20 Issues Bus Expanding Inter[1]

7/31/2019 20 Issues Bus Expanding Inter[1]

1/25

Business briefing series

20 issues for businesses expanding internationally


2/25

At Ernst & Young, we understand the challenges andwe

The Institute of Chartered Accountants inAustraliaknow what it takes to drive sustainable growth

because(the Institute) is the professional bodyrepresentingweve helped many of the worlds most dynamic

andChartered Accountants in Australia. Our reachextendsambitious companies develop into market

leaders.to more than 66,000 of todays andtomorrowsbusiness leaders, representing some 54,000Chartered

Our global network of Strategic Grow thMarkets Accountants and 12,000 of Australias best

accountingprofessionals are dedicated to serving the changingneeds graduates who are currently enrolled in our world-

classof fast-growth companies. Whether working withdynamic postgraduate

program.mid-cap companies or early stage venture-backedbusinesses, our professionals around the world drawupon

Our members work in di verse roles acrosscommercetheir extensive experience, insight and global

resourcesand industry, academia, government andpublicto help growing businesses reach their full

potential.practice throughout Australia and in 109countriesaround the world. We aim to lead the profession

byAs well as providing traditional assurance, advisory,tax delivering visionary thought leadership projects,settingand transaction advisory ser vices, our professionals

workthe benchmark for the highest ethical, professionalandwith you to reduce the complexity of legislation, help

aligneducational standards, and enhancing andpromotingyour tax strategy with your business goals, expand into

newthe Chartered Accountantsbrand.markets and pursue mergers, acquisitions or other

strategytransactions to take your business to the next level. Wecan

We also represent the interests of membersinprovide guidance around how to manage and control

yourgovernment, industr y, academia and the generalpublicrisks, so that you can approach the future with

confidence.by actively engaging our membership and localandinternational bodies on public policy,governmentSo whether your business thri ves on

entrepreneuriallegisl ation and regulatoryissues.spirit, innovation or superior customer service

andregardless of your stage of grow th our StrategicGrowth

The Institute can leverag e advantages for itsmembersMarkets team can help you take the next step. Its

notas a founding member of the GlobalAccountingluck that makes

leaders.Alliance (GAA), an international accountingcoalitionformed by the worlds premier accounting bodies.TheErnst & Young is a global leader in assurance, tax,

transaction GAA has a membership of over 800,000 andpromotes

and advisory ser vices. Worldwide, our 144,000 p eopleare quality professional services to share

informationunited by our shared values and an unwaveringcommitment and collaborate on international accounting

issues.to quality. We make a difference by helping our people,our The Institute is constituted by Royal Charter and

wasclients and our wider communities achieve theirpotential. established in

1928.Ernst & Young refers to the glob al organization ofmember For fur ther information about the Institute

visitfirms of Ernst & Young Global Limited, each of whichis a

charteredaccountants.com.

auseparate legal entity. Ernst & Young Global Limited, aUKcompany limited by guarantee, does not provide servicestoclients. For more information about our organisation,pleasevisit

www.ey.co

m

Disclaime

r

All information is current as at October 2010

This discussion paper p resents the op inions and comments of the author First p ublished Octob er 2010and not necessarily those of Ernst & You ng, the Institute of Chartered

This communication provides general information which is currentAccountants in Australia (the Institute), or their memb ers. The contents areas at the time of production.for general information only. They are not intended as professional advice for

that you should consult a Chartered Accountant or other suitably qualified Published by:p rofession al. Ernst & Young and the Institute expressly disclaims all liability

The Institute of Chartered Accountants in Australiafor any loss or d amage arising from reliance upon any information containedAddress: 33 Erskine Street, Sydney, NSW 2000in this paper.

Ernst & Young Ernst & Young Australia and the Institute of Chartered Accountants inAddress: Ernst & Young Centre, 680 George Street, SydneyAustralia 2010.

Busin ess briefing series: 20 issues for businesses expan ding internationallyAll rights reserved.

First edition

ISBN: 978-1-921245 -62-6

AB N 5 0 0 8 4 6 4 2 5 71 Th e I n sti tu t e o f C h ar te re d A cc o u n ta n ts i n Au s tr al ia I n co r p o ra te d in A u st ra li a M e mb e rs L i ab i l it y L im it ed . 0 9 10 - 3 7

ABN 75 288 172 749 Ern st & Young.


3/25

Business briefing series

20 issues for Anyone who has made the bold step of starting their own business has at somestage dreamed about taking that business of fshore in a bid for increased expansionbusinesses expandingand to generate additional revenue.

internationallyAlthough ambitious and potentially very lucrative, such a move could alsoprovevery costly if not donecorrectly.To assist business leaders with the process of taking on globalisation, theInstituteof Chartered Account ants in Australia (the Institute), in conjunction with Ernst&Young (EY) has produced this thought leadership paperentitled

Business briefing:

2 0 issues for businesses expanding internationally .

T he publication is the third part of the Institutes Business Briefing series

designedto help businesses to successfully navigate challenging issues. Thecommentaryin the report is divided into three key phases of an international expansionproject: Planning for

expansion Choosing your location

Conducting businessoverseas.

Business briefing: 20 issues for business es expanding internationally has been written

and presented in such a way as to maximise the readers understanding oftheissues. Each of the three sections contains a series of pull-out boxes whichguidethe reader as to the types of questions that they should be asking with regard

to the business. These questions are consolidated into a detachable checklistatthe back of the publication which can be used when consulting the

paper.I trust that you will find this thought leadership paper interestingandworthwhilereading.

Michael SpinksFCAPresident

Institute of Chartered Accountants inAustralia

3B us in es s b r ie fi ng s er i es :20 i s s ue s f o r b u s in es s es exp an di ng i nt e rna t io nal ly


4/25

B u s in es s b ri ef in g s er ies :2 0 i s s u es for b u s in es s e s e xp an di n g in te rna tio n al ly4


5/25

Contents

Introduction

6...................................................................................................

Planning for

expansion

8......................................................................................

1. Strategy 8................................................................................................

2. Global trends 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .

3. Marketresearch

9........................................................................................

Choosing the

location

10......................................................................................

4. Political and socialclimate

10..............................................................................

5. Local tax and regulatoryenvironment

11...................................................................6. Legal system 12.................................................................................

.........

7. Innovation andincentives

12..............................................................................

8. Location andinfrastructure

13.............................................................................

9. Culturalcompatibility

13..................................................................................

10. Local workforce 14.......................................................................................

Doing business

overseas

15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . .

11. Global managementteam

15..............................................................................

12. Global human resourcesconsiderations 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .

13.Financing

17.............................................................................................

14. Choosing the operatingstructure

18.......................................................................

