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Tuesday, August 6, 2013

How Technology Companies go Global



Companies seek to compete in the global market and often look for overall methods to bring local companies to a wider audience. A study conducted by Mets and Kelli (2011) helps leaders determine the overall process of global expansion. High-technology companies, in this instance, are considered those that actually contribute to new technologies versus those that simply manufacture existing technologies. The movement from local to global markets requires considerable learning and planning but is often done so in a haphazard manner.

Companies often start in a national market as they develop their business model. At some point they move to a global environment which forces them to adapt and use new business models to ensure success. There are a couple of different types of global businesses:

Born-Again Global: Companies that operate within the domestic market but due to an event become pushed into the global market. 

Born Global: Venture companies that are designed from the start to compete on a global market. 

Learned Global: These are companies that used research, learning, and knowledge to move into the global market by design. 

When companies start they often hedge their knowledge and competencies in order to make a market presence. These competencies and skills are matched with an environment where information is transferred quickly. Where trade barriers are lower, they generally have more success. The use of the Internet affords the opportunity to move across borders in ways that previous large companies with economies of scale dominated.

To help a company explode often requires the need for additional funding and capital. Venture capitalists look for those companies that are likely to sustain their operations into the future so that return capital can be returned with a profit. According to Laanti et. al. (2007) commonly used evaluations for technology companies include 1. Resources and Capabilities and 2.) Strategies for Globalization. 

Resource and capabilities includes the abilities of the founders/managers, innovative abilities, business networks and finance capabilities. Strategies for Globalization include product, operation, and marketing strategies.  It appears that the two concepts are separate by the resources that can be focused on expansion, leadership capabilities that determine how these resources are used, and the voice of the company to reach potential customers make the difference.

The study by Mets and Kelli analyzed seven Estonia start-ups to determine their globalization strategies. Some environments can help in fostering technology start-up companies while some slow down or retard such developments. Many organizations start by being suppliers to larger multinational companies and offer their own services through a freemium model. This model is the free service or application with premium pay services. The companies appear to have developed their products and their models at the same time. An interactive development occurs where market exposure and adaption work together. The author does not find that there is a single model for globalization but simply a general path from local to international. 

Lannt, R. et. al. (2007). The globalization strategies of business to business born global firms in the wireless technology industry. Industrial Marketing, 36.

Mets, T. & Kelli, A. (2011). Are hi-tech born globals really born global? Management of Organizations: Systematic Research, 59

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