The KSeeker

In Search of Knowledge…

Book Notes – Going Global or not?

Posted by Girish Krishnan on June 27, 2006

Notes from the book “When your strategy stalls what will you do?”

Go Global or No?

This one talks about the dilemma faced by the CEO of a $5 million data analysis package company called ClearCloud when he gets the news that one of their competitors is going global. ClearCloud currently is targeted only at the US Market and has the potential to be customized to serve different domains outside the telecommunications and financial industries it caters to now.

The question is whether clearcloud should take the plunge into new markets at the risk of overreaching its capabilities or stick to its knitting at the cost of missing key growth opportunities

Some view points:

Businesses win by building from a strong, defensible market position with a top-performing product and a supporting organizational structureHence we need to fortify our home base before going global.

The customer

  • Need to find out if customers will want to implement the product on a global basis

Whether to go global or not

  • Going global shouldn’t be for reactive reasons – need to have some strategic reasons too
  • The “Going international” strategy shouldn’t be taken just because the competition preempted it.
  • An International strategy should be based on at least one of three competitive advantages.
    • Arbitrage – leveraging advantages available in specific countries (for instance, low-cost capital or labor, special expertise, or favourable tax positions)
    • Strategic positioning – preempting a competitor, gaining a first mover advantage or locking in favourable terms with suppliers
    • Replicability – reproducing a product or a business model cost effectively in many countries in order to gain scale advantages.
  • Numbers should be worked out and we need to make sure that they don’t underestimate the cost of international expansion
    • Does the company have enough war chest to defend its share as well as to go international?
    • Is the immediate priority to select markets where the company can build profitable market share quickly.?
    • Have you taken into account cost of local product customization and support
      International sales teams take quite a long time before they close the first deal – are we prepared to wait?
    • Is the organization ready for global expansion – first we need a strategy and time line for domestic market. Planning should take into account the current competitors, duration of the sales cycle etc
  • Full range of options should be worked out before taking the decision
    • Expansion Alternatives need to be considered.
    • Building international sales offices vs alliance/joint ventures
    • Evaluation of potential partners systematically
    • Targeting global companies based in US could be a good way to begin expanding overseas.
    • Better than a more daring go-it-alone approach, it could look at fresh input and capital from a strong VC in Europe or asia
    • Staffing issues need to be thought about.

 

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