From the “Logistics of Logistics” podcast; June 4th, 2020
Joseph Paris and Joe Lynch discuss 5 challenges to expanding into Europe. As an American entrepreneur and recognized expert in operational excellence living in Germany, Joe Paris has unique, first-hand insights into the challenges facing American companies expanding into Europe.
Key Takeaways – 5 Challenges to Expanding into Europe
In Joe’s experience the biggest problems American’s companies struggle when expanding into Europe, for the following reasons:
- Taxation is a major concern when expanding into Europe because you will most likely be doing business in multiple countries, with very different tax codes. American businesspeople who are used to the large US market underestimate the accounting and tax expertise required to do business in the European market.
- Human resources are very different in Europe. In the USA, most employees are usually “at will” which means they can be released with a minimum of hassle. In Europe, employees are protected by government regulations and employment contracts. As a result, employing people in Europe is more rigid and expensive.
- Investment capital in Europe tends to be risk-averse and less plentiful compared to the USA. Companies expanding into Europe will need to pay extra attention to how their expansion will be financed.
- Lack of flexibility is a challenge for US businesspeople who are used to developing plans for the US market. In Joe’s experience, companies expanding into Europe should avoid big investments in real estate, people, and operations until they fully understand the market. Companies are better off entering the market slowly, partnering, and outsourcing to avoid a big investment. Postpone investment until you have a better understanding of the customer, risks, and opportunities.
- Environmental regulations in Europe are very different and often more stringent than in the USA. For businesspeople interested in European expansion, understanding the environmental impact and country-specific regulations is very important.
- Bonus challenge! Understanding customs and cultures is sometimes a struggle for companies expanding into Europe. Each country has its own unique culture and customs, which is very different from the US market, which is mostly homogenous. In general, Europeans have more national holidays, vacation days, and sick days. They also value their time off and create boundaries between work and play, which contrasts greatly to the culture of most American businesspeople.