Pushing boundaries and seizing opportunities: a key to global success

Entrepreneurs who want to seize opportunities internationally must take into account the history of, and ongoing developments in, globalisation and deglobalisation. The past few decades have been marked by a sharp increase in globalisation. This refers to the opening up of borders between countries, making it easier for goods and services to move around. It is the ongoing process of international exchange of people, goods, money and information.

But what do you need to know about international business as an entrepreneur or advisor? What challenges await you across national borders?

1. Globalisation

Throughout history, various factors have accelerated the process of globalisation.

Firstly, technological advances, and more specifically rapid developments in communication and transport technologies, have had a huge impact over the past few decades. They have made the world ‘smaller’. The internet, mobile communications and aviation have facilitated and accelerated the exchange of information, ideas, goods and services worldwide.

In addition, countries have started to conclude free trade agreements to reduce trade barriers and lower customs tariffs. Regional economic cooperation agreements, such as the European Union, NAFTA (North American Free Trade Agreement) and APEC (Asia-Pacific Economic Cooperation), have strengthened economic ties between participating countries and promoted trade. Global organisations such as the United Nations, the International Monetary Fund (IMF) and the World Trade Organisation (WTO) also play an important role in promoting international cooperation and trade. This has led to extensive economic integration between countries.

Large multinational companies have invested across borders and set up operations in different countries. This has led to a sharp increase in international trade, investment and the exchange of technologies and skills.

Travel has become easier, faster and more affordable, allowing people and ideas to move more easily around the world. This has promoted cultural exchange and increased understanding between different societies. The emergence of mass media, such as television, film and social media, has facilitated interaction between people worldwide. This contributes to a more globalised cultural identity.

Countries have also opened up their financial markets to foreign investment, making it easier for capital to flow internationally. This has led to an increase in cross-border investment and financial integration.

All these factors have combined to accelerate globalisation, resulting in an increasingly interconnected world in which economies, cultures and societies are more closely intertwined.

2. A shifting world order

Far-reaching globalisation has led to the evolution of the triangular relationship between Western Europe, the United States and Japan into a global economy in which China and the Asian countries now play a prominent role. China in particular has fundamentally changed the dimensions of this relationship, to such an extent that we can speak of a period before and after 2001. On 11 December 2001, China joined the World Trade Organisation. This gave China access to Western markets without any serious obligation to follow the same rules, particularly in the social sphere.

2.1 Multinationals (and technology giants) as the big winners

It is generally accepted that multinational companies have benefited most from globalisation. Their size, growth, profits and impact have increased enormously as a result of the expansion of the trading arena. They enjoy many competitive advantages that small companies can only dream of. In his book Gigantisme, Geert Noels talks about various ‘growth hormones’ that are administered from all angles and set a flywheel in motion. He refers, among other things, to the role of governments, in particular the reduction in corporate tax rates, which in recent decades has been preferred in many countries to a reduction in personal income tax.¹  But he also talks about the frequent introduction of complex rules that are often less obvious to small businesses. He also refers to the long-standing decline in international interest rates (until recently), which has acted as a lever for many mergers and acquisitions. Companies such as AB InBev, Google and Microsoft have become giants because they have swallowed up other large corporations. Take AB InBev, for example, which acquired Anheuser-Busch in 2008 for $59 billion and then SABmiller in 2015 for a staggering $134 billion. Microsoft has also made some high-impact acquisitions in recent decades, with LinkedIn in 2016 (27 billion dollars) and Activision Blizzard in 2022 (68.7 billion dollars). It is clear that the largest acquisitions have taken place recently, partly due to interest rate stimulus.

Today, the world’s largest companies are technology giants, particularly platform companies. Apple, Amazon, Google, Microsoft and Meta are perhaps the best-known examples, along with their Chinese counterparts Alibaba, Tencent and Ctrip. A continuing major growth driver for these giants is their growing pool of big data, the wealth of information about their customers, purchasing behaviour, search history and potential interests. They are also capitalising on the rapidly changing global population. However, smaller local players have undoubtedly also accelerated their growth as a result of globalisation, particularly as they have seen their scalability increase exponentially.

2.2 Escalating population dynamics

As an international entrepreneur, you have a business model. It is therefore advisable to look at your business model from a macroeconomic perspective and anticipate the rapidly changing trends in our global population. This will not only have consequences for the labour market, but may also have an indirect impact on the market potential of your product or service.

