Managing Global Expansion: A Conceptual Framework

1. Globalization: discretionary option  strategic imperative (medium – large corp)

a. Growth imperative:
i. Success + top talent
ii. Look to emerging markets for new opps
b. Efficiency Imperative:
i. If activity in value chain exceeds possible sales volume  need for global
presence (for cost advantage)
ii. Mercedes (DaimlerChrysler) example: leveraged smaller US market share
to strengthen competiveness in Germany
c. Knowledge imperative:
i. “create local know-how”
ii. Ex. India: innovation in CT scanner production, Indonesia: developed
innovations in reduc. Cost of cough syrup
d. Globalization of Customers: Worldwide corps
i. if customers of an American corp globalize, corp must respond
1. customer prefer worldwide consistency/coordination (sourcing,
services)
2. prefer to work w/ fewer supply partners
3. multiple suppliers pose risk of replacement
e. Globalization of competitors:
i. Respond to moves in competitive space
ii. First mover advantage
iii. Use presence to improve position in home market
2. Choice of Products: globalize entire portfolio or subset of products
a. 3 capabilities
i. knowledge of foreign markets
ii. how to manage people in foreign locations
iii. manage foreign subsidiaries
b. must avoid “strangers in a strange land”
c. globalization of all product lines risky: max return + min risk
 d.
i. 1st dimension: magnitude of glob. (higher when 5 imperatives strong);
opportunity to mix current strengths and processes globally
ii. 2nd requirement for local adaptation:
3. Strategic Markets:
a. Market potential x Learning potential

i.
b. market potential: size and growth expectations
c. learning potential drivers:
i. sophisticated/demanding customers
1. tougher standards
2. force to accelerate cultural understanding
3. force innovation
ii. pace of tech evolution
 d.
i. Ability to exploit market: height of entry barriers, intensity of completion
ii. Approach differs depending on importance
iii. Beachhead market: one tat closely resembles target market but is safer
(for learning)
4. Mode of Entry:
a. Export vs local production?
b. Extent of ownership control?

c.

d. Local production if:

i. Size of local market > min efficient scale of prod. (larger the market 
more local prod)
ii. Shipping + tariff costs
iii. Need for local customization (design, etc)
iv. Local content requirement (?)
e. Alliance:
i. If differences are high
 ii. If low operational integration
iii. Lower risk of asymmetric learning
iv. If company has less capital
v. Govt regulation require local equity
f. Greenfield operation vs acquisition
i. Greenfield op: freedom to impose its own mgmt.
1. Slower entry
2. More intense local competition (by addition)
ii. Cross border acquisition: can be tougher b/c of integration

g.
5. Setting up
a. Transplant corp dna: core elements of its biz model (several macro obstacles)
b. Clarifying core beliefs and practices (generalize where needed)
c. Transplanting core beliefs/practices
d. Embedding core beliefs/practices: Actually instilling the culture
6. Winning local
a. Host country customers
i. Culture
ii. Target customer
b. Winning against host country comp
i. Acquiring dominant local comp
ii. Acquire weaker
iii. Poorly defended niche
iv. Frontal attack on entrenched incumbents
c. Mgmt of relationships / host govt
7. Speed of Global expansion:
a. Rapid expansion is ideal but
b. Can spread company thin
c. Best if
i. Easy replicated
ii. Scale econ important
iii. High mgmt. capacity