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Economic interdependence and globalization have bolstered the global economy, growing the global gross domestic product (GDP) by USD25 trillion between 2000 and 2016. Because of the benefits of global growth, you might have been thinking about how to expand your Netherlands-based company internationally.
If you plan to take your company to international markets, you’ll want to consider the current state of your company, how growth could benefit you, and the best countries for growth. Then, create a plan on how to expand your Netherlands-based business globally, and consider working with a global employment platform to avoid needing to establish an entity, if you’re currently establishing an entity or to learn the business laws of the country of expansion.
Is now a good time for companies to grow outside the Netherlands?
Although small in size, the Netherlands is one of the most competitive economies globally, ranking fourth in the Institute for Management Development’s annual World Competitiveness Ranking report. A highly educated, multilingual workforce and open economy have attracted international companies in recent years. International trade is a crucial part of the economy: In 2018, exports accounted for 34 percent of Dutch GDP. If you’re looking to grow your company in the Netherlands, international collaboration is easier than ever right now.
The country also offers tax incentives for international businesses to open subsidiaries. The 30 percent tax reimbursement ruling allows employers of highly skilled workers to pay up to 30 percent of salaries as a tax-free allowance. The ruling offsets the costs of working internationally. The 30 percent ruling benefits both international companies and the economy of the Netherlands, bringing employees with in-demand skills to the country.
Further, the global Covid-19 pandemic has demonstrated the importance of relying on multiple markets. When considering both the pandemic and economic fallout from Brexit, European companies have been searching to expand their markets in recent years to reduce risk during uncertain times. International growth will help your company minimize risk by avoiding reliance on a single target market.
The Covid-19 pandemic also presents a new potential for remote work —70 percent of chief information officers surveyed were working remotely in March 2021, and many respondents intend to continue working remotely. Your company probably already has some resources in place for supporting a remote team, making it easier to implement remote work into your global growth plan. That way, new hires can stay in their current location while you continue to expand globally.
You’ll also want to evaluate whether your company is ready for global growth. Three factors influence whether international growth will benefit your company:
- You need to expand to reach your fullest potential: If your company’s successful enough to open in a new market, you’ve exhausted your domestic market options, your employees are well-trained and satisfied, and you have all the necessary tools to conduct business at your existing locations, it might be time to consider growing into international markets.
- You’ve studied both benefits and complexities that come with global growth: International growth also has risks. Part of understanding growth into the global marketplace is recognizing if international markets will respond to your product. Conduct market research to adjust your existing products or services to the diverse tastes of global customers and make a plan in case of unpredictable changes in the market.
- Your business plan is sound: A solid business plan, including a company structure that’s easily adaptable to international markets, can be the reason for your company’s success or failure with global growth. Consider how international packaging and manufacturing laws and requirements might be different, how you might have to change your current marketing methods and products, and an estimated timeframe until you’ll make a return on investment (ROI). Additionally, review your financial plan to ensure going global is the correct business decision.
Why is global expansion beneficial for companies in the Netherlands?
Companies in the Netherlands are poised to benefit from global growth. As the fifth-largest economy in the European Union, the World Bank ranks the Netherlands in the top 40 percent of the easiest countries to do business with globally. The Netherlands is also strategically located as a major European transportation hub, with easy access to European, African, and Middle Eastern markets. Global expansion is good for companies in the Netherlands because it can increase revenue from access to new markets, diversify your talent, and give your company a competitive advantage.
Below, we’ll discuss three major benefits of growing your Netherlands-based company globally.
1. Increase revenue
International growth can open your company to new markets and customers, which will ultimately increase revenue. Organizations that actively develop new markets and invest in new assets often recover faster from recessions than defensive companies or those that didn’t capitalize on growth opportunities. Participating in the global marketplace can expand your customer base, grow your market share, and increase your revenue.
However, understanding where to expand your company is also crucial in increasing revenue from global growth. Conduct market research to ensure a legitimate demand exists for your products or services in the desired market. Companies can also reduce costs through international growth, as some governments offer incentives for companies to invest. Countries encourage international direct investment through financial incentives like grants and loans, fiscal incentives like tax holidays or reductions, and additional economic incentives like subsidized infrastructure or market preferences.