For a long time, the world’s population stood at around 1 billion. Over the last 40 years in particular, we have seen exponential growth, which is putting us on track for a population of 10 billion. A world and economy of this size needs to be organised differently.

Population evolution in Africa, China, India, Europe and the United States differ significantly due to different demographic trends and population dynamics. This will have a huge impact on the role and economic growth of these regions in the coming years.

Overall, Africa has one of the fastest growing populations in the world. This growth is mainly driven by factors such as high birth rates, improvements in healthcare and a declining mortality rate due to better medical facilities and food security. In recent decades, Africa has made significant progress in education and economic development. Life expectancy has increased and child mortality rates have fallen. All these developments have led to a sharp increase in population.

“Everyone thinks that the future lies in the Eastern Bloc or in China, but even there they can hardly find people anymore.”

 

Although growth may vary from country to country, the United Nations estimates that Africa’s population will double by 2050. By the end of this century, Africa could be eight times larger than Europe and, with 4 billion people, close to becoming the most populous continent right after Asia.^.

A striking example of why entrepreneurs would do well to take population dynamics into account can be found in a recent interview with Daan De Wever, CEO of the telecom company Dstny:

“Due to the ageing population, we know that there will be up to 30 percent fewer workers in Europe in the future, and Generation Z’s loyalty to an employer is lower. Africa is the only continent with a rising demand for labour. We acquired a small start-up in Cairo, a software developer. A week later, we had already received 1,862 CVs.^“ Everyone thinks that the future lies in Eastern Europe or China, but even there, they are struggling to find people.

China has been the most populous country in the world for many decades. According to United Nations estimates, China had more than 1.4 billion inhabitants in 2021. However, China faces a huge challenge in terms of ageing, partly due to the (now abolished) one-child policy. As China has relaxed its population policy, the ageing process may stabilise in the future. But the consequences of the past are still noticeable. The Chinese government now faces the challenge of meeting the needs of an ageing population, such as healthcare, social security and pension provisions.

The situation is different in India, which has now overtaken China in terms of population. India has a relatively younger and faster-growing population than China. This is partly due to a relatively high birth rate and a large population in the fertile age group. In 2021, the median age in India was estimated at around 28, compared to 38 in China^.

The United States has rather moderate population growth, mainly due to a combination of a reasonable birth rate and significant immigration. Population growth in the United States is relatively slower than in India, but faster than in many European countries. The population of the United States is generally younger than that of Europe, but older than that of India.

Finally, Europe has a relatively slower population growth compared to India and the United States. This is mainly due to a combination of a low birth rate and an ageing population. Many European countries have a birth rate that is below the replacement level, which means that fewer children are being born than are needed to maintain the population naturally. This has led to an ageing population, with the proportion of older people in the total population increasing. Contrary to popular belief, Europe also has a low net migration rate, meaning that there is less immigration than emigration. This has an impact on overall population growth.

3. On deglobalisation

In recent years, China has fundamentally changed the dimensions of our global economy. The disruption in the logistics chain caused by the COVID-19 pandemic is a good illustration of this. China’s access to Western markets has triggered a trend towards deglobalisation. This is a trend in which global economic cohesion is declining and world trade growth is stagnating. Recent examples include the yellow vest protests in France and the protests against international trade agreements such as CETA.

Climate change is also accelerating the trend towards deglobalisation. The global economic system is being rethought. Short production and logistics chains are regaining popularity. In the past, the West outsourced many of its polluting activities to China (but also to Eastern Europe). Due to pressure to tackle the global ecological problem and achieve sustainability standards by 2050, to which all companies will have to comply, a reverse movement is gradually taking place. New technologies are being developed to reduce CO₂ emissions. Production is being anchored locally again. A recent example of this is the European Chips Act and the prominent role that Leuven-based Imec will play in putting Europe on the map in the field of chip technology and production.

In his book^,Geert Noels talks about a ‘healthy movement’ that will be beneficial for the planet and society. Deglobalisation is primarily a reaction to the gigantism (rapid expansion) of certain organisations and countries, without considering the consequences for the local population.

4. Opportunities and pitfalls in international business

For several reasons, growth companies are often encouraged to think internationally right away.

