Just because you can, doesn’t mean you should

The majority of different local companies are being lured by the bright lights of global expansion just because their products and services are faring well in their local market. But can they safely assume that the appeal in the global markets will just be as great? And can “faring well in their local market” be enough reason, even if they are capable, for them to go global and succeed? In this blog post, I will point out some ideas that will help companies evaluate their options before advancing into the immensely competitive global market.

In the case study “Go Global-or No?” by Walter Kuemmerle, he had four commentators offer advice for the dilemma of DataClear. One of the commentators said that there are classical mistakes that companies face when they are evaluating their options to go global. According to Sander (2001), one of it is “going global for reactive instead of strategic reasons”. Most often than not, a company would want to follow quickly whenever one of its competitors ventured into the global market because they fear that when they leave a company globally unchallenged or without competition for too long, that company might be able to have a solid foothold of the global market and competing with that company is difficult. Due to this, companies fail to recognize that they are only addressing a problem by short-term strategy.  A company should take into account a broader range of tactical options because having that reason is not enough for them to go global even if they are fully capable. They need to establish a competitive advantage.

As what Michael Porter said in his article The Competitive advantage of nations, “Companies achieve competitive advantage through innovation. They approach innovation in its broadest sense, including both new technologies and new ways of doing things.” Companies sometimes overlook the fact that the local success of their products and services doesn’t actually mean that it will also appeal the same in the global market. They fail to recognize that sometimes, their product or service doesn’t fit the market and innovation is required for them to gain edge over their competitors.

The differences in consumer need, wants, and usage pattern for products plays a big role for companies when going global. According to Holt, Quelch and Taylor in How Global Markets Compete, consumers in most countries had trouble relating to the generic products and communications that resulted from companies’ least-common denominator thinking. Companies are therefore encouraged to use the “Glocal” strategy which is making sure their product features, communications, distribution and selling techniques are customized to their local consumer tastes. Having a local general manager and support staff who already know the ropes of the local practices and cultures is advisable for this can be considered a competitive advantage.

Given the circumstances and ideas, going global definitely have its pros and cons. It is in the companies’ hands on whether they decide that they are capable of going global, perceived benefits outweighs the risk, and has the resources to keep up with the global demands, cultural constraints, operations and competitions that they are about to face.  My piece advice to these companies that are aiming to be part of the global market is that they allocate the level of investment, strategy, and time needed to be successful. Be patient and plan for a long-term investment in the region and not a short-time win.

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