The Importance Of Geographical Strategy And Coverage For An Organization
When corporations succeed in one location the temptation may be there to expand to another to gain access to a new market and new resources. However, companies realise that what works in one location may potentially not work in another so many companies now take a strategic view into where to open new offices. In this section the factors that companies take into consideration when choosing a new location will be analysed.
Moving within a country has fewer complications than moving globally. In both cases timing is critical, an organisation will need to decide whether they can afford to spend the necessary resources to expand, particularly when it will mean losing focus on the existing business whilst the expansion take place. If the timing is right and they can afford the growth, then the target location is the next decision that needs to be made. Many larger companies will have teams dedicated to the move that will research the potential expansion locales and create a number of business models before expanding. For example, Pixar chose to establish itself near the mudflats opposite San Francisco Bay to purposely stay clear of LA where most of the movie industry is established.
The reason being that they didn’t want to negatively affect the company’s culture. It’s not always this simple however as some industries and the companies have no choice but to follow the competition. Biotech companies often have locales near top universities around the world, so they have easier access to the unique talent. An example of this is Silicon Valley, which has the largest concentration of high-tech companies in the United States. Expanding operations globally as mentioned previously has a few more complications on top of those covered above. The company will need to identify the markets it wants to expand to, determine if their service is needed and identify their competition in that area. Every country has an entirely different market and therefore business need to alter their offerings. Many successful companies just assume that by doing the exact same thing that works in one location is guaranteed to work in another, but consumers are different. Vodafone for example initially targeted the Japanese market to try and understand the consumers over there but this soon turned to trying to introduce and sell headsets bought in Europe, yet the Japanese consumers were already using a completely different technology. (The Telegraph, 2004)
Those MNC’s that are already established in multiple countries around the world have to pay close attention to large economical events such as Brexit as these can have major effects on a firms operations. For example, as a result of Brexit Goldman Sachs, JP Morgan Citi and Barclays are all hiring people in Frankfurt as many of the Tier 1 investment banks look to launch new HQs within the EU. (Financial Times, 2018)Having a presence in multiple geographical locations is key for many MNC’s if the location is correct. The presence allows firms to gain access to a number of different markets, talent and resources.
