Sanctuary Soft, a young started up security software company in United Stated is planning to expand to overseas due to the need of providing the worldwide service to its client and the pressure by its shareholder. After the meeting between the company’s CEO and larger shareholders, they are distressed in whether stay in the US market or expand overseas. The four potential countries favour by Sanctuary Soft in its expansion plan included China, India, Germany and United Kingdom. In order to select a proper country for Sanctuary Soft’s first foreign expansion, this report will provide a detail explanation regard to the motivation of the first internationalization of Sanctuary Soft; the market opportunity of four possible foreign countries, and the expansion strategy in order to decide a proper countries for Sanctuary Soft’s first foreign penetration. Finally, this report will suggest some IHRM strategy/principle that Sanctuary Soft needs to consider in its selected foreign subsidiary.
The motivation for internationalization
The major motivations for Sanctuary Soft become a multinational company (MNCs) is to explore foreign opportunities, so as to accumulate specific knowledge in order to build their capabilities to provide service to its global basis clients. The larger clients who use the information security system are often having global presence. Therefore Sanctuary Soft needs to acquire new ideas and skills in the overseas market in order to increase its capabilities to serve clients internationally. As we know that the Sanctuary Soft’s capability is being sceptical by its existing client due to the lack of global presence, thus it is obvious that Sanctuary Soft cannot just stay in their home country if they want to attract the larger global clients and increase its market competitive in the global basis. Thus, Internationalization is the way to enhance the customer’s confidence toward the company, and at the same time attract more global customers for the company. In addition, the firm specific advantage of Sanctuary Soft is the other motivation that urges it to become a MNC. According to Tseng, a firm-specific advantage can compensate to some disadvantages which inherent in the foreign place (2007, 126). As we know that Sanctuary Soft had a head start in writing Advanced Encryption Standard (AES) than its competitors, so the pioneering experience let Sanctuary Soft gained more experience in the product technology and innovation than its followers. Thus it may make its product more attractive than its competitor which can offsets some disadvantages in the foreign market. For example, it might able to localize the product that suits the local customers’ taste and preferences by its advanced technology. Consequently, since the market expands, the company could probably gain more profit and become more competitive in the global market. In addition, according to Birkinshaw,Hood and Jonsson become a MNC can help the company to maintain and enhance its firm-specific advantage in the global basis(1998,222). It is because the firm can increase its capability in technology and product innovation through the cooperation with the global talent and company, thus secure its pioneering position in both home and global market.
Market opportunity and talent supply
In general, the market opportunity in the developed economy such as United Kingdom and Germany seems smaller than those emerging economies, China and India. According to the market data in 2005, the annual growth rate of GDP in these two emerging economies is 10.2% and 9.2% respectively, compare to 1.0% in Germany and 1.8% in United Kingdom. It seems provide a huge opportunity for Sanctuary Soft to explore if it chooses to enter either China or India. However when the company try to expand overseas, it cannot just focus on the GDP growth rate, but it also need to look at the Commercial Infrastructure of the country...