansion is a skilled team that understands both the company's goals and the nuances of each new market. This often includes hiring locally to bring in people who have insights into the region’s consumer behaviours, regulatory requirements, and business etiquette.
Local hires bring invaluable cultural understanding, which can prevent missteps and help the company quickly establish credibility. Moreover, having team members in the new region allows for real-time responses to local market needs and regulatory shifts, which may not be visible or fully understood by a remote team.
Local knowledge
Local knowledge extends beyond language skills—it encompasses understanding customer expectations, industry standards, competitive landscapes, and regulatory frameworks in each target country.
This knowledge allows a company to adapt its products, marketing strategies, and customer service approaches to align with local preferences and requirements. For example, consumer expectations around product quality, pricing, and customer service can vary widely by region, and misjudging these expectations can lead to brand disconnect or reputational damage.
Market research and a deep understanding of these variables are essential for aligning business operations and offerings with local demand.
Infrastructure
Establishing a solid operational infrastructure is key to scaling effectively in any new market. This includes setting up physical or digital systems to manage logistics, compliance, supply chains, and customer support within the region.
Adequate infrastructure also supports the handling of currency exchanges, tax compliance, data protection, and local HR needs, each of which comes with unique regulations that must be adhered to rigorously to avoid legal complications. A reliable infrastructure ensures that the company can deliver a consistent experience across markets while remaining agile and compliant with local laws and industry standards.
Market accessibility
Market accessibility refers to how easily your company can enter and operate in a new market. This includes factors like local employment laws, cultural differences, regulatory hurdles, and infrastructure challenges.
Your market accessibility depends on a number of key factors. Are you going to grow into a new market organically? Can or should you partner up with a third party organisation? Is your market expansion going to involve a strategic acquisition?