15. Implementing the operatingstructure

18...................................................................

16. Foreign exchange management and currency risk/controls

18...............................................

17. Business and internationaltaxation

19.....................................................................

18. Supply chain, transfer pricing and intellectualproperty

19...................................................

19. Risk management

20.....................................................................................

20. Exit or wind- down 20.............................................................................

........

Checklist

21.....................................................................................................

Contact details Back cover

................................................................................

........



6/25

Introduction

In August 2010, China overtook Japan as the second largest economy in the world, and it is closing thegapon the United States. The world is changing at a fast pace, driven by globalisation. Throughout theglobalfinancial crisis, agile organisations continued their quest to participate in and prosper from thetremendousgrowth in the emerging markets. Very few Australian organisations can afford to ignore this growthmomentum,nor the other benefits that can be achieved from investing in emerging and internationalmarkets.

The Globalization Index supports many marketindicators

Regardless of the size of their international footprint,1

that the trend towards ambitious internationalexpansion

the research identified the top five drivers for

will continue. This research depicts a global

landscape

businesses expanding internationally as overall

growthwhere organisations execute their international

opportunities, profitability, access to materials, access

expansion strategies at a rapid pace. This speed of to human resources, and the ability toinnovate.expansion may indicate the strong desire by

companiesto be the first-to-market and/or the imperative toBenefits for international

companiescapitalise on new marketdevelopments. from

globalisationThe survey was conducted in August 2009, with520

In which of the following ways hasglobalisationsenior executives worldwide. 38% of

respondents

had a positive impact on your business overthepast threeyears?

indicated that they currently derive over half oftheirrevenue from overseas operations. As indicated inthechart below, by 2012 more than half of the respondents

8 6 %

Overall growthexpect this to be the case, with one in four respondents 8 0 %5 3 %

expecting to derive more than three quarters of

theirrevenue from overseas. 6 8 %Profitability 5 1%

Only one in 50 executives surveyed believescontaining

3 2 %

their operations within their home country orearning

3 5 %

Access to materialsless than 10% of their revenue from overseas markets 2 7 %3 9 %

by 2012, to be a viable option.4 2 %

Access to 2 7 %human resources 2 1 %

What proportion of your companys revenues isderivedfrom its overseas operations (i.e. outside yourcompanys

27 %

Ability to innovatehome market) currently, and in three yearstime?

* 3 3 %

3 1 %

Proportion of3 0 %

revenue fromInvestmentNow opportunities 2 7 % international clients:13 10 17 23 20 18

2 9 %

25 75%Three1 6 %

years 2 7 15 21 2 8 26 Access to finance 10 24%2 0%time

15 %0 9%

0 % 1 00 %

Sou rc e: T he Glo bal iz ati on I nd ex S ur ve y 2 009

Proportion of revenue:

0 9% 15 24% 50 75%

10 14% 25 49% Over 75%

Sou rc e: T he Glo bali zat i on I nd ex S urv ey 2009

* Fi gu res m ay no t ad d up t o e x act l y 10 0% , d ue t o ro un di ng .

1. The Globalization Index 20 09 is a report written by Ernst & Youn g with th e Economist Intelligence Unit. The 2010 edition of the report is expected to be

released in January 2011.

6 B u s in es s br ief in g s er ie s:20 is s u es f or b us i nes s e s e xpa nd in g in t ern at i on all y


7/25

This report, the 20 iss ues for businesses expanding and incentives, location and infrastructure,culturalinternationally , focuses on the core issues that you compatibility and the local workforce. These i ssuesareshould consider when formulating and executing

yourlooked at from a strategic point of view rather than a

international expansion strategy. It does notprovide

country specific angle. Whilst for example legalsystemscountry specific analysis, however, common

themesare not examined in any detail, we raise thequestionhave been identified that can be applied regardless of whether your business is equipped to deal with a legal

your targetlocation.

system based on civil or Muslimlaw.

The commentary in this report is divided into thethree

The last section deals with issues associated withdoingkey phases of an international expansion

project:business overseas. An existing globalmanagementteam would make it easier to set up your footprint1. Planning for

expansion in a foreign location. Would your management

team2. Choosing yourlocation know how to deal with a request by a high

ranking3. Conducting businessoverseas.

official asking for a facilitation fee? Does your global

workforce need security protection in addition tootherincentive payments? Will your business befundedThe planning

funnelby an intercompany loan or do you need toconsidermore innovative funding arrangements such asIslamicfinance? Will you acquire an existing local businessto

Planning for expansion reach a certain market share quickly? Foreign

exchangemanagement and currency risk/controls, businessandChoosing the

locationinternational tax, supply chain and intellectual propertyand risk management issues are also looked atinmore detail.

Doing

business Finally, we consider exit and wind down issues.Agile

overseas

organisations will go through the process described

above at regular intervals. Based on the findingstheymay decide to wind down operations in onelocationand commence operations in another. This maymakeperfect commercial sense, however, broader brand and

reputation issues must be considered. For example, ifThe diagram above depicts the import ance of you have become an important employer in a

particularfunnelling your ef forts to ensure the bulk of your country or region your exit must be carefully plannedtoenergy and resources are spent setting up

successfulmitigate socialbacklash.operations. The first two phases focus on identif ying

potential locations and selecting the mostappropriatefor your operations.

In the planning for expansion section we examinetheimportance of a clearly defined strategy, global trends

driven by changing demographics and marketresearch.The planning phase is vital to avoid wasting resourcesinassessing investment locations that should neverhavebeen considered in the first place.

The detailed assessment under the majorheadingchoosing your location involves looking atthepolitical and social climate, the local taxandregulatory environment, the legal system,innovation



8/25

Planning for expansion

1.

Strategy

changes that arise from this growth that will affectbusiness practices and profit ability in the future.In

Clearly define and stress test your strategycountries such as China and India, populationgrowthWhat are the implications of international

expansionis accompanied by increasing affluence and agrowingfor your existing business operations? middle class consumer base. Therefore, thetraditionalcharacterisation and perception of emergingmarkets

Very few organisations can afford to ignore theas predominantly low cost manufacturing centresis

increasing trend towards globalisation.Entrepreneurial quickly changing. Emerging markets are also

becomingorganisations that are the first to move often have

strong consumer driven societies where the demandfor

the most startling success stories. However,those products and services is increasing faster than in

moreorganisations that do not stress test the financialand established and mature

markets.operational impact on their existing business, may

losemore than their dream of becoming a global player. The implications for your business are clear. Youcanbecome a participant in these markets and tapinto

