Managing Growth and Expansion into Global Markets

Logistics, Transportation, and Distribution

Thomas A. Cook

• Publisher: CRC Press
• Year: 2015
• Print ISBN: 9781482259179
• eBook ISBN: 9781498777346
• Topic: Business
• Subtopic: Management
• Index: Business

Company executives in every field are recognizing the critical importance of entering into the global economy. As transportation and logistics companies follow their clients expansion into these international markets, they must be able to service their clients supply chain needs in new economies and turbulent markets.Managing Growth and Expansion

Chapter 1

Understanding the Business Model for Growth and Expansion on a Global Basis

Company executives in every field and enterprise recognize the importance of going global. As companies go global, this extends their supply chains into new parts of the world, new economies, and turbulent markets.

This chapter looks at the basis of how the decisions are made to go global, the impact these decisions have on the global supply chain, and, more importantly, the companies that provide services to the global supply chain.

The Case for Going Global

Every company must give consideration to going global. For those that have already entered international market(s), they are looking to expand, raise their margins, and grow their presence in more and more countries.

Every company will validate its rationale for global expansion, but there are many common areas for all companies to consider:

• Domestic vs. international
• Margins
• Meeting aggressive growth targets
• Protection from competition
• Diversification
• Security
• Access to local market benefits and value add
• Creating a “panache”
• Going public
• Selling strategy

Domestic vs. International

Doing business domestically is very different from expanding into the global arena. The key difference is the array of risks and exposures a company faces as soon as it crosses international borders. These risks, which are outlined below, are perilous, extreme, and rampant. For the unprepared, the stakes are high.

The most successful companies that have engaged in global trade after a long learning curve are now prepared proactively. These successful companies would outline key risk factors in the following areas:

• Political
• Economic
• Demographic
• Physical
• Cultural and language
• Legal
• Compliance

Political

Political risk is one of the major deterrents to companies expanding into global markets, particularly outside “westernized countries.” History shows us numerous examples of political disasters that wreaked havoc to the interests of businesses and companies globally. In the last 50 years, these political occurrences include the following:

• Destabilization of Southeast Asia throughout the 1960s and 1970s, impacting countries such as Cambodia, Vietnam, Laos, Myanmar, and Thailand
• The Iranian Revolution in the early 1980s
• Nationalization issues in Latin America, which still continued in 2014 in countries such as Venezuela, Cuba, and Peru, to name a few
• Iraq’s invasion of Kuwait in 1992
• The events of 9/11 in the United States
• The wars in Afghanistan and Iraq and the overall destabilization in Africa and the Middle East
• Piracy in the east coast of Africa
• Nuclear threats from Iran and North Korea
• Continued terrorist initiatives worldwide

All of the above are just a small sampling of the political risks and exposures companies face in entering global markets. Even on doing business in westernized countries, the events listed above have a huge impact.

Political risk is a risk insurable by several government and private insurance companies. Some even consider war; strikes, riots, and civil commotions (SRCCs); and terrorism as political exposures.

Insurance companies group these exposures into four primary areas: confiscation, nationalization, expropriation, and deprivation (C, N, E, and D). While all four are closely linked, there are some differences between them.

Confiscation

Confiscation occurs when a government confiscates assets from another government or private entity. We saw this in the Iranian Revolution, where the new government seized all the local assets of foreign governments and private interests. When Iran acted so hastily and aggressively, it woke up many companies who had or were going to expand globally to look to insurance as a mitigating option. Politically risky markets expand significantly in capacity and scope of cover, following the Iranian Revolution and similar events that followed.

Nationalization

Nationalization occurs when a host government declares the “nationalization” of private assets. This occurred in 1984 in Peru, when the government took over the assets of private companies in the petroleum industries and made these a national asset.

Sometimes nationalization is done swiftly and in one shot. Sometimes it is “creeping” and accomplished over a period of time.

Typically, the host country justifies its nationalization initiative to be in the best interest of that ...

Table of contents

• Prologue
• Acknowledgments
• Author
• Chapter 1 - Understanding the Business Model for Growth and Expansion on a Global Basis
• Chapter 2 - Unique Challenges of Supply- Chain, Transportation, and Logistics Companies in Merger and Acquisition and Growth Strategies
• Chapter 3 - Organic Growth versus Merger and Acquisition
• Chapter 4 - Strategic Planning
• Chapter 5 - Management Assessment Tools
• Chapter 6 - Anticipated Merger and Acquisition Problems
• Chapter 7 - Problem Resolution Strategies
• Chapter 8 - Transition Management
• Chapter 9 - Legal and Regulatory Considerations
• Chapter 10 - Trade-Compliance Issues in Global Expansion and Mergers and Acquisitions Activities
• Chapter 11 - Best Practices in Global Expansion
• Appendices