Request B7

Writing Assignment 2

SAS INSTITUTE EXPANSION

Introduction

SAS Institute is a company that deals with analysis and software development and it is situated in Cary, in North Carolina. The company boasts for being one of the largest private software developers all over the globe. This company provides software that is used by other companies to gather, analyze, access and report on corporate data that helps in important decision making and this has seen most of the companies that appear on the Fortune 500 use the software developed by SAS. 

Overall overview of SAS Institute 

SAS began in the 1960s as a research institute part of the North Carolina State University and it was supposed to do some agricultural analysis from the United States Department of Agriculture (USDA). USDA funded the program to keep the system working and by 1976 there were over 100 customers seeking the services of SAS. This trend went on and on and by 1978 it had 21 employees and 600 customers.

In 1980 the four officials of the SAS moved it separate from the North Carolina State University ground and made its headquarters at Cary and since then the company has grown and appeared among the companies with the highest growth annually, six consecutive times. During the 1990s the company had approximately 7000 employees and as per the 2011 statistics the company had over 50,000 customers with over 200 products (Chris, 2011).

For over 35 years the company has remained private and this is because the CEO Jim Goodnight has made sure the company does not incur too much expenses and debts. Only 25%

of the revenue earned is used for research and development which is key to the success of the company.

Expansion opportunities

SAS Institute would love to expand and start offering services to other countries and their first choice is China. This is because China is an economic giant just like the United States of America and it is actually ranked second after U.S.A. If SAS has impressed over 80% of the top companies in the United States that appear on the Fortune list then, most probably it will impress the companies in China that will adopt its system and use it to make SAS more successful. 

Factors that are considered while looking for expansion opportunities include; 

How well the company is prepared to handle supplementary entities.

Is the notion-wide spread sufficiently to run numerous entities within the same region?

Does the company have the resources and capital sufficient to support numerous entities in the area?

Will the company be able to handle without fail the financial affliction?

These are some of the factors that SAS Institute has considered and they are very ready for the expansion project to China. Other advantages that SAS may be looking at is the high population of China that is advantageous when it comes to business because once the product is in the market it will sell very fast and the demand will be high furthermore, China has many companies that will love to use the software developed by SAS (Reynolds, 2003). 

Entry Mode

SAS Institute can use the entry mode of a wholly owned subsidiary which provides two ways to enter the Chinese market. These two ways include Greenfield investment and Acquisition and these ways have their advantages and disadvantages therefore, none is above the other.

The Greenfield investment is risky and costly though it guarantees full ownership and gives the firm full control on the other acquisition which has been used by most companies to enter a new market in a new country and SAS will used this entry mode. Wholly owned subsidiary (WOS) can be defined as a company whose full 100% stocks are owned by another company called the parent company. This means that SAS Institute will establish other companies while in china but the stocks are held by the main company in the United States which will act as the parent company for all the companies that will be established in China during the expansion. 

The acquisition strategy offers the fastest, and the biggest, opening intercontinental development of any of the alternatives. This acquisition strategy is a way of achieving greater market power and it is of low risk compared to Greenfield investment because outcomes can be estimated easily but the main disadvantage is SAS may increase their levels debt which has negative effects on the growth of the company. 

The main challenge for SAS as they venture into the Chinese market will be the language barrier as most Chinese speak Chinese and only few speak English but the company will overcome this by having some of its members understand Chinese language and also they should choose to work with the Chinese who know both English and Chinese (Yoshino, & Rangan, 1995),

Conclusion 

SAS can be very successful in China and may even expand to other continents such as Africa, South America and Australia. There are many risks involved, but to be successful in business one has to make risks and the most successful organizations that are multinationals walked the same path and took the same if not similar risks. 

References

SAS Institute Inc. Retrieved from,

http://www.fastcompany.com/36173/sanity-inc on May 2, 2014.

Chris, B., (2011). “SAS grows analytics market share.”Triangle Business Journal. New York: Wiley and Sons Publishers. 

Reynolds, F. (2003), Managing Exports: navigating the complex rules, controls, barriers, and laws. Age, John Wiley & Sons, Inc.,

Yoshino, M. Y., & Rangan, U. S. (1995), Strategic alliances: an entrepreneurial approach to globalization, Harvard Business Press