This allows start-ups to reach a much larger market than just their local region. This significantly increases their customer base and growth potential. Some business models are highly scalable, meaning that they can expand into new markets with minimal additional costs. Growth companies with such models can benefit from international expansion to grow their business quickly. For many companies, and digital companies in particular, it is often the only way to become profitable and remain relevant in the market.

In some cases, the local market may be saturated or there may already be an established player that is difficult to beat. By going international, start-ups can find niche markets where they can stand out and gain a competitive advantage.

Thinking internationally opens the door to a wider pool of talent and resources. Companies may be able to attract better employees or collaborate with international partners who can help them achieve their goals.

By being present in different international markets, companies diversify their risks. If a local market performs poorly or is affected by economic fluctuations, a presence in other markets helps to stabilise the company.

By being the first to enter an international market, entrepreneurs can gain a first-mover advantage. This means they have the opportunity to establish themselves as a trusted brand before competitors enter the market.

Thinking internationally can attract the attention of international investors and venture capital funds interested in supporting promising start-ups with global growth potential.

Of course, thinking internationally is not suitable for every growth company. It also brings challenges, such as cultural differences, legal requirements, language barriers and logistical complexity. It is important to conduct a thorough market analysis and develop a well-thought-out strategy before deciding to go international. On the other hand, you need to consider the optimal timing. In his book 50 Lessons for Entrepreneurs^,Jurgen Ingels explains the risk of wanting to go too fast. Not only do you risk your international adventure failing, but your home market could also suffer.

5. Enough ‘skin in the game’

When doing business internationally, the question often arises as to whether it is useful and/or necessary to set up a local entity abroad. It is also possible to offer products or services directly from your home country (Belgium). Often, the first flag is planted abroad by the presence of an employee, which becomes increasingly substantial over time.

In addition, companies can open a branch locally. This is an establishment without legal personality. Finally, one can decide to set up a separate legal entity, a subsidiary.

In practice, the decision will often depend on the type of market and product or service. Suppose you are an entrepreneur offering a product in a business-to-business market and you run significant liability risks. In that case, it will always be preferable to set up a separate subsidiary or subsidiary entity. If you opt for the right legal form, that company will protect the entrepreneur against local liability risks. Any claims can then be ‘absorbed’ by the local subsidiary. If the parent company (e.g. in Belgium) has valuable intellectual property rights, these will remain protected, provided that the contractual framework with clients and suppliers is correctly drawn up.

Incidentally, it will be difficult to gain a foothold in certain markets without a locally established legal entity. Some countries prefer to do business with ‘compatriots’ or expect enough ‘skin in the game’ to be able to do business locally. Think of markets such as the United States, but also Germany, France or Japan. The latter country is considered very protectionist, where it will often be necessary to find a local business partner in order to contract with a first customer.

6. About international holding structures and economic substance

International entrepreneurship often means daring to take the plunge and set up local foreign entities, such as foreign sales and/or production entities. Typically, entrepreneurs will opt for a holding structure. The choice of holding location is essential in this regard, both from a tax and other business considerations.

For example, the successful Belgian big data company Collibra recently set up a top holding company in the Netherlands, taking into account the more flexible share option legislation and associated tax regulations in that country. Management considered this crucial to recruit additional talent and continue the company’s growth.

Entrepreneurs should take into account stricter European and OECD guidelines on ‘economic substance’. Holding companies are deemed to be resident for tax purposes in the country from which they are managed. To this end, the holding company must have sufficient economic substance in the country concerned. If not, the holding company runs the risk, among other things, that its dividend income (profits from its underlying subsidiaries) will no longer be tax-free. Even stricter conditions are expected in this regard in the coming years (in the fight against shell companies). Make sure that your corporate structure is sufficiently future-proof.

7. Outsourcing of work across national borders and global mobility

Due to the above-mentioned demographic dynamics, entrepreneurs are increasingly looking abroad for opportunities for local recruitment. For example, a large amount of the data entry work that used to be done in Belgium is now carried out by employees in countries such as India. Business Process Outsourcing is then carried out by an organisation in India that offers services to various companies. An alternative form of outsourcing specialised services and operational tasks (e.g. software development, HR, finance, purchasing, production) is to set up a Shared Service Centre (SSC) abroad. Such a (semi-)autonomous unit aims to achieve significant cost savings, standardisation and increased quality and only provides services for its own organisation.

