At some point, many businesses face the decision on whether or not to become multinational. A multinational business has certain advantages that others might not, including locating different parts of the supply chain in different countries and specializing parts of the production process in different areas of the world. What are some of the reasons why a business might want to become multinational?
The Reasons a Business Might Become Multinational
- Specialized Production: Many industries are located in different parts of the world. For example, the components of an iPhone don’t just come from one factory in one country. Instead, they use pieces from different branches of the tech industry and different parts of the world. A multinational company can produce different parts of their business in other places to maximize profits and efficiency.
- Outsourcing: Many businesses can cut costs when outsourcing tasks or services internationally. A high-labor cost country moving some of the more labor-intensive parts of the process to countries with a lower cost for labor can save a great deal on their typical production costs.
- Scale for Savings: Depending on what industry you want to become multinational in, you might face high fixed costs when getting started. Businesses that can grow quickly will experience more cost savings thanks to greater efficiency and the lower cost per item or unit that comes with producing at scale.
- Different Taxes: Another common reason why a business will become multinational is to take advantage of countries that offer lower corporate tax rates. Make sure that you work with an experienced tax planning team to ensure that you understand how your tax obligation will change and any potential ramifications as a result.
- Skilled Labor: When you become multinational, you can access the broad and deep talent pool that the globe has to offer and reap the rewards.
- More Consumers: Just like you can access a larger talent pool, you can also access a larger customer base. Selling abroad gives you a new audience excited about your products, and it might even open up new avenues that wouldn’t be possible in your own country.
Experience the Benefits of When You Become Multinational with MKS&H
MKS&H provides tax and accounting services to businesses of every size and in every industry. We can work with you to navigate the complexities one may face when expanding their international business in the United States. Contact us today for a consultation.