Before expanding internationally, you should havea an ever increasing consumer base to help

secureclear picture of what you are trying to achieve. Areyou your future profitability, or you can watch others

fillsearching for a new and cheaper source of capital,

that space. Those business leaders that do notact

market leading talent, more cost ef fective production,risk watching others reap the benefits and maybe

new markets, or all of the above? Can you execute yourchallenged when those first-movers turn theirattention

strategy alone or do you need strong partners bothto Australia. Seen from this perspective,international

from an advisory as well as a business perspective?expansion is also an opportunity to help strengthenyour

You should consider the pressure global expansionmay business at home in the medium to long

term.have on your domestic operations in terms offinance,management time and human resources. Will youenter

The flow of foreign direct investment (FDI) into acountrythe identified market(s) through acquisition, joint

venture,

is an important indicator of the economic viability

ofa partnership or a green field development? Ensure you that location. Similarly, demographic trends such asthetest your assumptions and have a clear understanding

ofage and education profile of the population may also

how long it will take to turn aprofit.

indicate future economic vitality and the growth ofaconsumer base. An example of this is Vietnam,wheremore than 70% of the population is 30 years or younger.2. Global

trends Vietnam is currently attracting significant FDI incertainIs your organisation exposed to new and industrysectors.emerging

markets?Has the composition of yourmajorcompetitors

changed?Global foreign direct investment witnessedamodest, but uneven recovery in the first halfof

Is foreign direct investment in yourindustrysector clustered in locations where you

do

2010. Developing and transition ec onomies

nownot have a presence? absorb more than half of globalFDI.

It is important to monitor and to be aware of global World Investment Report 2010

trends, particularly in relation to demographicchanges.

United Nations Conference on Trade and Development

Australias population is estim ated to grow to 36millionby 2050. To put this into perspective, that isequivalentto the bi-monthly combined population growthofChina and India. World population growth is notanew phenomenon; however it is thedemographic



9/25

3. Market research

What research is available to provide youwithinformation on market and industry

conditions?Is this information up-to-date and what is the

future outlook?

Create a short list of new and emerging markets,

tap into existing networks, talk to youradvisorsand visit your short listedlocations.

Market research is very important but can becostly;however there are numerous resources available free of

charge to help you uncover useful information aboutthestrengths and challenges of global markets. Muchofthis research can be done from your home base andwillhelp you in generating a short list of potentiallocationsfor expansion.

Reliable statistical data or reference materialcansupplement but should not replace a field trip. Theworldis moving and changing fast. What may have beenagood investment location historically, may notpresentthe same opportunities in the future. Tap intoexistingnetworks via chambers of industry and commerceorother organisations representing an investment

location,visit trade fairs, talk to your advisors, visit your t arget

locations and meet the local people. This willgreatlyassist you to make an educated and informeddecisionabout whether that market is right for yourbusiness.



10/25

Choosing the location

4. Political and social

climate

An assessment of your target locationspoliticalenvironment, including the potential for social unrestor

Is the political system stable? How doyou regional instability is relevant for determining the risk

ofassess sovereign risk?

any potential investment. This has been animportantDoes the country suffer under high levels of issue in South East Asia, where variouscountriessovereign debt? have been affected by social unrest in recentyears.Is there likely to be social unrest or are

workers To support this, the graph below illustrates theorganised in powerful unions?importance investors place on political stabilityinassessing emerging market locations. Almost 60%of

The pace of change of the global political landscape

respondents rated political stability as the most important

is accelerating due to globalisation. Politicaldecisions government-related factor to consider when deployingin one country may have far reaching implications

for FDI. Before entering a new market, you shouldevaluate

trading partners or the globalised business community the risk based on the future outlook for the country or

theat large. The response to the global financial crisiswith region, not just the status quo or historic events.

Ensurestimulus programs around the globe illustratedthis. that you take note of any early signs of social

unrest.Most governments appreciate that globalisation isthemotor of economicexpansion.However, as the graph below illustrates, concerns are If you were to plan a foreign direct investment

indeveloped or emerging markets over the nextyear,

now emerging about new protectionism,regulations which of the following would you consider to be

theand trade issues. More than 5 0% of Globalization Index

most important government related-factors?respondents believe that major economies will

adoptlimited protectionist measures in certain keysectors. Po lit i c a l st a b il it yFurthermore, the burden of sovereign debt may force

a country to abandon business friendly

programs.

Ma c r o ec ono mic st a b il it y

Cu r r enc y st a b il it y

Ho s t go ve r nme nt su pp or tWhich of the following asser tions about theimpact

f or i nw a r d f o r e ign i nv e s t me nt

of protectionism in coming years most closelyreflects

H os t go v e r nme n t a t t it u de

your view? (% who agree with eachstatement)

t ow a r ds dome st i c e nt e r p r is e s

C or p or a t e a n d o t he r

r e l e v a nt t a x e sM a jor e c on omie s wi ll a do pt

C la r i t y a nd pr edic t a b il it yl imi t e d p r ot e c t io nis t me a s ur e s

o f t he le g a l s y s t e min c e r t a in k ey s ec to r s

S t r e ngt h a nd f a ir n e s s ofG l oba l ma r k e t s w i ll r e ma in or

le g a l s y s t e mbe c ome m or e o pe n a s g ov e r nme n t s

Ri s k of n a t ion a lis a t i on ort r y t o r e s t or e e c ono mic gr ow t hex prop riat io n

Do mes t ic p ol it ica l ex p edie ncy

w il l ov e r r id e c l a ims b y w or ld 0% 20% 4 0% 6 0%le a d e r s t o r e si s t pr o te c t ion is m

Dev elo pe d Em er gi n g Ti t - fo r- t a t p r ot ec t i onis m

w i ll t r igg e r a da ng e r ou s

So u rc e: T h e G lob ali zat i on I nde x S urv ey 2009

do wn wa r d s pi r a l in glo ba l t r a de

Th e w or ld e c o nomy w ill r e p e a t t he

pr ot e c t i oni st e r r or s o f t he 1930 s

D on t k no w

0% 10 % 2 0% 3 0% 40 % 50 %

So u rce : T h e Gl ob aliz at io n In dex Su rv ey 2009



11/25

5. Local tax and regulatory environment does not rule out the possibility of government support

for certain industries to protect domestic marketsagainst

Is the tax regime business friendlyand/or foreign competition, through subsidies or other forms ofcompetitive

? protection. An extensive double tax treaty networkmayDoes the country have free trade agreements likewise look impressive; however it is necessary tolook

or double tax treaties?beyond withholding tax rates and test how thetreatiesDoes the regulatory regime set the scene for deal with mutual agreement procedures andarbitrationa sound corporate governance framework? around transfer pricing, permanent establishmentissuesand a global work force. Not all double tax treaties areA low headline corporate t ax rate is always appealing .2the same and some countries may try to asserttaxing

However, this can also be deceptive due tomany rights beyond what investors would ordinarily

expect

factors including the existence of state based taxes,

under OECDguidelines.

withholding taxes and consumption taxes such asavalue added tax (VAT). Your market analysisshould

A countrys regulatory framework will beconsideredinclude commercial discussions with a local

marketopen to FDI, if it can strike the right balancebetweentax expert taking into account your specific facts

andcreating a secure environment for effectivecorporatecircumstances where

possible.governance across all industry sectors,withoutstifling entrepreneurial freedom ordiscriminating

Free trade agreements generally indicate an open and

investment friendly economy. However, theirexistence

against foreign investors.

