When You Shouldn’t Go Global

Presented by:Diana Lim

2010.09.28

Marcus Alexander and Harry KorineHarvard Business Review | December 2008

20th Century Walls

Political Walls Trade Walls Transportation Walls Communication Walls

The Walls Come Tumbling Down

1940 1950 1960 1970 1980 1990 20000

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Tariffs for Industrialized Countries 1940-2000

Aver

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The Walls Come Tumbling Down

The Walls Come Tumbling Down

The Walls Come Tumbling Down

Question

2 diseases: Rare and Common If they’re not treated they are equally severe

Economic Globalization

Perceived incentives

Sense of inevitability

Pressure on companies to globalize

Revlon

Revlon’s expansion in Brazil in Brazil, the Camellia flower is for funeral

purpose Revlon launched a perfume with the aroma

of Camellia They need to recall back their product and

find other market to sell it Brand name infected, spent extra time,

money and effort

Avoiding Ill-Fated Strategies

Are there potential benefits for our company?

Do you have the necessary management skills?

Will the costs outweigh the benefits?

eBay’s failure in Japan may well have been prevented with a self-assessment like this

eBay

from eBay’s foundation in 1995 they were profitable

launched its Japanese site on February 28, 2000

Two years later when eBay pulled the plug on its Japanese operations – pulverized by Yahoo! Japan Auctions

eBay

they hired the wrong person as country manager tried to force Japanese consumers to fit the

company’s American-centric service model made grandiose announcements about their

entry into the Japanese market, well before they had a localized product ready to launch in Japan

missing the first mover advantage was perhaps eBay’s single biggest blunder

Globalization’s Siren Song

Deregulated Industries (telecom, postal service, utilities) – increased competition in home markets and new found freedom

Service Industries (retail, banking, insurance) – scale economies and growth beyond home markets

Manufacturing Industries (automobiles and communication equipment) – mergers and consolidation in order to survive

Vodafone

World's largest mobile telecom company measured by revenues and the world's second largest measured by subscribers

Vodafone acquired J-phone in 2001 full range of mobiles with features and

styling almost a generation behind those available from the other major carriers

Did not increase investment to catch up

delay in launching accompanying 3G services

Unloaded 98% of its share in 2006

Walmart

Retail giant with a tremendous success story Entered in 1998, exited in 2006 Difference in product preferences Located outside cities Do not distinguish between discount and normal

prices – no compelling reason Visually oriented customers (prefer the department store-like, neat, clean, and sophisticated atmosphere)

Daimler-Benz and Chrysler

“Mercedes was universally perceived as the fancy, special brand, while Chrysler, Dodge, Plymouth and Jeep were the poorer, blue collar relations”

-- James Holden, President of Chrysler

Daimler-Benz luxury vehicles had captured less than 1% of the American markets.

Chrysler's primary reason for teaming with Daimler-Benz is to extend its international reach

Globalization is getting more complex and this change is getting more rapid.

The future will be more unpredictable

"I think there is a world market for maybe five computers”

Thomas Watson, chairman of IBM, 1943

“Sen. Obama cannot possibly believe, and doesn't even act as if he believes, that he can be elected president of the United States next year.”

– Christopher Hitchens, author/journalist, 2007

“Overall risks to the outlook seem less threatening than months ago.”

IMF 2007 World Economic Outlook

Ikea

first came to Japan in the mid 1970s

pulled out of Japan in 1986

reopened in 2006

“It’s not good enough just to land here and hope that everything is going to work. You need to have everything in place—the whole supply chain, the well-trained workers and an organization that can actually expand and grow.”

--Lars Petersson, CEO of IKEA’s Japan operations

Summary

Not all globalization strategies are flawed But many have stumbled Great vision, lousy execution Before launching a global move, need to

conduct a self-assessment Ensure efforts make strategic sense to avoid

disastrous consequences

Summary

Is this just a fad that is driven more by “bandwagon” thinking than actual business value?

Promoted by analysts, consultants, and media as the only way to succeed?

Are we implementing solutions or buzzwords?