2. Diversify your talent and resources
Hiring workers based on location is a business practice of the past. Today, remote work allows your employees to be anywhere in the world. Companies that depend on a remote workforce have the advantage of employing team members with diverse skill sets, technology, educational backgrounds, and language skills.
Further, employing people in the areas you’re offering your products and services will ensure your team understands how to reach customers best. Even if your company is planning on growing globally in the future, having existing talent in a particular country before expanding can give your company a competitive advantage when you’re ready to move into that country.
Growing your company internationally can also give you access to resources that might not be available in the Netherlands. Successful companies know how to source resources in the most cost-effective way, including those that aren’t readily available in their primary locations. International expansion lets your company access specialty labor, raw materials only available in specific locations, industry-relevant technology, and the most cost-efficient production and manufacturing.
3. Increase your global competitive advantage
Expanding into international markets generally gives your company an advantage over competitors. Growing companies understand the importance of global competition and know when to tap into global markets. By operating somewhere the competition doesn’t target, you build strong brand awareness and customer loyalty first.
Diversifying your revenue sources will also give you stability during times of economic turbulence. Companies that rely on a single-source supply chain lack stability and are less likely to be able to handle disturbances in the global economy. On the other hand, companies that rely on the worldwide supply network practice better risk management and experience increased stability. Accessing new markets gives you insight into consumer trends and helps ensure you have enough revenue to keep your company stable in a crisis.
Which countries offer the best growth opportunity for Netherland-based companies?
When thinking about how to expand your Netherlands-based company internationally, you’ll have to consider the best markets for your products or services. The top country of origin for imports and destinations for exports in 2020 was Germany, followed by Belgium. The U.S., the UK, and France are also top importers. Ideal global expansion locations for Netherlands-based companies include Germany, Belgium, France, the U.S., and the UK.
Germany and the Netherlands have close relations in government, trade, and civil life. Germany is the top country of origin for imports to the Netherlands and exports from the Netherlands. Its dynamic economy, which is the largest in the EU, and location are ideal for growing your company internationally.
Although Germany is currently experiencing a skilled worker shortage, the country’s economy has thrived in recent years. The lack of skilled labor has led the country to open its borders to skilled immigrants. The country’s laws also allow for unrestricted movement throughout the EU, making hiring workers from anywhere easy. Further, Germany’s a European leader for its international trade fairs, with two-thirds of major global industrial events occurring in Germany.
Belgium is the second leading trade partner with the Netherlands. You’ll find ease in expanding your Netherlands-based company to markets in Belgium as the two countries already have an economic alliance and social similarities. Dutch (Flemish) is one of Belgium’s three official languages, and the two countries consult each other regularly for defense and domestic and international affairs.
The two countries also experience a strong economic union that increases the ease of growing into markets in Belgium. The goal of the Benelux Economic Union is to ensure the free circulation of people, products, capital, and services between Belgium, the Netherlands, and Luxembourg, resulting in the first international labor market that was completely free. The most significant sectors in Belgium include public administration, defense, education, health and social work, wholesale retail and food services, and industry.
Beyond being a top trade partner with the Netherlands, France also shares the same European values. The countries released a statement claiming allegiance to European Union (EU) values, including human rights, freedom of expression, and economic prosperity based on sustainable growth. Each government will create a plan for regular consultations to maintain a strong bilateral relationship.
Both countries also maintain a commitment to strengthening the autonomy of EU member states while still keeping an open economy. One of the recovery measures from the economic recession caused by the Covid-19 pandemic is strengthening economic convergence while ensuring states are free from unnecessary dependency. Since the French and Dutch governments are actively encouraging economic collaboration, now is the perfect time to expand into France.
4. The U.S.
The partnership between the U.S. and the Netherlands is one of America’s oldest continuous bilateral relationships, with diplomatic relations beginning between the two nations in 1782. Each nation demonstrates a commitment to free trade, making the U.S. an excellent location for global growth. The Netherlands is the eighth largest investor of American goods and supports about 700,000 jobs in the U.S. On the other hand, the U.S. is the Netherlands’ largest international investor.