Legal systems around the

world

Ci vi l L aw

Co mmo n L aw

Mu sl im L aw

Cu sto ma ry L a w

Mi xe d Sy ste m

S o ur ce: Leg a l s y s te ms a r oun d t he w or l d, U ni v er s it y o f O t t a w a : ww w. ju ri g lo b e. ca /e ng / i nd ex. p h p

2. Ernst & Young Passport (in cludes the 2010 Worldwide Corp orate Tax Guide , the 2010 VAT Guide , the 2009 Global Executive

and the

2009 Transfer Pricing Glob al Reference Guide )



12/25

Choosing the

location

(continu ed)

6. Legal system 7. Innovation and incentives

Is it a common law system? If not, areyou

Should you develop your products inemergingsure you understand the

outcomes?or fast growth markets?

Do the laws and the legal and judicial Should you have a presence at global

system provide support for and protection innovationclusters?of commercial

activities?Are generous grants and incentivesavailablefor innovative organisations?

An effective legal system that provides a balance

between protecting the commercial interestsof

Maintaining an environment that supportsinnovationbusiness, whilst also protecting the consumer,

canis critical for future business growth. Innovationcanprovide you with a level of confidence that you

can

be centralised, or decentralised and driven locally.

Aslegally enforce your commercialagreements.

demonstrated in the chart below, organisationswitha centralised strategy are just about as likely asthose

A common law legal system can be a hugeadvantage with a decentralised approach to regard it as essentialas you will be much more likely to understandthe to apply innovative ideas from local

markets.framework and outcomes. The map on page 11 shows

however that the number of countries with apurecommon law system islimited. Innovation is critical to growth

whetherCivil law is the prevailing system in much ofEurope

centrally or locally

drivenand in many of the emerging markets, while Muslimlaw

Please rate your agreement with the followingstatementregarding innovation activities within yourbusiness

may be encountered when doing business in theGulfStates, the Middle East and parts of Africa and Asia.

Ma i nt a in ing a n env ir o nmen t6 5 %

The legal system will af fect every aspect of your w he r e pe op le c a n be i nno v a ti v e i s 6 8%c r i t ic a l t o f u t ur e b us in e ss gr ow t h

international expansion. Forexample:

4 8 %We a da p t pr o duc t s an d se r v ic e s

It will affect merger and acquisition activity

to t he ne e d s of loc a l ma r k e t s 6 7 %

W e b e li e ve pr o c e s sitself and will set boundaries through anti-trust

58%inn ov a t ion i s a s imp or t a n t

61 %or competitionlaw

a s pr od uc t i nno v a ti on

A p pl y ing in nov a t i on ide as f r om 4 4 %

It will be instrumental for theprotection

lo c a l m a r ke ts is e s s e nt i a l5 2 %

of trademarks, commercial design or plantW e c r e a t e pr od uc t a n d se r v ic e s 3 6 %

innovations (including copyright ordistribution

s pe c i fic a ll y f or loc a l ma r k e t s 4 9 %

law, data protection and privacy)

In nov a t i on c ent r a l is ed in he a dqu a r t er s It will set the scene for litigation,arbitrationor mediation In nov a t i on dec ent r a li se d t o lo c a l ma r k et s

It will provide guidance with respectto

Sou rc e: T he Glo bal iza ti on I nd ex S ur ve y 20 09

information

technologyL abour law will regulate employmentmatters For many businesses, the decision to relocate

researchThere is real estate, planning andconstruction and development activities to an emerging market

willlaw to consider.

be influenced by a number of strategic and business

drivers. These may include using the target locationasa strategic hub for market expansion into thatregion.Conducting research in emerging and fastgrowthmarkets can drive new ideas by tapping into a new pool

of innovative and market leadingtalent.



13/25

An understanding of the various governmentincentive

of potential considerations such as the targetlocationsregimes ranging from tax holidays and

incentives,size and accessibility, transport, utilities andinformationto discretionary government grant support may

helpsystems, access to financial services and otherfactors.sweeten the deal for many organisations . In

addition

3

to any formal programs, the host countrysgovernment

9. Cultural compatibilit

ymay be interested in attracting your investmentin Are there significant cultural differences that

mayorder to boost the local economy and create jobs in

impact the way you conduct yourbusiness?

strategic sectors. In most jurisdictions,governments Are there likely to be language barriers?may be receptive to specific negotiatedconcessionsand incentives, depending on the circumstancesand Entrepreneurial organisations through their very

naturethe nature of the investment. It is important toconsider can achieve growth and develop a global footprint

these possibilities at an early stage before committing relatively quickly. However, it can take a long timetoto the target location. This ensures that an

effective create a diverse workforce that reflects the variety ofstrategy can be developed that places your organisationmarkets in which the organisation operates, andculturalin a strong bargaining

position. customs can impact significantly on businesspracticesin the chosenlocation.8. Location and infrastructureWithout early at tention to these issues,yourIs economic infrastructure secure and

reliable?management team may be left behind in termsofcultural awareness and diversit y. This can generatea

How would you deal with power outages,

telecommunication down time or trafficcongestion?

competitive disadvantage as the management teamwillbe required to make rapid decisions, while at the sameIs the location central to your regional

markets, time ensuring that they have a clear understandingof

suppliers of goods and services?the local customs and operating

conditions.It is import ant to understand the infrastructure thatwillbe at your disposal in the target country and assess its

reliability and the positive or detrimental impact itmay

Cultural business etiquettehave on achieving success in your targetmarket.

