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Custom Go Global or No Essay

Data-Clear is a company involved in developing software. Its main focus is the data analysis business because it perceived this segment of the software business to be largely unexploited. Data-Clear was meant to develop applications based on algorithms and with the help of two researchers; they were able to develop a state of the art data analysis package which they named Clear-Cloud.

Data-Clear’s Strategies

Clear-Cloud was released in two versions .One for the telecommunication industry and the other for the financial industry. Its annual demand from the USA telecommunications and financial services sector is estimated to be around $600 million but the challenge is to make potential users aware of the product. Currently, Data-Clear is intending to develop Clear-Cloud to suit the chemical, petrochemical and pharmaceutical industries. These industries have the potential to raise sales revenue to $900million.

Although the strategies implemented by Data-Clear’s founder, Greg McNally have yielded tremendous results, there is a looming threat of being outpaced in the international markets. VisiDat, a British company is already testing data analysis software which is very likely to compete with Clear-Cloud and has already sold its product to Shell, a global enterprise that's not based in the States.

The Main Strategic Threats

The main issue facing Data-Clear is whether to expand globally and or focus on increasing sales in the US market. If Data-Clear chooses to go global then it will have to decide on whether to build another subsidiary to serve Europe or form alliances with players already established there. Factors it has to consider in either option are: What are the cost implications? What are the financing options available so as to meet expenditure needed in either case? How long will it take to assemble a team which has international management experience? 

  • Data-Clear’s founder, Greg McNally has a PhD in computer science and has spent 15 years in software development business. His experience has helped him spearhead the company to develop one of the most successful data analysis software.
  • So far, the team Greg has assembled seems competent and this is reflected in the increase in sales. However, the decision on whether to target the potential market of $1.5 billion domestically and $1.26 billion abroad has to be made as soon as possible because the company’s future success lies on it.
  • In its first year of operation, Data-Clear sales reached $2.2 million and the second year sales are projected to reach $5.3million in the USA. Year 2001 sales are targeted to reach $20millon and $60 million in year 2002.
  • Recruiting two more executives into the company was a necessity. Greg’s currently owns fifty percent of the company after selling thirty percent to David Lester for 5 million in additional funding. His two researchers own twenty percent.
  • The company currently has 38 staff members, and estimates that building the support infrastructure needed just for domestic expansion could cost as much $2 million on top of product development.
  • Data-Clear currently lacks enough cash to fund a move beyond core industries and it further lacks marketing and sales cost estimates to do so because these industries are so different from the one data clear is currently focused on. Furthermore, there are several weaknesses in the company such as; the company founder, Greg lacks international management experience while his current venture capital partner has adopted a hands-off approach and is unlikely to be of much help in plotting an international strategy.

The dilemma facing Data-Clear is whether to expand overseas or continue to focus on strong domestic prospects. There is a strategic threat of being outpaced by competing companies in the global market if Data-Clear doesn’t expand internationally.

I would not recommend Data-Clear to expand overseas at this point in time. Greg and his team have little or no international or operating sales experience in addition they will need to re engineer the product so that it can analyze data in other languages. DataClear does not yet have the personnel or capital to support an international venture.

Overseas the company would need a senior executive with five to six years' experience in the target markets and a mastery of at least one relevant foreign language. At present, the only executive with any international experience is Susan and hers was just two years in Asia, not Europe

It would be a mistake to go global because of reactive purposes instead of strategic reasons. VisiDat’s sale to shell is not reason enough to refocus Data-Clear’s strategy on overseas alternatives. Even though the main rationale presented is that DataClear should preempt VisiDat in order to defend its strategic position. VisiDat is oriented toward the oil and gas market rather than Data-Clear's financial services market.

Building international Sales offices from scratch could be expensive and may not yield much in the way of concrete results. Defending a strategic position is expensive, and until Data-Clear needs to builds a bigger war chest, such a move may divert management's attention from the immediate priority of selecting markets where Data-Clear can build profitable market share quickly. In addition the company has focused on two of the world's most expensive markets in which to set up operations, London and Tokyo.

Choosing a joint venture partner is a difficult process what’s more Greg has given a fairy large amount of equity to DL ventures. Benro Company is not a smart choice for a joint venture because it’s a small niche player. Poor track record of most joint ventures suggests that DataClear needs to evaluate its potential partners more systematically. An ill-conceived alliance with Benro could prove as risky as competing against VisiDat; Benro also serves the financial

Service sector

Data-Clear needs to understand its potential competitors a lot better than it currently seems to. There are plenty of unanswered questions, is VisiDat the only threat? How real is the $500,000 order from Shell? Is that a big order in the petrochemical market? How long will it take to convert Clear-Cloud to compete with VisiDat's product in that market? Thus far, Data- Clear's competitive analysis seems to be limited to reading news articles and press releases from the competition. No company should guide its actions solely on the press releases, rumors, and sales triumphs of competitors,

DataClear might benefit from continuing to build close relationships in its domestic markets with customers that have a strong international presence or at least global brand recognition. Names like Sprint, Citigroup, and Microsoft, Hewlett Packard etc.

It is much more important to focus on cementing a position of strength in the United States where the company has an early lead in the largest, most-promising territory than to be the first to market in all possible territories. To spend so much of senior management's time on aggressively establishing foreign operations when the company has not yet fortified its home base is a recipe for failure. A $5 million, 38-person, company like Data-Clear does not seem to have a strong enough base of strength, given the potential size of the markets involved.

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Data clear is facing a decision that sooner or later every new business must face. A more established company would be wise to preempt the threat as soon as it can. But as a fledgling start-up, DataClear does not yet have the personnel or capital to support an international venture the decision made on whether to expand or not will greatly determine how successful the company will be. Data-Clear’s management lacks a proper plan to expand its business globally. Expanding globally means the management will have to meet different needs of customers in different countries which will necessitate Greg to look outside the company to colleagues, investors, and specialists. Instead of pursuing that process I believe that Data-Clear will benefit from continuing to build close relationships in its domestic markets with customers.

This case has helped me to understand that managers encounter very many challenges in their day to day decision making. Preempting the actions of a competing firm is important as well as completely analyzing a situation before taking action. I’ve also learnt that expanding a business has many aspects e.g. modifying a product to suit different countries before selling it, involving specialists and consultants to do feasibility studies when expanding to a new region, ensuring there is enough capital to cater for expansion cost and also about need for venture capital in the businesses world.

Custom Go Global or No Essay

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