T5. Why Internationalise?

Before we think about issues in Intercultural Management related to Marketing, it would be as well to consider where and why companies internationalise (sell and/or install themselves in other countries.

For this we will need two models with which you should already be familiar:

Blending the Business  (JOLLEY) – See prior Task/Block

Growth Vector Matrix (ANSOFF).

[There might even be a third which you already know and love: Abraham Maslow’s Heirarchy of Needs, if, that is, we can assign to companies human attributes and desires (not unreasonable as corporations are run by humans, to produce for humans to make profit for humans).]

I won’t detail here all I will say in class: the images/ models below I will talk you through, OK?

1. Heirarchy of Needs (MASLOW)

Well, what are the business’ equivalent of food, water etc?  Perhaps it depends – for some in dry, parched lands, water and food are of grave importance and the idea of actualisation is ‘not on anyone’s radar‘ . We, on the other hand, have water on tap – literally – and don’t have to wonder where our next meal is coming from – yes, we still depend upon these things, but we take them for granted and are looking higher up the pyramid.  Perhaps the same is true of organisations / corportaiions.

Basic physiological needs????       Perhaps:

• productive capacity
• legal identity / entitlement to exist and trade
• a market to serve
• capital

And Safety???:

• liquidity
• market demand growth or at very least stability
• competitiveness vis-à-vis other producers

But when the local / domestic market is saturated…. what then?  Perhaps respect and support (‘love’ and commitment of shareholders)?  This means performance and improvement: growth in turnover and profits.

If there is stagnation and lack of growth, shareholders will sell their stock and buy into other operators who can deliver a better ROI.  This in turn produces a vicious circle that can threaten the entire existence, let alone just the future of the enterprise:

1. reduction in capital
2. reduced productive capacity
3. reduced production
4. reduced turnover
5. reduced profit
6. reduced share value
7. sales of shares ……

In short, safety requires market growth and the limits of domestic marketplaces can be soon reached: internationalisation is an obvious opportunity for large and small firms alike.

At that point (even if it hasn’t in the domestic marketplace), the issue of culture begins to rear its head….

2. Blending the Business  (JOLLEY)

Survival means growth and growth requires the seizing of opportunities and the eradication (or management) of threats.  Many of the opportunities thrown up by the business environment are international and therefore intercultural in nature: the arrival of the WWW on the global commercial ‘stage’ in the mid/late 1990s, for example.  Seizing the internet opportunity, particularly for companies in the English-speaking world – [English being the de-facto ‘lingua-franca’ of international trade] was and is an almost irresistable opportunity for international, even global expansion…. into the uncharted waters of interculturality.

3. Growth Vector Matrix (ANSOFF).

If one has to grow to survive and to prosper, then what are the dimensions / options?

It is generally considered that in terms of cost/benefit and overall risk, pushing an existing product into related/new marketsis the better option: quicker, easier, less costly and less risky than options involving entirely new products.  It is thus perhaps better and easier to put one’s foot in the international market waters with an existing product than it is to develop entirely new products even for an existing market.

As a result, it is hardly surprising that organisations in saturated domestic markets tend to look over the border for their immediate salvation and security.

Actually, I prefer a version of this that adds a third column and row (so 3 x 3 rather than 2 x 2):

• related market
• related product

This is because risk normally dictates ‘softlee softlee catchee monkey‘ – ‘small steps‘ into the unknown are perhaps less of a risk than ‘gaint leaps’ (echo of Neil Armstrong on the Moon, I hope).  Think Hofstede for a moment : which cultures seem confident with risk and which tend to be risk averse?

Conclusion.

Thus, based upon the three models above, it is perhaps not difficult to appreciate that companies can find themselves rapidly propelled towards internationalisation in search of growth without perhaps appreciating the intercultural dimension.

The builders of the Tacoma Narrows bridge were expert builders with the latest equipment, designs and materials, but the context of the Tacoma Narrows was not like anything with which they were familiar. Their materials didn’t ‘fail’ in one sense, they just weren’t re-evaluated in the light of prevailing local conditions.

Do you know what happened???

Watch THIS!

The real reason for it’s collapse: aero-elastic flutter..….

Internationalisation and the crossing of cultural borders is a voyage:

• a voyage forward and into the future
• a voyage into different contexts (which may not be entirely possible to predict)
• a voyage into the relatively unknown
• a voyage where safe arrival is never guaranteed and risk is ever-present. One can never totally eradicate the risk of failure.

Let’s think the movement of the American East Coast settlers heading west 4000km towards the Pacific for a moment…..  In fact internationalisation is a projection into the unknown.

Can you work out the parallels?

Let’s go on that ‘journey’….  You are my ‘pathfinders’:

• how will you prepare,
• how will you react to the unknown when it appears
• should ‘situations’ be addressed and managed at the point of need or back at base camp?

Project is [Latin]:  Pro = forward   + iaceo = I throw