Bringing your host in Tokyo a bottle ofAmericanwhi skey is a thoughtful gift. Its a major offens

e inParticular attention should be paid to the targetcountrys Dubai. American whiskey is revered in China

andcommunications infrastructure. In the digital agethis

Japan. But in the Islamic Middle East, andamongis arguably more critical than ever before, given

theMusli m hosts i n Asia, alcohol is strictlytabooimportance of information technology to the

effectiveIn the Mi ddle East and Asia, gi fts must alwaysbeoperation of modern businesses. You should

considergiven at the end of the meeting so they arenotregarded as bribes . In Latin America,however,

the capacity and efficiency of telephone andmobile gifts are a great icebreaker and can be given

atnetworks, and also data delivery mechanismssuch the start of a

meeting

as fibre optic cable and broadband internet. Is theBusiness cards in Japan, China and other partsof

infrastructure modern, reliable and safe? How vulnerableAsia are considered a representation of ones selfis it to being compromised for example from power offer and receive cards wi th both hands, andalwaysfailures and cyber at tacks, and are there

emergencylook at it as i f youre s tudying itcarefullysystems and disaster recovery plans in

place?In mos t of the Is lamic Middle Eas t, its the normtokeep visitors waiting. This is not considered

rude,When expanding into the target location,consider

but an extension of the Middle Eastern customtowhether the attributes which have made you

successfulmix business with pleasure. It is alsoacceptableat home can be leveraged to drive success abroad.

Yourto ask about your hosts children, especially sons,but never their wives .

ability to shift wealth, products, people and information,

will be heavily dependent on accessing adequatesocialand commercial infrastructure. There are a widerange

F o rb es: ww w. msn b c. m sn .c om / i d / 35 9 8 60 24 /

3. Ernst & Young, R&D incentives in the new tax landscape.



14/25

Choosing thelocation

(continu ed)

10. Local workforceIn this respect, the importance of language cannotbeoverstated, as it will underpin everything thebusiness

What is the availability, skill-set and coststructuredoes in the target location. Effective

communicationof the local work force?

(or the lack thereof ) has the ability to make or break the

business. It is a key foundation upon which thesuccess

When expanding into a global market, yourhumanof the business may be built. Your management

teamresources can mean the dif ference bet weensuccesswill need the language skills to communicate

effectivelyand failure. As your organisation grows off-shore,

with those who will interact with your businessincluding

get ting the right people in the right locationcangovernment, regulators, financiers, suppliers, staf f and provide a vital competitive advantage. The qualityofcustomers. Even in countries where English is

commonlythe local workforce may often be the deciding factor

spoken or is the language of business, regional nuances in determining whether to expand your businessto

can be a source of misunderstanding and can lead to that location and also in determining howsuccessfulmore serious problems. such an expansion willbe.

As demonstrated in the diagram below, the level of

tolerance and understanding of cultural andethnic

Companies are viewing the labourmarketdifferences and language barriers in foreign markets more through a global lens, and in manycases,ranks highly

amongstGlobalization Index respondents off-shoring decisions, especially in higher,

when asked about the most important culturalfactors

value- added functions, are being driven bytalentwhen conducting business internationally. The

topshortages at home as much as by cost-cutting.

ranked issue related to the level of international

experience of the workforce is discussed below. A.T Kearney , Global Services Location Index 2009

Which of the following cultural factors do you

expect toWhen set ting up a local workforce in yourtargetbe most important when conducting your

international location, there are numerous practical issues toconsider.

business over the next year? (% ofrespondents) You will need to think about the education level

andexperience of your prospective workers and howmuch

L e ve l o f in t e r na t io na l

you will need to invest in training. You will needto

e x p e r ie n c e o f w or k f or c e

determine the terms and conditions ofemployment

De g r e e t o w hic h pr o duc t s

a n d s e r v ic e s n e e d t o b e a d a pt ed and you may need to negotiate with individuals,

labourt o s uit f or e ig n m a r k e t s

unions or other bargaining agents. There may belocal

L e v e l o f t ol e r a nc e a nd

und e r s t a ndi ng of c ult ur a l/ e t hic

legislation or regulations concerning workinghours,

di f fe r e n c e s in y our fo re ign m a r k e t s

weekends and public holidays and there mayalso

La n gua g e b a r r ie r s in

f or e ig n m a r k e t s be local customs or practices that will impact ontheoperation and activities of your workforce. Inaddition

To le r a n c e of f or e ig n b us in e s s

i nflu e nc e in hos t m a r k e t s you will need to consider your global

remunerationapproach and whether short term and longterm

Cu lt ur a l s imi la r i t y t o

ho me ma r k e tincentive programs will be offered to your overseas

employees, as well as the tax and regulatoryimplications

D e gr e e t o w hi c h a dv e r t is i ng

a n d c ult ur a l i ma ge r y c a n be

associated withthis.

u nder st o od int ern at ion ally

P r e s s a nd me di a f r e e dom

in f or e ig n m a r k e t s

Op e nne s s t o f or e i gn c ult u r a l

infl ue nc e ( e .g. th r oug h

t e le v i si on, c ine m a e t c .)

0 % 1 0% 20% 30 % 40 % 5 0%

So u rc e: T h e G lob ali zat io n In de x S urv ey 2009



15/25

Doing business overseas

11. Global management team Will some members of your managementteambe required to spend a lot of personal time in the

Who will negotiate with government,customers, new location?suppliers and business partners? How should

you Will Australian expatriates be sent to runthe

manage risks such as bribery andcorruption? business or can the services of local

managersWho will be responsible for the recruitment of staff? be relied upon?

Do you have an international management teamor To be prepared, you must consider the challenges

yourdo you need to build one?

business will face during the start-up phase, and who

Commencing business operations in a new marketcan

from a management perspective is best placed to deal

involve significant risks, and therefore it is import antto

with those challenges. In determining this,considerhave a strong management team that understands

the

any potential negotiations with the government or

otherchallenges ahead. Having established the business ina

local officials in the host countr y. Negotiations mightbenew country, a variet y of issues may present

themselvesrequired over issues such as licensing arr angements,taxsuch

as:concessions, labour conditions and local jointventurepartners. The right negotiating technique will beessential.

How to ensure that your businessoperationsrun

smoothly?Does your organisation have sufficient knowledge of the

How much hands on involvement is requiredby

host country and expertise to conduct negotiationsoryour management

team?will you need specialists with expert local knowledgeto How much time and resources will it

consumenegotiate on your behalf? The graph on page 16 shows

setting up your operations? that organisations that operate in more than 10countries

Corruption Perceptions Index2009

9.0 10

8.0 8.9

7.0 7.9

6.0 6.9

5.0 5.9

4.0 4.9

3.0 3.9

2.0 2.9

1.0 1.9

0 0.9

T he Co rr up t io n P erc ep t io n s I nd ex ( CP I) me as u res t h e p e rcei ve d le vel o f t h e co rru p t io n in 180 cou n t rie s a nd t erri t or ie s ar ou nd t he wo rl d. Th e CP I is a s u rv ey of

s u rve ys , bas ed o n 13 d if f eren t exp er t a nd b u s in es s s ur veys . S co res ran g e f rom 0 (p e rcei ve d t o b e hi gh ly c orr up t ) t o 1 0 ( pe rce ive d t o h ave lo w le vel s o f c orr up t i on ).

