In the context of a modern globalized world, plenty of companies have to face a challenge of international expansion. In order to survive and remain competitive, they strive to launch new subsidiaries all over the world. However, in some cases, it might lead to failure. The suggested case study presents DataClear company that contemplates whether to expand globally or not. Although expansion assumes higher profits and international operation, it also threats by unstable position on the domestic market and insufficient product development in several industries. In this regard, this paper aims at the examination of key players, the company, the industry, and alternative directions resulting in a recommendation of the most appropriate course of action.
DataClear is a software company operating in financial services and telecommunications industries and having $ 2.2 million income in 1999. It is expected to reach $ 60 million in 2002 (Kuemmerle 38). The number of employees includes 38 people. DataClear is headquartered in Palo Alto, California and based on Greg McNally’s brilliant idea to establish a product analyzing great amounts of raw data without programmers’ assistance. This data analysis package was called ClearCloud. However, an experience and aggressive expansion steps of British VisiDat cast a shadow on the future success of DataClear. According to Susan Moskowski, a member of a sales team, VisiDat might threaten potential of DataClear by occupying Europe and Asia and then kill the company by entering the US market (Kuemmerle 39). Part owner of DataClear, David Lester, and a business development-manager, Tom Birmingham also play an important part of the company’s development. It is essential to note that there are the two sided players, namely, Pierre Lambert, a candidate for head of European sales and Sarah Pappas, Greg’s old friend from school and founder of Desix designing specialty chips for the mobile communications industry.
To face the competition and address it appropriately, the company needs to choose the most relevant strategy. Let us consider several alternative courses of action suggested by groups A and B that were determined in advance and had some time to ponder over the situation before the discussion (Kuemmerle 39). Group A considered establishing new offices in Europe and Asia. It is clear that this decision requires a range of improvements. In particular, the whole interface needs to be translated into several languages, especially regarding such languages as Chinese or Japan it might cause additional difficulties due to their two-byte nature. Moreover, DataClear needs to ensure perspective support and development resources. At the same time, such a strategy might lead to a significant growth benefiting both potential international customers and the company.
Summing up, the mentioned strategy has the following advantages: face competition, use of English as a universal language, new markets, and independence. First, it is quite significant to meet competition on the proper level so that competitors cannot be able to crush the company (Verbeke 233). Second, there is an opportunity to apply English as the most widespread language. Nevertheless, such a strategy would be useful only at first as demand for local languages would undoubtedly appear. Third, opening new offices overseas creates a plethora of opportunities to explore new markets including chemical, pharmaceutical, and petrochemical ones. Fourth, operating as a single owner of the product, DataClear would have a choice to decide on all the issues. Simultaneously, a range of critical disadvantages should also be mentioned. The lack of international experience might lead to numerous mistakes as no one except Susan has an experience of the international management. More to the point, Susan had only two years of work in Asia, but not in Europe. Insufficient capital as a financial factor might spoil all the dispositions due to limited investments. Misunderstanding of cultural aspects also makes a huge impact on an autonomous international expansion (Trompenaars 58). As it was stated before, none of the team members has worked for European or Asian companies while being aware of their cultural peculiarities is a key to success (Kuemmerle 44).
Group B found that creation of alliances might be a beneficial strategy to expand. For example, Benro, a small software shop in Norway, might act as a partner and facilitate the expansion. In this case, joint venture possesses both pros and cons that are as follows: potential joint ventures, the establishment of alliances to achieve better outcomes, and new markets. The form of joint venture expansion would allow combining resources of two companies. In particular, the establishment of alliances opens access to intellectual property. Also, cross-cultural benefits would include easier adaptation to new markets.
At the same time, cons compose essential issues as well. First, an important factor is the shortage of staff as only 38 employees work for DataClear. Therefore, it is evident that the company in need to recruit more people, if expanded (Kuemmerle 48). In order to provide newly hired employees with an appropriate working environment, the company should stick to local principles. However, a set of fundamental issues related to equal working opportunities, prevention of any form of discrimination, and confidentiality should be ensured. Moreover, globalization sets a faster pace of operation leading to rapid changes and improvements. In addition, long negotiations might occur in the course of action. Undoubtedly, alliances require continuous negotiations to discuss every issue concerning the joint operation. At that, some issues are discussed for months. Such protracted solutions might lead to decreased effectiveness as in the case with Desix that had only 40 percent of efficiency while establishing a joint venture (Kuemmerle 41). Insufficient trust between partners matters as well as it might be difficult to build confidential relationships between representatives of different cultures. Furthermore, it is crucial to thoroughly study legal issues concerning a particular country.
The third alternative course of action presumes operation on the local basis without expansion. This strategy has the following positive points: knowledge of the product, awareness of the market, low investments and high profit on investments, and diversification to new industries that would decrease a risk of failure due to the elimination of dependence on one sector. Also, there is no need for cultural adaptation. Among negative points, there are the following ones: increasing competition both within and outside the domestic market, need for entering new industries, and need for new investments and implementation of know-how.
Seeing the above observations, it is possible to suggest the most appropriate strategy for the future development of DataClear. First, it should continue to be local strengthening its positions. The company should take a clearer look at the situation and adequately evaluate its potential. Second, the company should follow diversification strategy including seizure of new industries such as petrochemical and pharmaceutical, skills reinforcement, and experience gaining. Nevertheless, the company should be cautious when entering other fields (Kuemmerle 45). Particularly, it is better to embrace the mentioned industries only after the current fields would be covered at least on one-third. After that, it is essential to grow globally sticking to the strategy of a joint venture (Gooderham 111). In other words, the policy of compromise seems to be the best solution as currently DataClear needs to acquire more experience and investments. At the same time, it is crucial to monitor competitors’ actions on the global stage so that it would be easy to adjust to newly emerged requirements. This would also help DataClear to determine potential threats and opportunities resulting from proper strategies (Johansson and Pallmar 7). It goes without saying that the company should conduct feasibility research before entering the international market.
Furthermore, DataClear might outsource its operation to other countries such as China or Korea that would contribute to the reduced costs (Schniederjans, Schniederjans, and Schniederjans 99). To adapt the product to cultural diversity, it is important to hire local employees and focus on product customization. These employees might not only help to introduce the product, but also to establish potential alliances. In their turn, the establishment of alliances would help to the subsequent growth.
In conclusion, it should be emphasized that DataClear’s strategy should be consistent and thoroughly elaborated. Before entering the global market, local positions need to be enhanced, and overseas markets need to be examined. After that, it might be recommended to build a strong plan of expansion focusing on long-term operation and relevant evidence. All in all, international expansion is more preferable than exclusively local operation, yet the first should occur in time.
Works Cited
Gooderham, Paul N. International Management. Theory and Practice. Cheltenham, UK: Edward Elgar, 2013. Print.
Johansson, Martin, and Göran Pallmar. International Growth Strategies for Software Companies. Berlin, Germany: Vulkan, 2014. Print.
Kuemmerle, Walter Go Global or Not? Harvard Business Review, 2001. Print.
Schniederjans, Marc J., Ashlyn M. Schniederjans, and Dara G. Schniederjans.Outsourcing and Insourcing in an International Context. Armonk, NY: M.E. Sharpe, 2015. Print.
Trompenaars, Alfons. Riding the Waves of Culture: Understanding Diversity in Global Business. Burr Ridge, IL: Irwin Professional Pub., 2014. Print.
Verbeke, Alain. International Business Strategy: Rethinking the Foundations of Global Corporate Success. Cambridge, UK: Cambridge UP, 2011. Print.