- How well is your business model suited to globalization? In general, an e-commerce business needs to move bits (information flows), money (payment flows), and atoms (physical flows). Moving bits requires telecommunications infrastructure. Moving money requires payment infrastructure. And moving atoms requires physical infrastructure. The extent to which your business relies on these infrastructure elements determines the ease of transportability of your business model
- What foreign markets or regions should you target first? There are two different rollout approaches:
- Regional Dominance is preferable under three conditions: when production and consumption are regional rather than global in scope; when customer behavior and market structures differ across regions but are relatively similar within a region; and when supply-chain management is very important to success. Consumer retailing and financial services fit those characteristics well.
- A Global Beachheads decision involves picking the region that you want to target. The selection of specific regions or countries should be based on the following factors: Market attractiveness (market size, infrastructure, barriers to entry, and growth); Offering fit (fit between your offering and the needs of customers in the region); Capability fit (level of local market knowledge and local domain expertise you bring to the region); Competitive intensity (level of urgency in pre-empting regional and other U.S.-based competitors).
The global beachhead strategy makes sense when trade is global in scope; when the business does not involve delivering orders; and when the business model can be hijacked relatively easily by local competitors. Portals and some business-to-business markets (such as steel, plastics, and electronic components) demand a global beachhead strategy.
- With whom should you partner in building your global businesses? Good global partners include local startups who you can partner with or think of acquiring; local venture capitalists; local incubators; large corporations; and local entrepreneurs; also consider Big 5 accounting or multi-national consulting firms and think about capital partners.
- How should you structure your international organization? A cliché of international business states that as you build your global organization, you “think globally, and act locally.” The thinking goes that “glocal” corporations should strike a balance between locating expertise close to markets and centralizing other aspects of the business in one global organization.
One way to organize your thinking is to separately consider each aspect of your business, and to determine the degree of localization each aspect demands. Good candidates for centralization include technology, product development, marketing, and IT infrastructure. Other divisions such as sales, business development, and supply-chain management need to be local, because these are closest to the markets, require local market expertise, and are most subject to regional variations.
Although most e-commerce players think about entering one market at a time, piecemeal globalization may leave you with a mess of poorly integrated regional businesses. It pays to think architecturally about the eventual structure of your global business.
The innermost layer is the global core, which provides vision, leadership, and strategy. The core also includes corporate versions of marketing, administration and business development. The middle layer is a set of shared services that are provided to all the regional market units. These services include procurement, human resource management, marketing services, and partner management. The outermost layer is the local market units. These units are rich in local expertise on customers, regulation, partnerships, and supply-chain management.
Separating the global core from the local market units becomes an excellent way to manage the paradox of thinking globally, but acting locally. And the shared services layer allows the firm to standardize infrastructure and to gain economies of scale across the market units. - How can you overcome infrastructure constraints in localizing your business model? Shift your thinking from what is missing to what is available locally.
Authors: Mohanbir Sawhney, Sumant Mandal
Source: Go Global
Subject: International / Global Questions
Source: Go Global
Subject: International / Global Questions
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