Tran s p aren cy I nt ern at i on al. Al l rig h t s r es er ved .



16/25

Doing business overseas (continu ed)

12. Global human resources considerationsare highly likely to have a diverse managementteamwhilst those with only domestic operations areunlikely

What benefits will you provide to expatriates andto have a significant proportion of senior management

what are the tax consequences? Do youremployeesfrom another

country.require securityprotection?

Do you have a team that can deal withassignmentMore global companies are more

likelymanagement, immigration and taxcompliance?to have international

managementShould these functions beoutsourced?Roughly what proportion of senior management

arenationals of anothercountry?

Although expatriates know your business andmayenjoy the opportunit y to work overseas; they mayalso

F orei gnlack local knowledge. Relocating and

remunerating

o perat i ons in3 0 1 6 1 9 9 2 6

11 or more expatriates can be more expensive than localhires,

cou nt rie s

so you should first consider the objectives of theF orei gn %o perat i on s

5 5 2 2 9 6 5 assignment and your desired return on investment.If

in 1 10

cou nt rie syou decide to use expatriates rather than local hires,you

Do mes tic must also consider what happens when the

assignment

o perat i on s 88

5 1 4

o nlyis finished. A repatriation plan should beimplementedso the knowledge and skills gained on assignment are0 % 10 0%

retained within your organisation. You must alsoensure

Senior management from another country:

that you have the resources to manage the relatedlocal

Less than 5% 5 14% 15 24% 25 49% 50%+and international compliance obligations, particularlyifS o ur ce: T he Glo bali zat i on In dex Su rv ey 2 00

9 you are expanding into more than onecountry.* F ig ure s ma y n ot add u p t o ex ac t ly 100 % , du e t o rou nd in g.

To ensure your expatr iate st aff are not distracted fr om

the job at hand, organisational suppor t will be requiredHave you also considered the possibilit y ofcorruption

to deal with relocation and immigration issues. Thislevelin your host country? Is it common for local

officialsof support will vary from organisation to organisation;

or business people to demand bribes, facilitation fees however this along with the development of anincentiveor kick-back payments? How will you deal with

suchplan should be factored in, even if the new host location

demands while protecting the interests and integrit yof

is attractive. Generally, most organisations developformalyour business? Will the local authorities be of

assistancemobility policies that consider issues such as the levelofor will they be complicit in the process? Failing

toremuneration, relocation benefits and otherincentives.identify and deal with such risks can bring

seriousIncreasingly organisations are also linking theirmobilityconsequences; as such practices may be

criminalprograms with their t alent management strategy. Thetaxoffences under the laws of both Australia and the affair s of your employees will also get more complicated

host country and punishable with heavy finesand/or

with tax exposure in more than one location,

specificallyprisonsentences. due to the revised rules in Australia for the taxation ofemployment income. Benefits provided to yourAustralian

The map on page 15 illustrates the perceived levelsworkfor ce whilst working overseas could potentiallybe

of corruption in countries around theworld. assessable both abroad and domestically. Tax equalisation

arrangements are a common mechanism usedforemployees who work abroad for a period of time.

Another important consideration (and cost) willbethat of security for your employees. In somecountries,expatriate employees may be the target of extortion

threats, kidnapping attempts or other forms of violence.

They will need to be assured of their safet y, which

may include specific accommodation,

transportand protection arrangements as part of their overallremuneration and benefitspackage.



17/25

13. Financing The map below depicts how Islamic financeisavailable worldwide.

What are the cash flow needs of your business?

What is your projected revenue growth? Areyour

How you manage your ongoing finance raisessignificantfinancial models sound or overly

optimistic?taxation considerations both in Australia and yourtargetcountry. You should test your assumptions byusing

Do you need strong partners to finance yourfinancial modelling to determine if you can achievethe

expansion? Have you considered Islamicfinance desired debt to equity ratio recommended by your

financialas a source of funds?

advisors. You should confirm that your treasuryfunction

What is the debt equity mix of funding? Whatare is per mitted under local and Austr alian law to ensure

thatthe taxconsequences? the ter ms of your finance arrangements do not breach

theIt is import ant to stress test your financial models

and

transfer pricing rules or thin capitalisation thresholds.

Hybridrevenue targets to ensure you can service yourdebt.

financing arrangements, changes to the non-port folioThis testing should involve hypothetical parameterssuch

dividend exemption and withholding taximplications,as an interest rate hike, currency deflation or dif

ficultneed to be reviewed carefully from a tax perspective.

market conditions. During the global financialcrisis, You should stress test assumptions made in

financialsuccessful businesses continued their growth pathdue models to ensure that you can still service

theto the establishment and implementation of realisticand recommended debt levels if certain factors turn

toeffective business models that had been stress tested. the worse. You should also confirm that theproposedThere are many options available for raising finance debt to equity ratio on both the Australian and foreign

for your global expansion. There are, of course, well entity balance sheet is permitted under therelevantestablished conservative options including bank

ortaxation law as potential breaches of the transfer

intercompany loans, however, you may wish toconsider

pricing or thin capitalisation rules can result intheemerging financing options such as Islamic

finance.

denial of tax deductions.

Global Islamic Funds by Hom e Country of Asset Manager (QI

2010)

5

8 3 4 21 4

8 1

4 5

3

1

13USA 6

~ 2 .7 2 1 0 02

2 4 2 771 2

8 21 8 1 6

4

Malaysi a

~ 5 .1

1KS A K uw ait

~ 2 2 .8 ~ 4 .0 17 7

133

B ah ra in U A E

IslamicAuM

~ 1. 2 ~ 6 .1

2 6

by Country

(US$ billion):

10+1

1 10 9

0.5 1

0.1 0.5N o t e:Fu nd s pe r c ou nt ry in cl ud e t ho s e m an ag ed b y

p la yers h ead q uar t ere d i n t ha t re s p ect i ve ju ri s di ct i on .0.01 0.1

I n di cat e s t o t al A uM of I s lam i c f u n ds in US $ b il li on

Sou r ce : E ur ekah e dg e, Zaw ya Fu nd s M on it o r, E rn s t & Y ou n g an aly s is I n di cat e s t he n um b er of f un d s



18/25


14. Choosing the operating

structure

16. Foreign exchange management and

currency risk/controlsAre you looking for slow organic growth?

Will you start out with a sales office or are you Is the local currency stable orvolatile?looking for a green field development?Is currency hedging available at a reasonablecost?Are you looking to establish an immediate

localCould currency restrictions inhibit or evenprohibitpresence? If so, will you set up a joint venture the flow of international funds?

or will you acquire an existing localbusiness?

