Selection of the Target Market
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
Few businesses can afford to enter every market that is available to them. Even
the biggest corporations in the world, like Nestlé or General Electric, have to be
smart in their choice of markets. Along with determining when to enter them,
they also need to consider the relative benefits of having a direct or indirect
presence in various parts of the world. Small and midsized businesses are
frequently limited to an indirect presence; for them, forming partnerships with
suppliers, consumers, and occasionally rival businesses is crucial to obtaining a
global competitive edge. However, a plan that works well for one business may
not work well for another.
Finding the most appealing international markets, figuring out when to enter
them, and choosing the correct partners and investment level have proven to be
challenging for many businesses, particularly when dealing with big rising
markets like China. For instance, it is now widely acknowledged that Western
automakers overinvested and entered China much too early in the hopes of
gaining a "first-mover advantage" that would yield higher profits. The real
world was much different. The majority of businesses experienced significant
financial losses, difficulties collaborating with regional partners, and a decline
in their technological edge as a result of "leakage." None were able to generate
enough sales to cover their investment.
In the face of poorly timed strategic decisions or rapidly shifting competition
conditions, even extremely successful multinational corporations frequently
experience significant losses on their foreign endeavors at initially, and
occasionally are forced to reduce their abroad operations or even abandon entire
nations or areas. For instance, not all of Wal-Mart's international initiatives have
been successful, which continues to irritate investors. The business paid $10.8
billion to acquire the British supermarket retailer Asda in 1999. Asda was
previously positioned as "Wal-Mart lite" in addition to being profitable and
healthy. Asda is currently far behind Tesco, its top competitor. Despite Wal-
Mart's thriving UK businesses, sales growth has slowed recently, and Asda has
failed profit forecasts for multiple quarters in a succession and faces additional
declines in the UK market.
This outcome follows Wal-Mart's expensive withdrawal from the German
market. At a loss of $1 billion, it sold its 85 stores there to competitor Metro in
2005. Eight years after entering the fiercely competitive German market, Wal-
Mart executives, used to using their company's enormous market power to
pressure suppliers, acknowledged that they had failed to achieve the economies
of scale necessary in Germany to outbid competitors on price, leading to an
early and costly exit.
Why is it so hard to choose and enter international markets? According to
research, a widespread "the grass is always greener" mentality affects many
organizations' global strategic decision-making, particularly those with little
international experience, and leads them to overestimate the allure of overseas
markets. According to Competing in a Global World (Page 4), "distance," in its
broadest sense, can be a significant barrier to success on a global scale if it is
not properly understood and compensated for: Administrative differences can
slow expansion plans, make it harder to attract the right talent, and raise the cost
of doing business; cultural differences can cause businesses to overestimate the
strength of their brands or the appeal of their products; geographic distance
affects how well people communicate and coordinate; and economic distance
has a direct impact on costs and revenues.
The fact that creating a worldwide presence takes time and significant resources
is a related problem. Ideally, consumer demand determines how quickly a
company expands internationally. However, in some cases, securing a long-term
competitive edge requires expanding before direct opportunity. However, early
commitment to even the most promising long-term market makes it impossible
to generate a sufficient return on invested money, as many businesses that
entered China in anticipation of its membership in the World Trade
Organization have discovered. Because of this, more and more businesses—
especially small and midsized ones—are choosing global expansion strategies
that need less direct investment. In many industries, strategic alliances have
reduced the significance of vertical or horizontal integration for profitability and
shareholder value. Alliances increase a company's fixed cost contribution while
broadening its worldwide reach. In addition, they can be excellent windows into
technology and significantly increase the chances of developing the core skills
required to successfully compete globally.
Lastly, a multifaceted approach is necessary for a global assessment of market
potential, which adds complexity. In many businesses, there are two types of
markets: "must" markets, where a company must compete to achieve its global
goals, and "nice-to-be-in" markets, where involvement is desired but not
necessary. "Must" markets are those that define technological leadership, are
crucial from a volume standpoint, and are the sites of important competitive
fights. For instance, Motorola views Europe as the main arena for competition
in the cell phone sector, but it sources a large portion of its technology from
Japan and its sales volume from the US.
