Sunday, March 3, 2013

Is Global Expansion Right For Your Business?


The fastest way to global expansion and for the most part the most efficient way relative to financial and other resources would be to invest in foreign expansion (mergers and acquisitions). The ability to find existing businesses in other countries to either partner with or acquire helps to quickly grow and develop the local talent and expertise needed to expand globally. Although this has proven to be an extremely successful strategy, there are some obvious risks that could make this strategy go horribly wrong. Most large corporations have the capital and expertise to go into these various global markets and turn the businesses they acquire around. However without that expertise a company would have to rely on their partners or the acquired company to provide the leadership and integration. This could be dangerous if there was some reluctance by the partner or acquired company to share their expertise or buy in to the global strategy.

To overcome the “reluctance” obstacle moving some headquarters to the foreign locations would be beneficial. This is also very critical from a business development perspective since it is very important to understand not only the language but all the cultural etiquette when trying to expand in foreign countries.This is not only a necessary business move it is a very strategic political move. As these emerging markets become larger players on a global and political scale, it would not be acceptable to only use key leaders from the US to run these foreign companies. There would definitely be a political backlash and eventually an unwillingness to do business. Having local operations and leadership demonstrates a commitment to the region but also respect relative to a willingness to learn and do business correctly within the particular culture.

Most companies today have a strategy of internationalizing the senior management ranks within their organizations. This simply means expanding the senior leadership team to include leaders from the local regions instead of just having leaders from the US manage the foreign companies. This is a necessity as foreign governments, work forces and economies are becoming less tolerant of senior leaders who are not adept to the language and/or culture in which they do business. Keeping a centralized leadership structure would be very beneficial however leaving key executive slots open for local leadership would greatly assist in business development and government lobbying efforts.

In the 1970's and 80's General Electric was most famous for demonstrating the ability to grow fast and efficient through globalization. Their strategy for expanding globally was effective for the time they decided to pursue it however it may take different forms for other organizations today. Since smaller companies are expanding globally there are several important factors to consider: Deciding what business would be optimal for expansion, understanding the local foreign economy enough to know what approach to take and knowing what products and services to offer are all critical components. Is it mergers and acquisitions, working with a key partner or is it building from the ground up? Finally having the local presence within the leadership team is a key necessity from a goodwill, political and business development perspective. 

Rodney Brown

Mr. Brown brings extensive experience building companies and leading sales, operations and service organizations in technology and healthcare. He is the Executive Director of HealthNet connect and CEO of HNcBNc.

The views and opinions on this blog are my own.

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