Organisations generally can hedge internationalinternalThere are a number of factors that will determine

thetransactions effectively without adverseoutcomes,method of entry into your chosen location. The

marketalthough the tax and accounting treatment canbeconditions and the opportunities to capture

immediate

complicated. The risk and commercial exposure

risesmarket share will impact the design of yourinitial

exponentially where transactions with externalsuppliersbusiness model and structure. For example, you

mayand customers areinvolved.have time to establish various operating entities

and The diagram below illustrates the fall of the Euro againstbuild up your infrastructure such as factories or, youmay the US Dollar initially triggered by the sovereign

debtonly have time to set-up a simple representative office

crisis in Greece. The fall of the Euro acceleratedwhen

from which you can immediately negotiatecustomer the crisis spread to other European countries. The

risecontracts. These factors may in turn drive yourchoice and fall of a currency can impact the economics of

anof legal operating structure and also the method you

entire project or production set-up. It cansignificantly

adopt to gain a foothold in the market. For example,

alter the margins of goods sold on the world market, aswill you establish a joint venture with a hostcountry well as the cost of overseas sourced inputs. The hedgingpartner or operative and/or set-up various contracts

of cross currency supply or loan contracts mayremove

to establish your operations? T here will be costs and

some of the risk but will also come at acost.

benefits associated with these choices which mustbeconsidered, including those concerningcommercial,legal, regulatory and tax issues.

1 . 5 5

15. Implementing the operating

structure1 . 5 0

What are the legal and administrativeprocedures

1 . 4 5

and regulatory requirements for setting upthe 1 . 4 0operating structure and starting thebusiness?

1 . 3 5Should you outsource the set-up tocorporatesecretarial service providers?

1 . 3 0

How easy is it to start-up your business in thehost

1 . 2 5

country? What is the level of red tape and howwill1 . 2 0

you go about cutting through it? You may havelocalaccounting and reporting obligations and otherlegal N ov Dec J a n Fe b Ma r A pr Ma y J un J u l A u gstatutes that you must comply with at start-up andon

2009

20 10

an ongoing basis. Penalties for non-compliancemay S ou r ce : Y aho o F in anc ebe severe, including criminal prosecutions andprisonsentences. How will you make sure that youhaveidentified all obligations and how you will satisf y them?

In addition to foreign exchange management, youneedIt may be cost effective to outsource your

corporate to ensure that the target location does not imposesecretarial, accounting and tax functions to localexperts. limitations on the movement of currency in and out

ofthecountry.



19/25

17. Business and international t axation 18. Supply chain, transfer pricing and

intellectual

propertyAre you aware of how the new Australianattributionregime in relation to controlled foreign

companiesHave you identified all possible supply

may allow you to take better advantage of chainefficiencies?efficiencies overseas?

Have you considered potential AustraliantaxHow will profits be taxed in your target location? issues as you move functions,

intellectualWhat is the treatment of losses? property and risk offshore? Is yourintellectualproperty and data protected?

Consider how tax is assessed and paid in the host

country. The timing and quantum of taxpayments

The development of an effective supply chainprocesswill impact your cash flow. Ensure that start up

losses

is vital to establishing ef ficient operations and

achievingcan be carried forward to reduce future tax liabilities. maximum profitabili ty. You should consider localandPayment of withholding taxes will typically be

requiredinternational commercial contracts, the adequacy oflocalon cross-border payments of interest, dividends and physical infrastructure beyond that which wasassessedroyalties. In cert ain jurisdictions, taxes will be

triggeredduring start- up and the reliabilit y of associated services

on the payment of technical services fees andother

on which the business willrely.payments to non residents. Double taxation

agreements You could also explore the possibility ofverticalmay operate to allocate taxing rights bet ween the

host integration such as the acquisition of key suppliersorcountry and Australia. Detailed tax due diligence

is distributors. However in doing this, you shouldgiverecommended if you are acquiring a foreign

business. consideration to any potential infrastructure,regulatoryor other constraints that may hinder such anexpansion.If you have operations in multiple countries, youmayThe reform of the Australian CFC rules

willconsider the suitability of the target location for a shared

improve the competitiveness ofAustralian services centre. An example may be movingyourbusinesses expanding overseas. Overallit

existing production or other business functionsfromwill be the c atalyst for better efficiencies

inAustralia and/or other locations to your targetlocation.foreign operations. Such decisions may result in the shifting of riskand/orintellectual property from the target location toanother

Daryn

Moore

, Ernst & Young Australia, Partner

location. This may have an impact on the coststructure

Oceania Leader International Tax Services

and profitability of your business from aninternationalperspective and give rise to transfer pricing and other

Australian international tax rules such as thecontrolled

tax issues. Revenue authorities often focus ontheseforeign company (CFC), thin capitalisation and transfer types of transactions.

pricing rules must also be considered. Australiahasand is continuing to reform the CFC rules toensurethat Australian organisations are not disadvantagedincompeting overseas. Non-portfolio dividends paid by the

foreign organisation to Australian corporate shareholders

are not taxable in Australia at the corporate level and also

do not generate franking credits. Australia does allow for

certain tax deductions for a loss or outgoing incurredinderiving foreign dividendincome.



20/25


19. Risk management an emerging market for example, moved from rank 12

in 2009 to rank 5 in 2010. You should also recogniseHave you identified areas of risk and how you

that in such an environment, to manage existingand

will address them?newly emerging risks, an effective riskmanagementAre your foreign operations susceptible to fraud? strategy and process should be implemented.Obtainingappropriate insurance in your selected host countryis

There are a number of business risks that should bean important consideration to mitigate againstpotential

considered when entering an emerging orinternational business

risks.market. To identify these risks, Ernst & Youngconducted You should also consider your organisations

exposureresearch to ascertain the top 10 business risksfacing to potential fraud. Are you at greater risk if the control ofmultinationalfirms. your organisation resides in only a handful of managers,

The Ernst & Young Business Risk Report 2010 is based rather than a structure with a board of directors and4

on interviews with industry executives andanalysts

policy and process around corporate governance,

representing 14 industry sectors. T he surveyasked

internal/ external audit and other externalcontrols?each interviewee to identif y and rank the top

businessrisks for 2010. Aggregating the results worldwide20. Exit or wind-

downand across industry sectors, resulted in thefollowing Will you continue to maintain a

presencetop 10 business risks for multinational firmsranked in this

location?byimportance: What are the legal and commercial

issues1. Uncertaint y around regulation andcompliance associated with terminating

business2. Access to credit and the impact of risinglevels and employment

contracts?of government debt

What is your strategy for redeploying3. The withdrawal of global stimulusprograms your resources?

