THE GLOBALISATION OF BUSINESS
Background
A recent UK government White Paper (Making globalisation a force for good) stated “Globalisation brings ever increasing movement across national boundaries of goods, services, investment, people and information, binding people and nations more closely together. This has profound implications for the UK and for the rest of the world. Not surprisingly, it has been the focus of much recent debate.”
Britain, as one of the world’s oldest and most open trading nations, the second largest investor in the world and a key player in the European economy can play a leading role in promoting global investment and trade.
The growth in globalisation and world trade is encouraging many small-to-medium-enterprises (SME’s) to open their minds to international opportunities. But there are a number of key questions which need to be answered.
Can we simply export to this market or should we consider the alternatives? Should we appoint a local distributor, license our technology or open a branch office? Is a strategic alliance or joint venture the best option? What is the business case - is it in line with our business strategy? Is it practical, feasible and affordable? Can we cope with the risks and costs involved?
Case Study
Romarsh
A Wiltshire based Beacon Company manufactures transformers, was close to failure in 2003 when the new management team took over. The business was successfully turned around by 2005 despite competition from low cost producers. Future reliance on the traditional business was, however, doomed to failure as international customers migrated to the Far East and transformer manufacture has a lack of proprietary technology. This has been addressed by the formation of two Joint Ventures.
The first sees Romarsh move up the vertical supply chain by importing technology from the USA to design and manufacture state of the art Power Conversion Sub-Systems. The Second sees Romarsh set up a Joint Venture transformer manufacturing facility in India. Phil Crawford-Smith (Managing Director of Romarsh) will explain how this change of strategy was implemented and will highlight some of the pitfalls encountered along the way.
www.romarsh.co.uk
FAQ
Questions fielded by Phil Crawford-Smith MD and supported by Peter Nystrom US Partner
Q: What is the partner breakdown in terms of equity?
A: 49.9% Romarsh 50.1% Elcomponics India. The reason for this is the lending qualifications required under Indian banking regulations. The Mem. of Arts & Assoc. fully protects Romarsh
Q: Timescale for setting up JV?
A: 3 to 4 months. Shorter - the India connection re shareholder rights took longer than UK.
Q: What benefits have accrued from purchasing?
A: sourcing the same components in some cases 50% cheaper. The partners have local knowledge which results in money saving.
Q: Is volume an issue?
A: Not so far. If anything Romarsh are restraining higher output. Example - supply of aluminium 16 weeks lead time before JV now just 3 weeks and better quality.
Q: Shipping?
A: savings net of transport and carrier has proved highly efficient.
Q: How did you find the partners?
A: Luck! Actually existing working relationships. TSi US were looking to expand in the African continent and sourced Romarsh. Through enquiries and due diligence concluded they were most suitable partner. Elcomponics India had an existing working relationship i.e. supplier. Romarsh had the capacity, right attitude, trusted and global outlook.
Q: How do you maintain your competitive advantage?
A: others are already copying products but are in some cases two years adrift. The JV is moving forward with improvements, new lines and will achieve market penetration before others can.
JV business model is design linked and knowledge.
Q: Where is the break?
A: Romarsh accepts the dynamics of the relationship may change in the future.
Q: Do you use selling agents?
A: yes - English speaking; profile fed into US Foreign Commercial services and Industrial Sectors; track record in sector; complimentary activity.
Support Agencies
UK Trade & Investment
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UK Trade & Investment is the Government organisation that supports companies in the UK doing business internationally and overseas enterprises seeking to set up or expand in the UK.
www.uktradeinvest.gov.uk |
South West Manufacturing Advisory Service 
South West Manufacturing Advisory Service (South West MAS) is run by manufacturers for manufacturers and is dedicated to providing companies in the South West with the best available information and advice. Offering free or subsidised hands-on support from manufacturing specialists, South West MAS is focused on securing the future of manufacturing in the region by helping manufacturing businesses improve productivity, reduce waste and compete more effectively in the marketplace. www.swmas.co.uk
