There are two main aspects to identifying the company’s resources for international and global expansion:
- The reasons why the company wants to go international or global
- Sustainable competitive advantages of the company in its home market prior to going global. These will form the bedrock of how the company will go international or global.
The following films explain the relationship between these two important factors:
Sustainable competitive advantages of the company
These are the advantages over competitors that cannot be easily imitated by others. They form the bedrock in strategy theory for the development of effective strategy. Unfortunately, they are easy to discuss in principle and more difficult to identify in practice. [For those with an academic background, they relate to the Resource-Based View, RBV, of the organisation – more in the Strategic Management section.]
Essentially, the argument is that the competitive advantages possessed by the company in its home market should form the basis of its international expansion strategy. For companies already in international markets, they will wish to focus on those advantages that allow them to outperform their rivals.
Here’s a checklist of some possible areas of competitive advantage for a company:
- Differentiation: unique features or attributes that set a company apart, such as a brand or special level of service
- Low costs: but these need to be translated into a customer benefit like lower prices than competitors
- Dominance of a part of a market, such as a market segment or niche
- High performance or technology – perhaps a patented process
- Quality – superior to rivals for example in performance or durability
- Service levels that are superior to rivals – perhaps in national coverage
- Network of relationships – people and business contacts that set the company apart
- Specialist technical skills and other areas of specialist expertise – sometimes called ‘core competencies’
- Branding – from one country that might be extended elsewhere to other countries
Readers will note that I have not included some other areas of competitive advantage here like reputation, innovative capability and knowledge. The reason is that these are more relevant to basic strategy development, rather than international strategy. But if they are relevant, include them!
Other important resources related to going global
Much of strategic management literature is obsessed with competitive advantage. In practice, any organisation attempting to expand beyond its home country will need a wide range of other resources that are not better than rivals but just as important.
For example, a decent distribution network for a product may be no better than rivals but will be essential in selling the product.
Perhaps the most important resource is the human resource – don’t underestimate the knowledge, skills, time and personal sacrifices that are needed for good results.
So what resources do we need and where will they come from?