What It Takes To Be a Truly Global Company
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It takes much more than just opening up an overseas office to be considered a global brand, according to a new study.
Researchers at Michigan State University say the key to successful global business expansion is spreading operations across multiple countries, rather than trying to dominate one region or market.
While many businesses boast of their worldwide status, the study, led by Tomas Hult, director of MSU's International Business Center, and Ahmet Kirca, associate professor of marketing, contends that only a handful of companies are truly global.
Often misunderstood among management, Hult said having a global strategy means coordinating efforts across all countries in which the company conducts business, not just running a business from a centralized headquarters.
"It would be highly inefficient if a business is in 100 countries and everything has to go through one place," he said. "You have much more leverage and synergy if you have a coordinated effort among countries you're in, so there's learning and give-and-take."
While there's no magic number of countries that determines success, if a business operates in more than a dozen countries, and especially in more than 30, it must have a global strategy, Hult said.
Overall, the study concludes that since global expansion is costly for service industries, manufacturing industries will profit most from international growth.
In addition, the research found that the size of a business isn't a determining factor in how well it succeeds overseas.
"It's very clear, through this research, that the more multinational you are, the more likely you are to perform well over time," Hult said.
The study, the largest ever conducted to examine the effects of multinationality on a company's performance, incorporated data from nearly 48,000 firms. The results are in the latest edition of Global Strategy Journal.