Global Business Expansion: Strategies for International Success

Operations: Key Questions for Value Creation

• What processes create value? Example: Amazon with its automated logistics.
• What activities support these processes? Example: Google heavily invests in R&D and qualified HR.
• What external factors influence operations? These include globalization, offshoring, and digitalization. Example: Nike manufactures in Asia to cut costs.
• What are the key considerations for internationalization in operations? Culture, costs, laws, and partners are crucial. Example: IKEA adapts its products to the Chinese market.
• What common mistakes should be avoided in operations? A local mindset, lack of market study, and unclear contracts can lead to failure. Example: Walmart failed in Germany due to cultural mismatch.

Global Entrepreneurship and Internationalization Fundamentals

Defining Global Entrepreneurship

• An entrepreneur is someone who starts a business, assuming inherent risks. Examples: Chris Guillebeau (known for digital businesses and Side Hustle School) and Melanie Perkins (Canva).
• Global vs. International: A global approach means offering the same product everywhere, while an international approach involves adapting products to each country. Examples: Apple (global strategy) vs. Nestlé (adapting to local tastes).
• Is internationalization mandatory? Not necessarily, but it significantly aids growth. Example: Glovo started locally before expanding internationally.
• Key components of an internationalization plan: Human Resources (HR), legal considerations, operations, and branding.

Understanding the Entrepreneurial Ecosystem (EE)

What is an Entrepreneurial Ecosystem?

• Definition: An EE comprises all agents and institutions that support entrepreneurship within a specific region. Example: Silicon Valley.
• Pillars of an EE: Policy, Culture, Finance, Markets, Human Capital, and Support.
• Risk Tolerance: This involves accepting failure as an integral part of the entrepreneurial process. Example: U.S. culture often embraces failure as a learning opportunity.
• Three ideas to improve an EE:
  1. Reduce bureaucracy.
  2. Include entrepreneurship in education.
  3. Celebrate success stories.

Funding and Risk Capital for Global Ventures

• Business Angel: An individual who invests capital, often in exchange for equity, and provides mentorship. Investments typically range from $10,000 to $500,000. Example: Jeff Bezos's early investment in Google.
• Private Equity (PE) vs. Venture Capital (VC):
  • Private Equity (PE): Focuses on investing in and acquiring stakes in mature, running companies. Example: Cinven (known for investments in healthcare).
  • Venture Capital (VC): Specializes in funding early-stage, high-growth potential ideas and startups. Example: Accel (an investor in Supercell).
• Crowdfunding: Raising money from a large number of people, often in exchange for a product or reward. Example: Kickstarter (a platform where projects like smartwatches can be funded).
• Crowdlending: Lending money to individuals or businesses in exchange for interest. Example: LendingClub.

Globalization: 20th vs. 21st Century Dynamics

• 20th Century Globalization: Characterized by physical expansion, primarily by large corporations establishing factories and physical presence worldwide. Example: Coca-Cola building bottling plants globally.
• 21st Century Globalization: Defined by digital, rapid expansion, enabling even small businesses to go global quickly. Example: Shein (a fully online fashion retailer).
• Contrast: Zara (a physical retail presence) vs. Shein (digital-only model).

Key Considerations for International Expansion

• Culture: Understand local values, language, and communication styles. Example: Starbucks adapts its menu to suit local tastes in different countries.
• Psychic Distance: This refers to how different a foreign market is perceived to be from the home market. Example: Spain might perceive Italy as culturally closer than Japan.
• Geo-localization: Strategically start with a limited number of countries or regions. Example: Glovo initially focused its expansion on Southern Europe.
• Budget and Digital Readiness: Assess financial resources and the company's digital infrastructure for international operations.

Three Tips for International Success

1. Adapt to local culture. Example: McDonald's in India offers vegetarian options and avoids beef.
2. Secure trustworthy partners. Example: The joint venture between Sony and Ericsson.
3. Maintain flexibility. Example: Netflix adapts its content library and recommendations for each country.

Common Mistakes in Internationalization

1. Copy-pasting the local model without adaptation. Example: Walmart's failure in Germany due to a lack of cultural understanding.
2. Neglecting cultural and market research. Example: Best Buy's struggles in the UK market.

Stages of Internationalization

1. Passive Exports: Unplanned or reactive exports, often triggered by unexpected online orders.
2. Export with Partners: Collaborating with local partners to facilitate exports. Example: Spanish wine producers utilizing international distributors.
3. Active Export Strategy: A deliberate and organized approach to exporting, often involving dedicated export departments. Example: Inditex (Zara's parent company) with its structured export operations.
4. Local Subsidiary: Establishing a local entity or branch in a foreign market. Example: Mango opening its own stores abroad.
5. Foreign Production: Setting up manufacturing or production facilities in another country. Example: Volkswagen factories in Brazil.

International Market Penetration Strategies

• Piggyback: Utilizing another company's established distribution network to enter a market. Example: Small brands selling through a large retailer like El Corte Inglés.
• Joint Venture (JV): Sharing resources and risks with a local partner to operate in a foreign market. Example: Nestlé + General Mills.
• Franchise: Licensing a brand and business model to local entrepreneurs. Example: McDonald's.
• Direct Export: Selling products directly to international customers, offering more control. Example: Zara's initial international expansion strategy.
• Distributor/Agent: Appointing a third party to sell products on your behalf in a foreign market. Example: Nestlé using local distributors in new markets.
• Subsidiary: Establishing a wholly-owned entity abroad, providing maximum control. Example: Apple's operations in Ireland.