Global expansion offers doorway to survival for businesses amid pandemic
Gaining access to broader sources of funding is just one reason companies should consider moving
The Covid-19 pandemic has disrupted business activity globally, forcing many companies to permanently or temporarily bring down the shutters. But amid the uncertainty and economic turmoil the pandemic could fuel a new wave of innovation and opportunity. After all, history tells us that some of the most successful companies were built during recessions.
Take ride-hailing Uber and rental online marketplace Airbnb, which were both founded during the global economic crisis in 2009. The two platforms broke from the traditional structure in which businesses have a product to sell.
Another classic example of a company that defied the odds and emerged successful during a recession is Disney. Founded by brothers Walt and Roy Disney during the Great Depression of the 1930s, their business model was simple: to try bringing comic relief to the many people who were hard hit by the financial crisis, by creating cartoons. Disney is now a household name, valued at about $130bn.
As businesses look for ways to build resilience and sustainability in a post-Covid world those brave enough to venture into new markets may stand a better chance of surviving — even given gloomy global growth prospects.
Here are three reasons why now is a good time to look beyond your borders:
Take advantage of shifts in behaviour to capture new markets. One of the outcomes of a crisis is that it can bring permanent behaviour shifts. Covid-19 has ushered in a few, including the shift to remote working and accelerated digitisation. Taking advantage of the opportunities these shifts offer will require skill and careful planning early on. The first step is to understand and map these shifts and identify the specific niches that open up; for example, can you take the value you offer online? The second is to make sure you understand the markets you are moving into.
According to Allen Morrison of the Swiss-based Institute for Management Development, the best approach when looking to go global is to embed globally diverse expertise in the company’s management structure early on by carefully selecting and hiring executives who are knowledgeable about the markets in which the company wants to operate. Another solution is to send promising young executives abroad at an early point in their career, allowing them to integrate a new culture into operations.
Hedge against market risks and gain access to broader sources of funding. International expansion also offers businesses protection by spreading the risk. So, when one country experiences a downturn, a business can still thrive elsewhere. Research by Yeejin Jang of Ohio State University also highlights that the location of a firm’s operations affects its access to different sources of funding. A multinational can more easily issue a corporate bond in international markets, for example. One implication of this is that they are less affected by capital market dislocations in their home country than domestic firms.
Global companies can use capital raised in other markets for further marketing and expansion in their home market. Companies on the global scene can also gain access to build key contacts and strategic alliances globally, which could give them an edge in terms of access to materials or inputs at negotiated prices. Operating globally could similarly increase access to investment opportunities. Covid-19 is set to unleash a fresh wave of worldwide innovation that could shape the future. Being competitive in a global sense could boost organisations’ chances of being part of the “next big thing”.
Win the war for top talent by accessing new talent pools and investing in your people. The war for top talent in a global world has always been intense, but now that huge majorities of the workforce have relocated to their basements or attics, the prospects of reaching this talent have suddenly become brighter. Companies based in emerging markets may have been disadvantaged in the talent game through being unable to entice people to relocate. But now, according to the global analysis of Harvard Business Review’s ManpowerGroup, the balance could be shifting, with eight out of 10 workers wanting more remote work to attain a healthier work-life balance.
Skills are necessary to drive business growth, and having the benefit of different global perspectives is crucial in terms of competing in the world’s fastest-growing markets. Additionally, understanding different cultures can give a business a leg-up in the highly competitive global market by helping it better understand people from other countries that can, in turn, improve relations with customers.
The global economy has been dealt a crippling blow. McKinsey forecasts suggest demand is only likely to return to 2019 levels within one to four years. Nevertheless, organisations that can reset and adapt to the new normal quicker will be in a stronger position to turn crises into opportunities.
Kevin Sneader and Bob Sternfels, partners at McKinsey, argue that to come back stronger companies should reimagine their business model as they return to full speed.
“The moment is not to be lost. Those who step up their game will be better off and far more ready to confront the challenges — and opportunities — of the next normal than those who do not,” they say.
• Dr Shrand is academic director and senior lecturer for the CEMS master of management specialising in international management at the University of Cape Town’s Graduate School of Business.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.