Setting up

If you are seeking to develop your business in a foreign market or region, you will need to consider establishing a more substantial operation. This can be for a variety of reasons such as lower costs, increasing market penetration, improving customer service and complying with government regulations.

Most firms only set up an overseas operation after testing the market. This can be a logical progression from working with an agent or distributor as a company grows its sales. There may be a demand from customers that the exporter has a local presence, and to win government contracts this could actually be a requirement.

In most countries around the world there are government-backed economic development organisations ready and willing to support setting up a more permanent base in the local market. They will be able to help with advice, support and introductions to other companies who have set up similar operations.

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Types of overseas operations

Setting up an overseas operation involves some form of direct investment. There are five main options.

Virtual office

This involves setting up an overseas office address and phone number, using a managed office facility. A virtual office provides a fully serviced workspace, with a receptionist to answer your calls, without the capital expense of owning, leasing, and equipping your own office. This can be a flexible low-cost option to start up an operation overseas. However, this approach will probably only work short term.

Local representative office

This is an overseas office established to conduct marketing research or customer liaising activities. This is generally easier to establish than a branch or subsidiary. Companies often use this type of set up in emerging markets such as China, India and Vietnam. They have the restrictions of not being able to invoice locally for goods or services.

Branch office

A branch can sell directly to the market, promote the brand, and conduct business in its own name. However, as it’s not a legal separate entity the UK parent company remains fully liable for its activities.

Wholly owned subsidiary

This is an incorporated entity created in the overseas country. There may be tax advantages and as a limited liability company it provides more credibility with banks, service providers, and partners. However, there can be conflicting interests and objectives between the local subsidiary and the parent company. Additionally, this is a major investment and therefore whilst providing more control it is a higher risk than the other options.


This is the purchase and complete take-over of another business in your sector, and can be an important way of growing your business in an overseas market. You have immediate access to more customers and have a local set-up. However, the culture and values of your UK business may clash with the locally engaged staff of the business that you acquire, so this should be carefully managed. Again this is a major financial commitment and there is considerable risk if the acquisition goes wrong.

To get ready for setting up a business abroad you will need to think about the following steps.

Step 1: Identify the set up opportunity

Taking the following actions will help you identify if there is an opportunity to set up a business abroad:

Step 2: Establish the business abroad

Taking the following actions will help you to establish the business abroad:

Step 3: Manage the new business operation

Taking the following actions will help you to manage the new business operation: