Common Pitfalls When Entering New Markets — And How to Avoid Them
Expanding into a new market is a major milestone for any business. Whether driven by growth ambitions, access to new customers, or strategic positioning, international expansion offers significant opportunities. At the same time, it introduces legal, regulatory, and structural complexities that are often underestimated.
Many companies encounter avoidable setbacks not because their business model is weak, but because critical legal considerations are addressed too late, or not at all. Below, we explore some of the most common pitfalls businesses face when entering new markets and how a structured legal approach can help avoid them.
1. Choosing an Inappropriate Market Entry Structure
One of the earliest and most consequential decisions when entering a new market is selecting the legal structure for operations. Companies often default to familiar options, such as setting up a local subsidiary, without fully assessing whether this aligns with their commercial objectives.
Common issues include:
Overly complex structures that increase administrative and tax burdens
Limited flexibility for scaling, restructuring, or exiting the market
Misalignment between the legal setup and operational realities
How to avoid it:
A successful market entry starts with clarity on strategic goals: speed to market, level of control, risk tolerance, and long-term growth plans. Based on these factors, companies should evaluate options such as subsidiaries, branches, joint ventures, or representative offices — each with different legal and regulatory implications.
Early legal guidance helps ensure the chosen structure supports both immediate market access and future development.
2. Underestimating Local Regulatory Requirements
A frequent misconception among international businesses is that regulatory requirements are uniform across regions, particularly within the European Union. In reality, while EU law provides a framework, many obligations are implemented and enforced at the national level.
Risks of underestimating regulation include:
Delays in launching operations due to missing permits or registrations
Unexpected compliance costs
Regulatory scrutiny or enforcement actions
This is especially relevant in regulated or semi-regulated sectors, where licensing, reporting, or supervisory requirements may apply before commercial activities can begin.
How to avoid it:
Before entering a new market, businesses should conduct a regulatory assessment to identify applicable laws, sector-specific requirements, and ongoing compliance obligations. Integrating regulatory timelines into the overall market entry plan allows companies to launch with confidence and avoid costly interruptions.
3. Overlooking Corporate Governance and Compliance Obligations
Corporate governance is often treated as an internal or administrative matter. However, in many jurisdictions, governance requirements are embedded in law and carry legal consequences if ignored.
Typical governance-related pitfalls include:
Unclear allocation of decision-making authority
Failure to meet local reporting or filing obligations
Lack of awareness of directors’ duties and potential liabilities
These issues often surface during audits, disputes, financing rounds, or exit processes — when they are most difficult and expensive to fix.
How to avoid it:
From the outset, companies should establish governance frameworks that comply with local legal requirements and reflect how the business actually operates. This includes clear rules on management authority, documentation, reporting, and compliance oversight. Proper governance not only reduces legal risk but also increases transparency and credibility with stakeholders.
4. Mismanaging Employment and Workforce Regulations
Hiring local staff is often essential for successful market entry. Yet employment law is one of the most jurisdiction-specific areas of regulation, and assumptions based on home-country practices can quickly lead to problems.
Common mistakes include:
Using employment contracts drafted for another jurisdiction
Failing to comply with mandatory employee protections
Underestimating termination restrictions and collective rights
The consequences range from unenforceable contracts to disputes, penalties, and reputational harm.
How to avoid it:
Employment arrangements should always be tailored to local law. This includes contracts, workplace policies, and HR practices. Understanding mandatory benefits, working conditions, and dismissal rules allows businesses to build compliant and sustainable teams from day one.
5. Treating Legal Advice as a Reactive Measure
Perhaps the most fundamental pitfall is viewing legal advice as a “fix-it-later” service rather than a strategic tool. Many companies involve legal advisors only after issues arise, when options are limited and costs are higher.
This reactive approach often leads to:
The need to unwind or restructure flawed setups
Delays in expansion plans
Missed opportunities due to unresolved legal uncertainty
How to avoid it:
Legal considerations should be integrated into the market entry strategy from the beginning. Early involvement of legal advisors allows businesses to make informed decisions, anticipate risks, and design structures that support growth rather than constrain it.
Entering New Markets with Confidence
Successful market entry is not about eliminating risk altogether, it is about identifying, managing, and allocating risk intelligently. Companies that approach expansion strategically, with legal and regulatory insight built into their planning, are better positioned to enter new markets efficiently and sustainably.
At RPS Legal B.V., we support businesses throughout the market entry process, from initial strategy and structuring to regulatory positioning and ongoing compliance. Our Market Entry Advisory services are designed to help companies navigate complexity with clarity and confidence.
Considering entry into the Dutch or broader European market?
A structured legal approach can make the difference between a delayed launch and a successful expansion.