In practice, we find that local management is often a challenge, partly due to language barriers and cultural differences. Many entrepreneurs get this wrong and do not take sufficient account of local customs. As mentioned above, it is important to look at the potential of the labour market on a sufficiently global level and also to consider other regions that you may (wrongly) consider less obvious today.

“With a well-thought-out mobility strategy, you can attract highly qualified talent and at the same time show that your company is ready for future global challenges.”

 

In addition, working with foreign subcontractors and service providers is a well-known way of providing solutions to labour shortages while simultaneously reducing costs. Recent figures from the European statistics agency Eurostat show that Belgium still has one of the highest labour costs in Europe. With an average labour cost of 43.5 euros per hour, we are still well above the European average (30.5 euros per hour based on data from 2022).⁸  Cooperation with foreign subcontractors is an important channel for international labour mobility to the Belgian labour market, with no fewer than 214,062 unique individuals posted to Belgium in 2022.⁹  Posting involves the temporary transfer of employees employed in one EU Member State to another EU Member State to perform a service contract, within the framework of the free movement of services. The employer pays the social security contributions for the posted worker in the country where the employer is established.¹⁰  Due to the significant labour costs (high social security contributions) in Belgium, this leads to a competitive advantage for foreign service providers.

Given current population growth trends, it is understandable that an important element in this is the posting of third-country nationals (non-EU nationals). They come to Belgium via other countries (mainly EU Member States) without additional permit requirements ⁽unlike third-country nationals who come to Belgium to work on the basis of traditional labour migration with a single permit). The posting of third-country nationals is a significant and rapidly growing phenomenon: in 2022, 21% of postings were non-EU citizens, compared to 9% in 2017.

The EU also recognises the need for economic migration for the European labour market. It is taking various initiatives to facilitate job matching in the context of the internal market within Europe (EU Talent Pool¹², EURES platform¹³) and to provide the policy framework to encourage beneficial international mobility (Talent Partnerships¹⁴, Labour Migration Platform¹⁵ ).

In today’s globalised world, new forms of cooperation are also developing with international professionals and organisations that cross borders to offer local talent on the global market. A good example of this is Employer of Record (EOR), sometimes also referred to as ‘Professional Employer Organisation’ (PEO). Such organisations offer solutions for the employment of external staff worldwide. An employee is employed by an EOR in their home country and performs work remotely for the actual employer based in another country.

Please note, however, that not all countries have a fully developed legal framework for these new forms of cooperation, which means that not all solutions can be applied in their entirety.

Even if your company currently has no concrete plans to operate in other countries, you may still be faced with the need to operate globally in an increasingly globalised business environment. On the one hand, this is necessary to remain competitive, but also because employees increasingly expect their employer to offer them the opportunity to work from any location and to support them in any relocation. With a well-thought-out mobility strategy, you can attract highly qualified talent while demonstrating that your company is ready for the global challenges of the future.

8. The courage of international entrepreneurs to make decisions

For entrepreneurs, internationalisation offers an exciting opportunity to expand their market reach and benefit from the growing global economy. Doing business internationally often requires a dose of courage from entrepreneurs. Entering new markets, dealing with unfamiliar cultures and navigating complex business environments are just some of the challenges companies face. Entrepreneurs often focus on self-development to learn new behaviours and strengths.

8.1 The ability to take risks

Doing business internationally often comes with a higher risk profile. Entering new markets brings uncertainties, such as political instability, exchange rate fluctuations and market volatility. Successful international entrepreneurs have the ability to assess and manage risks and take bold decisions when necessary. They understand that taking risks is inherent to business success and that avoiding risks can lead to missed opportunities.

8.2 Overcoming fear of the unknown

International entrepreneurship often involves entering unfamiliar territory. This can cause anxiety among entrepreneurs who are unfamiliar with the target market, culture and business practices. Bold entrepreneurs can overcome this anxiety by gathering knowledge and developing a deep understanding of the new market. They embrace the unknown as an opportunity to grow and discover new possibilities.

8.3 Cultivating a healthy dose of curiosity

International entrepreneurs have a high level of curiosity. They are highly motivated to truly understand a new market and culture. As already explained, this is essential for entering specific markets.