4. The global war for talent and compensationThere are different ways to exit or wind-down yourstructure

s operations in a host country. You will need to t akeinto

5. The strategic imperative of succeeding inan account local laws, tax and financial issues. You

mustemerging market, as these markets continueto also determine if you wish to maintain a presence in

thedrive global growth

host country. Options may include liquidation, thesale6. Increased cost pressures as the result of

commodityof shares or even floating the business. The exitstrategyprice inflation and low cost

competitorsshould be part of your overall business plan.

7. Incumbent firms in transitional sectorsadjusting There are also reputational risks to consider,

particularlyto non-traditionalentrants if your business was an important employer in a

country8. Staying ahead of consumer preferencesand

or region. To avoid costly litigation orcompensationgovernment regulation on environmental

issuespayments you must also be aware of the

industrial9. Political backlash and reputational riskstriggered

relations environment. Consider whetherlocalby corporate social responsibility

breachesregulations restrict the transfer of funds overseas.

10. Rescue mergers and regulatory changes thatmayforce new

transactions.

The above list has changed considerably in bothorderand content from the 2009 report, which demonstrates

that businesses operate in a dynamic, ever-changingglobal environment that requires constantmonitoring.The business risk associated with not succeedingin

4. Ernst & Young Business Risk Report 2010



21/25

20 issues for businesses expanding

internationallyTable based on the top 20 issues and relatedquestions.

Planning for expansionYes

No

1. Strategy Clearly define and stress test yourstrategy

What are the implications of your international expansion foryourexisting business

operations?

2. Global trends Is your organisation exposed to new and emergingmarkets?

Has the composition of your major competitorschanged?

Is foreign direct investment in your industry sector

clusteredin locations where you do not have apresence?

3. Marketresearch

What research is available to provide you withinformationon market and industry

conditions? Is this information up-to -date and what is the future

outlook? Create a short list of new and emerging markets, tap into

existingnet works, talk to your advisors and visit your short listedlocations

Choosing the locationYes

No

4. Politicaland

Is the political system stable? How do you assess sovereignrisk?social

climate Does the country suf fer under high l evels of sovereigndebt?

Is there likely to be social unrest or are workersorganised inpower ful

unions?

5. Local tax and Is the tax regime business friendly and/orcompetitive?regulatory

Does the country have free trade agreements or double taxtreaties?

environment Does the regulatory regime set the scene for a sound

corporategovernanceframework?

6. Legal system Is it a common law system? If not, do you understand theoutcomes?

Do the laws and the legal and judicial system provide support forandprotection of commercial acti

vities?7. Innovationand

Should you develop your products in emerging or fast growthmarkets?incentive

s Should you have a presence at gl obal innovationclusters?

Are grants and incentives available for innovativeorganisations?

8 Location and Is economic infrastructure secure and reliable?infrastructur

e How would you deal with power outages, telecommunicationdown-time or traffic

congestion? Is the location central to your regional markets and supplier s of

goodsand ser vices?

9. Cultural Are there significant cultural differences that may impact the wayyoucompatibilit

y

conduct your business?

Are there likely to be languagebarriers?

10. Local workforce What is the availability, skill-set and cost structure of the local workforce?

21B us in es s b r ief i ng s er i es :20 i s s ue s f o r b us i ne s s es exp and in g i nt er nat i on al ly


22/25

20 issues checklist (co ntinued)

Doing business overseasYes

No

11. Global management Who will negotiate with government, customers, suppliers andbusinessteam partners? How should you manage risks such as bribery and

corruption? Who will be responsible for the recruitment of

staff?

Do you have an international management team or do youneedto build

one?

12. Globalhuman

What benefits will you provide to expatriates and what are thetaxresources consequences? Do your employees require securityprotection?considerations

Do you have a team that can deal with assignmentmanagement,immigration and tax

compliance?

Should these functions beoutsourced?

13.

Financing

What are the cash flow needs of your business? What is your

projectedrevenue grow th? Are your financial models sound or overlyoptimistic?

Do you need strong par tners to finance your expansion?Have you considered Islamic finance as a source of

funds?

What is the debt equity mix of funding? What are the taxconsequences?

14. Choosing the Are you looking for slow organic growth? Will you start outwithoperating

structure

a sales office or are you looking for a green fielddevelopment?

Are you looking to establish an immediate local presence? If so, willyouset up a joint venture or will you acquire an existing localbusiness?

15. Implementingthe

What are the legal and administrative procedures andregulatoryoperating

structure

requirements for setting up the operating structure and star

tingthebusiness?

Should you outsource the set-up to corporatesecretarialser viceproviders?

16. Foreignexchange

Is the local currency stable orvolatile?management

and Is currency hedging available at a reasonablecost?

currencyrisk/controls

Could currency restrictions inhibit or even prohibit theflow ofinternational

funds?

17. Busine ss and Are you aware of how the new Australian attributionregime ininternational ta

xationrelati on to controlled foreign companies may all ow you totakebetter advantage of efficiencies

overseas? How will profits be taxed in your target location? What

is thetreatment of losses?

18. Supplychain,

Have you identified all possible supply chainefficiencies?transfer pricing and

Have you considered potential Australian tax issues asyou

intellectualproperty move functions, intellectual property and risk

offshore?Is your intellectual property and dataprotected?

19. Risk management

Have you identified areas of risk and how w ill you addressthem?

Are your foreign operations susceptible tofraud?

20. Exit or wind- dow n Will you continue to maintain a presence in thislocation?

What are the legal and commercial issues associatedwithterminating business and empl oyment

contracts?

What is your strategy for redeploying yourresources?

B us i nes s br i ef in g se r ies :2 0 is s u es f o r bu s in es s es exp an di ng int e rn at io na ll y22


23/25


24/25

Contact details

Ernst &

Young

The Institute of Chartered

Accountantsin

AustraliaErnst & YoungCentre680 George Street,Sydney

33 Erskine Street, Sydney, NSW2000GPO Box 9985, Sydney, NSW2001

GPO Box 2646, Sydney NSW2001 Service 1300 137

322Phone +61 2 92485555 Phone 02 9290

1344

Fax +61 2 9248 5959

Fax 02 9262 1512www.ey.com Email

[email protected] Frank,Partner

charteredaccountants.com.auAsia-Pacific Chief Operating Officer

Tax LeeWhite

Phone +61 2 92484810 Executive General Manager

[email protected] Phone + 61 2 9290

5598Daryn Moore,Partner

Email [email protected] Leader International Tax

ServicesPhone +61 2 [email protected]

Greg Logue,PartnerOceania Leader Strategic Growth

MarketsPhone +61 2 [email protected]


25/25

20 Issues Bus Expanding Inter[1]

Documents

Transcript of 20 Issues Bus Expanding Inter[1]