Further, employees can easily travel to and from the U.S. under the Visa Waiver Program. This program allows people from participating countries to travel to the U.S. for either business or tourist purposes for 90 days without a visa. The top three U.S. states to consider when growing your company include Texas, California, and Pennsylvania. These states have both the highest export levels to the Netherlands and the most international direct investment.
5. The UK
Because an increasing number of companies in the UK are turning to the Netherlands after Brexit, current relations between the two countries are strong. Companies in the UK are eager to still serve customers in the EU after the UK’s departure.
Now that the UK isn’t part of the EU, product exportation is different. You’ll have to file an export declaration, and customers receiving your product might have to pay import fees. You can use the European Commission Access Database to review import tariffs, duties, trade barriers, and required international shipping documents. You’ll also have to apply for an economic operators registration and identification (EORI) number with Dutch Customs before shipping internationally.
How can you go international with your Netherlands-based company?
After determining which country you’re going to expand to, create a plan to expand your Netherlands-based company globally. Before you grow your company, you must first perform market research, evaluate the risks of global growth, and understand the hiring policies in the countries where you’re expanding.
1. Perform market research
After you ensure you have a solid business plan, you’ll want to research different countries you’re planning on including in your global growth plan before jumping into international markets. Have a thorough understanding of the competitive environments of the countries in which you’re expanding to market to customers in your target demographic.
Know the competitive landscape and demographic information of your target customer bases in your growth locations. Conduct product usability testing and focus groups to ensure your products land well with the target customer demographic, and perform competitive price analysis before offering your products internationally. Understanding your customers will help ensure you attract customers before competitors.
2. Know the local labor laws
Research the labor and hiring laws of different countries to ensure you’re giving adequate time off, benefits, wage, and severance if you have to let employees go from your company. You’ll also want to consider whether you’re expanding to a country with strong social programs, as these countries tend to have higher payroll taxes. Further, ensure you understand how to register your company, open bank accounts, and file with tax agencies in your growth location.
You should also research specific countries’ employment regulations, including payroll, compensation, and benefits. You might find it easier to leverage a global employment platform to set up your payroll since you often can’t have international employees on your company’s payroll if you don’t have a business entity in that country. Other factors you’ll want to consider include Pay As You Earn (PAYE) systems to pay social contributions and taxes and ensure you comply with privacy data laws.
For example, the EU upholds the General Data Protection Regulation (GDPR), one of the world’s most stringent data privacy laws. If a company is conducting business with countries in the EU, they must carefully process sensitive customer and personnel data to protect their privacy. The Dutch Data Protection Authority (DPA) may issue a large fine if you fail to comply with the GDPR.
To comply with the GDPR, companies must keep a record of all data processing activities, document and report any data leaks, and always ask permission before processing data. You might want to attend an information session about the GDPR or hire staff who can help you stay compliant. To collect personal data, you should meet at least one of the six following requirements:
- Obtain permission to collect data.
- You have to collect data to execute an agreement, like if you need address information to send a product to customers.
- Data is required for a legal obligation.
- Data is required to protect someone’s life and health when you are unable to ask for permission.
- You need data for general interest tasks.
- You have justified cause, such as needing to collect data to pay wages.
Beyond researching the laws and policies of the location you’re expanding to, you should also examine its physical infrastructure, including available ports of entry, local shipping routes, and distributors and vendors in the area. Review your business contacts to see if you know any individuals with relevant information about the specific country you’re planning on expanding to before choosing to grow internationally.
3. Understand country-specific talent pool
Finally, different countries have various HR and hiring policies and practices you’ll have to consider during the global recruitment process. You’ll need to know how to recruit team members with the right skill sets for your company. Research a country’s labor force before you start your recruitment efforts, as applicants’ educational backgrounds and skills could differ from what you’re used to. Understanding your preferred applicants’backgrounds and professional experiences will also help you recruit the most qualified individuals for your company.
Globalization Partners is your international business growth solution
Globalization Partners is the global growth solution to expand your Netherlands-based company internationally. Learn more about our global employment platform for companies in the Netherlands and request a proposal today to learn how we can help you grow worldwide.