Week 4 Expanding the Organization

International Management Review Vol. 8 No. 2 2012

83

Essay: Developing Global Leadership:

A review of barriers and adjustments for international expansion

David Burkus

Oral Roberts University, City and Country, USA

Global expansion brings with it many new challenges and opportunities for any organization. This article

outlines four barriers to global expansion (language, regulation, culture, and competition) and provides

leaders with organizational adjustments: organizations must develop executives with a global mindset and

cultural sensitivity; leaders must decide on the level of involvement and decentralize their structure to

empower local managers. These adjustments will better prepare an organization for going global.

It’s inevitable. Just as a growing hermit crab will eventually look for a new shell to grow into, as

organizations grow, many leaders will eventually look to other countries or continents to expand into.

However, often the method that brought success at home is not the same route that will ensure success

abroad. Fortunately, there’s help for leaders looking to help their organizations go global. This article will

outline common barriers to global expansion and suggest organizational adjustments leaders will need to

make. Leaders will need to develop an understanding of these barriers and adjustments in order to know

what to expect when they’re expanding.

Organizations expanding into new countries will likely find that “business as usual” will not operate

well in the new culture (McCall & Hollenbeck, 2002). The cultural differences among locals will create

several barriers that must be overcome for a successful expansion:

Language. McCall & Hollenbeck’s (2002) research on global executives found that learning the

language was often the largest barrier to working across cultures. Though English is the unofficial

language of international business, critical information can be lost in translation. Similarly,

negotiators who do not speak the local language can find themselves at a disadvantage.

Regulation. Differences in labor and consumer regulations can make doing business more difficult

in foreign countries (Black, Morrison, & Gregersen, 1999). For instance, emission regulations for

computer models are stricter in Europe than the United States; as a result, product lines may have to

be customized. Awareness of regulatory standards is vital in order to remain competitive with local

firms.

Culture. The cultural norms of interaction affect the way business transactions are made, even if all

parties interact in the same language. In the United States, many executives focus on doing business

first and letting personal relationships build as the business relationship does (Black, Morrison, &

Gregersen, 1999). In many cultures, this order is reversed. Knowledge of this and other cultural

differences can make interactions with local executives significantly less complicated.

Competitors. As companies enter new markets, they inevitably meet local competitors. These

competitors have knowledge of local markets that foreign companies may not. For example,

McDonald’s spent 13 months trying to sell beef hamburgers in India before an understanding of local

beliefs convinced them to use lamb (Rosen, Digh, Singer & Philips, 2000). Partnering with local

competitors or conducting extensive competitive analysis is vital for gaining this market knowledge.

These four barriers are not exhaustive, just common. When crossing cultures, organizational leaders

can expect to encounter barriers similar to the ones listed above and, in some cases, drastically

different ones.

Whatever barriers these leaders face, their first step is to prepare. Organizations increase their

chances of successful expansion by adjusting the way they operate. Several adjustments may need to be

made to prepare an executive or organization for going global:

Develop a global mindset. Executives preparing for expansion must develop a mindset that is open

and aware of cultural diversity yet can synthesize across this diversity (Gupta & Givindarajan, 2002).

Organizational leaders must be able to synthesize their companies global strategy with the needs of

the local organization and local market.