Global expansion

Question

Write an article on Global expansion's strategy followed during 1990.

Answer 1

Global expansion has been a growth strategy immensely followed during 1990s, since they offered access to markets as well as opportunities to utilize economies of scale. Multiple issues such as economic, social, cultural, political and legal in addition to several tangible as well as intangible factors must be considered before determining the right location. Analytic Hierarchical Process (AHP) is one of the analytical approaches suggested for solving such complex problems by forming a simple hierarchy and evaluating various factors in an organized manner even under inconsistent data regarding multiple criteria. AHP had been used alone or in combination with mathematical programming in the previous studies. AHP helps in obtaining an ideal ranking for all the locations, but it becomes more complex if selection of location is combined with other issues such as allocation for each location.

Badri (1999) tried a goal programming model in addition to AHP to select locations and decide on location-allocations in an international setting under multiple conflicting factors. Badri (1999) employed the AHP as a stand-alone methodology initially and later used a combined AHP and GP model for evaluating six potential plant location sites namely Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Qatar and Oman for a petrochemical company to serve six distribution centers namely Dubai, Tehran, Jeddah, Manama, New Delhi and Amsterdam.

The AHP methodology ranked these sites for criteria such as political situation of foreign country, global competition and survival, government regulations and economic related factors. Pairwise comparisons were made and the sites were rated based on Saaty’s 1 (equally preferred) to 9 (extremely preferred) recommendations. Right eigenvector method was applied to the matrices later formed using Expert Choice Pro Software and the results were compared against a consistency ratio of 0.10. Synthesization helps in obtaining the overall prioritization of the sites. However, AHP ignored factors such as multiple location problems, insufficient resources, inability to choose multiple sites simultaneously and allocation decisions. Hence Badri (1999) extended the approach and included GP. AHP was initially used to prioritize the set of location alternatives, which was later employed as a ranking scheme for the GP framework. The objectives dealt with satisfying demand of distribution centers, minimizing the fixed cost, transportation costs and total costs, locating the satisfactory quality of life, maintaining production complying with air standards and a policy of desired expansion.

A comparison of the above two methods exhibited the superiority of the combined model. Though UAE chosen through AHP supports with resource limitations, it fails to consider under-allocation problems and opportunity losses. By the combined model, four sites namely UAE, KUW, KSA and OMN are chosen which will also comply with other goals set by Badri. Thus this model offers a methodical approach, incorporates crucial and judgmental international factors and optimizes the resource allocation process.