When looking to invest in globalizing companies that are about to go global there are many important factors to take into account. These factors can determine whether a company will thrive abroad, or sink under the pressures of a foreign market. Before investing, it is imperative to fully evaluate the plethora of influences that can indicate whether a company is truly ready to make the leap from domestic to global.
1. Does the Opportunity Fit the Globalization Strategy?
When a company decides to go global, it should only be under the precondition that globalizing falls in line with the company’s greater, long-term business strategy. This is a common error that many multinationals make as they move into emerging markets —forgetting the importance of aligning their expansion plans with the strategy and objectives that made globalization an opportunity in the first place. Robert Coles, co-founder and chair of the Centre for Alternative Leadership & Management, agrees and states that, “Most companies internationalize on the back of opportunity rather than strategy…But if your objectives aren’t clear, one thing will happen, you’ll achieve the wrong objectives.” If a company is ignoring its core business strategy for the short term profits of going global, it’s most likely a bad investment.
2. One-Size-Fits-None for Globalizing Companies
Companies often move into a new, overseas market without properly taking into account the cultural differences and needs of their new consumers. This leads to a supply and demand mismatch that is bad for both the company, and its profit margins. The assumption that a product or service will suit all audiences in all cultures is a massive pitfall. One of the most successful tactics for a globalizing company is making it seem as if their product or service is actually a local brand. A distinctly outstanding instance of this is Austrian owned, Red Bull. “Red Bull really looks like a product from a global economy. It doesn’t look like a traditional American soft drink — it’s not in a 12-ounce can, it’s not sold in a bottle, and it doesn’t have script lettering like Pepsi or Coke. It looks European. That matters,” explains Harvard Business School professor Nancy F. Koehn.
3. International Partnerships and Relationships
One of the greatest indicators of a company’s ability to successfully globalize is their positioning with international relationships and partners. If a company is able to align itself with other brands and partners that are already established and well known in countries of interest, the hurdle of assimilating into a new economy becomes exponentially easier. Athletic equipment and apparel company, Nike, is one of the most prominent examples of such a global company. In 2002, Nike established a key 13-year relationship managing the world famous Manchester United Football Club’s merchandising operation. This type of international partnership gave Nike a firm foothold in both the U.K., and across the entire football watching world. As such, Nike not only aligned itself with an already famous brand, it also engrained itself in a culture of hundreds of millions of consumers.
Before investing in a domestic company, it is important for you to understand their goals. Are they looking to expand to new markets? If so, have they thought through strategies to move abroad? If you are investing in globalizing companies, suggest that they connect with an experienced globalization partner who can walk them through the detailed process of going global.
Written by Jordan Papolos Technical Writer at CSOFT
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