Globalization of Business and Northwest Louisiana

This article is the eighth in a series on what causes a firm’s value to increase

Global business initiatives can substantially help increase the value of a firm if they are done well. But evidently businesses in Northwest Louisiana are not embracing the revolution going on in global business yet.

Here is some very interesting data. In 1970, more than half of the world’s 7,000 multinational corporations were headquartered in the United States and United Kingdom. Today, there are 79,000 multinational corporations and only 2,418 or 3.1% are based in the United States. 56,448 multinationals (71.5%) are based in other developed countries like Germany, Italy, Canada and Japan and 20,586 multinationals (26.1%) are based in developing countries like Colombia and South Africa.

Another way to appreciate the reach and impact of global business is by considering direct foreign investment. This occurs when a company builds a new business or buys an existing business in a foreign country. Overall, foreign companies invest more than $2.3 trillion a year to do business in the United States. U.S. companies invest more than $3.5 trillion a year to do business in other countries. Clearly there is something going on here.

But here is some more interesting data. When I first moved to Shreveport to take my current job four years ago, we did some market research to see what folks demanded here in our region with respect to master’s level business offerings. Of twenty-five topics surveyed, global business was the last priority among our survey participants. While our sample may not represent all of Shreveport/Bossier, this finding was startling.

If this is a representative viewpoint in our region, why is this? Do our great, mostly private family businesses simply have a full plate now and not have the time or energy to consider some kind of international or global business initiative? Some people have suggested to me that we live in sort of a “cocoon” here in Northwest Louisiana. The extreme wealth created by the 1920s oil boom here gave many families the wherewithal to simply invest that money in safe bonds and live off the proceeds without touching principal. They think the Haynesville Shale find will do the same thing. Are these observations true?

Why then are we discussing global business? Recall the theme of this series of articles is growing the valuation of your firm. International or global expansion could be in the sweet spot for some of the firms in our region to grow profitable revenue without huge capital investments. Alternatively, perhaps some kind of alliance or joint venture with an international firm here in our region could be a valuable strategic initiative.

So to not capitalize on what could be an “easy putt” (to use a golf analogy) could be foregoing an opportunity to help grow the valuation of your firm. If I have piqued your interest, how can you begin to think about this?

Firms usually “go global” through the following “phase model” in the following order:

  1. Exporting – producing products in the home country and selling those products to customers in foreign countries. This is usually done through an agent.
  2. Cooperative Contracts – licensing and franchising
  3. Strategic Alliances – companies forming strategic alliances combine key resources, costs, risks, technology and people. The most common form is a joint venture.
  4. Wholly Owned Affiliates (Build or Buy) – unlike the first three options, wholly owned affiliates are 100% owned by the parent company. For example, Haier America in Camden, South Carolina, is a wholly owned affiliate of the Haier Group, which is based in Quingdao, China.
  5. Global New Ventures – companies most often move through the first four phases slowly. But three trends have caused some firms to spring full blown as a global new venture from the start: a. quick, reliable air travel; b. low-cost communications technologies from email to teleconferencing c. a critical mass of trained business people with extensive personal experience in all aspects of global business

The next question is where to go global? After finding places with good business climates (office space, low trade barriers, etc. and where political risk is low), you need to find customers who appreciate your distinctiveness and are very similar to those you serve well here in the U.S. Many firms have looked at international and global expansion as lagniappe, especially with exporting. They think why don’t we just throw out a fishing line and see what incremental business can happen; after all it is just extra correct? Best practice now shuns this practice. If your firm cannot locate a large enough group of customers globally who can appreciate your distinctiveness, then wait until you can.

If you are interested in one of the international or global initiatives, our Chambers of Commerce can help you.

Next Up: Firm Valuation and Executive Compensation – A Misunderstood Topic

Bill Bigler is Director of MBA Programs and associate professor of strategy at LSU Shreveport. He spent twenty five years in the strategy consulting industry before returning to academia full time at LSUS. He is the incoming president of the board of directors of the Association for Strategic Planning, one of the leading professional associations in the field of strategy. He can be reached at