8.4 Adaptability to other (entrepreneurial) cultures

In order to achieve successful cooperation in other countries, it often comes down to demonstrating sufficient adaptability to local behaviours and cultures. It is important to immerse yourself in the unwritten codes of the country in question. In practice, negotiations often break down due to cultural differences. For example, long dinners and patience are part of negotiations in Chinese culture. The difference with the United States could not be greater. The ‘exaggerated’ enthusiasm is very contagious. However, convincing communication will rarely lead to a quick deal. Our Belgian modesty does not work to our advantage in this respect.

8.5 Making strategic decisions

Bold international entrepreneurs are able to make strategic decisions that deviate from conventional thinking. They have the ability to explore new business models, develop innovative products and services, and enter unconventional markets. Rather than thinking outside the box, they think without a box. Taking bold and innovative decisions can give a company a competitive advantage and enable it to distinguish itself in a global market.

8.6 Cultivating an entrepreneurial spirit

International business requires a strong entrepreneurial spirit. Bold entrepreneurs are proactive, resilient and determined. They are willing to take on challenges, accept failure and learn quickly from their mistakes. They are also flexible and adapt to changing circumstances. An entrepreneurial spirit enables them to overcome obstacles and seize opportunities, even in difficult market conditions.

8.7 Building an international network

Bold international entrepreneurs understand the importance of building strong relationships and creating an extensive international network. They invest time and effort in building contacts, attending international trade fairs and events, and understanding the local business culture. A broad network of partners, customers and suppliers can open doors and offer valuable business opportunities.

In 2018^, the Massachusetts Institute of Technology (MIT) conducted a major study into the ideal age for entrepreneurship. The study concluded that it is not the ‘young, energetic’ wolves who have the greatest chance of success in entrepreneurship, but rather the 45-year-old experienced entrepreneur. The study refers to experience, but above all to the much larger network.

International entrepreneurship requires courage and daring on the part of entrepreneurs. Making bold and well-considered decisions and tackling challenges can set you apart and enable you to flourish in a global market. So if you have the ambition to take your business to new heights, be brave, embrace the unknown and take the leap into international entrepreneurship.

 

Written by: Anna Mordkowicz and Jonas Derycke

 

1. NOELS, Gigantisme. Lannoo, 2019, 92.
2. NOELS, Gigantisme. Lannoo, 2019, 110.
3. VAN PUYMBROECK, “Interview with Daan De Wever, CEO of Dstny,” De Tijd, 29 July 2023.
4. TORFS, “India will surpass China as the most populous country this week (and it may even have already happened)”, VRT NWS, https://www.vrt.be/vrtnws/nl/2023/04/24/india-gaat-nog-deze-week-china-voorbij-als-dichtst-bevolkte-land/ (consulted on 10 August 2023).
5. Taiwan currently holds the key position in the modern chip technology sector. Taiwan Semiconductors has a market share of no less than 52%. The United States and Europe are now competing to regain relevance in this market, given its enormous importance for everyday electronic products such as smartphones, computers, cars, etc.
6. NOELS, Gigantisme, Lannoo, 2019, 211 ff.
7. INGELS, 50 Lessons for Entrepreneurs, Lannoo, 2020, 92 & 102.
8. “Wages and labour costs”, https://ec.europa.eu/eurostat/statistics-explained/index. php?title= Wages_and_labour_costs (consulted on 21 August 2023).
9. “Migration in figures and rights”, https://www.myria.be/nl/publicaties/migratie-in-cijfers-en-in-rechten-2023 (consulted on 21 August 2023).
10. “Socio-economic monitoring 2022: labour market and origin”, https://werk.belgie.be/nl/ publications/socio-economic-monitoring-2022-labour-market-and-origin (consulted on 21 August 2023).
11. “Migration in figures and rights”, https://www.myria.be/nl/publicaties/migratie-in-cijfers-en-in-rechten-2023 (consulted on 21 August 2023).
12. “EU Talent Pool Pilot”, https://eures.ec.europa.eu/eu-talent-pool-pilot_en (consulted on 21 August 2023).
13. “EURES”, https://eures.ec.europa.eu/index_nl (consulted on 21 August 2023).
14. “Talent Partnerships”, https://home-affairs.ec.europa.eu/policies/migration-and-asylum/legal-migration-and-integration/talent-partnerships_en (consultation on 21 August 2023).
15. “Labour Migration Platform”, https://home-affairs.ec.europa.eu/networks/labour-migration-platform_en (consulted on 21 August 2023).
16. INGELS, 50 Lessons for Entrepreneurs, Lannoo, 2020, 92 & 102.