What are the benefits to going global?
Are You Ready To “Go Global?”
Strategic motives must drive the decisions to conduct business globally.
– But what is your action plan?
– Where do you begin?
– How do you begin?
– Which markets should be entered first?
– What would be the optimal mode of entry?
– How rapidly should you expand globally?
Definition of global entrepreneur:
– A global entrepreneur seeks out and conducts new and innovative business activities across national borders. These activities may consist of exporting, licensing, opening a new sales office, or acquiring another venture.
We are living in a world where all the major business functions in the value chain are highly globalized and deeply integrated. According to McKinsey and Company, 80 percent of the world’s GDP will be sold across international borders by 2027, compared to about 20 percent in 2001. Multinational business activity will grow from approximately $5 trillion to $70 trillion by 2027.
To understand how this is happening consider your desktop computer. It might have been assembled in Mexico with Chinese components; it uses chips designed in the United States, manufactured in Malaysia, and preinstalled with software applications that were jointly developed in India and Ireland. According to a United Nations World Investment Report, there are about 40,000 multinational corporations in the world with nearly 300,00 foreign affiliates. A global business is a multinational venture incorporated in one country that has operations in one or more other countries.
Do you have a global mindset?
A global mindset is a way of being rather than a set of skills. It is an orientation and a state of mind able to understand a product, a business, an industry sector, or a particular market, on a global basis. The executive with a global mindset has the ability to see across multiple territories, focusing on “commonalties across many markets.” Having a global mindset means the ability to scan the world from a broad perspective; “always looking for unexpected trends and opportunities that may constitute a threat or an opportunity to achieve personal, professional or organizational objectives.”
Global expansion favors smaller, entrepreneurial companies. It gives them access to capital, technology, talent, and markets that previously only big firms could reach. In fact, over 63,000 or 77 percent of all the companies involved in exporting from the United States had fewer than 100 employees.
A global entrepreneur seeks out and conducts new and innovative business activities across national borders. These activities may consist of exporting, licensing, opening a new sales office, or acquiring another venture.
Benefits to Going Global
There are many benefits for entrepreneurs participating in global business activities. We group them in three categories: strategic, financial, and production related.
Examples of strategic benefits are:
– enhancing domestic competitiveness
– reduction of dependence on existing markets
– capitalizing on the growth potential of the new country market and neighboring countries
– protecting foreign markets
– stretching and building marketing capability
– global brand building and awareness
– finding new talent
– transferring competitive information and new product ideas from those markets to other markets, or what we call “learning local and share global” activities.
Examples of financial benefits include:
– finding new customers
– increasing profits and sales
– earning a greater return from set of core competencies
– increasing the universe of potential investors
– capitalizing on tax advantages
– minimizing impact of seasonalities in local markets
Production-related benefits include:
– guaranteeing supply of raw materials
– acquiring technology and R&D capabilities
– cutting costs through global outsourcing
– improving purchasing power for customers buying locally
– realizing greater experience curve economies in production
– extending lifecycle for current products or services
– selling excess production capacity
Case In Point: Starbucks Coffee – Going Global One Cup at a Time
Howard Schultz, who led the purchase of Seattle-based Starbucks Coffee in 1987 for $250,000, later boasted, “Starbucks is going to be a global brand, in the same genre as Coke and Disney.” By 2003, Starbucks has grown from 15 stores and 100 employees in 1987 to more than 65,000 employees serving more than 22 million customers worldwide each week. It is the leading retailer, roaster and brand of specialty coffee in the world, earning more than $3.3 billion in revenues from 6,200 retail locations in 30 countries.
It was recognized by Fortune magazine as “One of the Most Recognized and Respected Global Companies.” During the annual shareholders meeting in early 2003, Starbucks Corporation celebrated the worldwide acceptance of its brand by customers around the world. “Over the past several years Starbucks has become an integral part of customers’ everyday lives,” said Schultz.
In 1983 Schultz traveled to Italy, where he was impressed with the popularity of espresso bars in Milan. He saw the potential in Seattle to develop a similar coffee bar culture and a couple of years later he founded Il Giornale, a shop that offered brewed coffee and espresso beverages made from Starbucks coffee beans. In 1987, with the backing of local angel investors, Il Giornale acquired the assets of Starbucks and changed its name to Starbucks Corporation.
By the end of the year they had 17 stores, with one in Vancouver, BC. In 1995 Starbucks Coffee International was created and formed a joint venture with SAZABY Inc., to develop Starbucks coffeehouses in Japan. A few years later they acquired the Seattle Coffee Company in the United Kingdom with more than 60 retail locations.
Ten years after Schultz purchased the company, Starbucks had reached $1 billion in global sales and he transitioned from chairman and CEO to chairman and chief global strategist.