MBA Students and Global Market, Technology Management

- Why is it important for MBA students to learn and know about global markets, not just domestic markets?

- Can you explain why doing an MBA in Technology Management is less about technology and more about doing business with that technology in overseas market?

- Based on the material below, what business issues does the ACdc company face?

Your fledgling consulting business has recently been called by ACdc Windows, Inc. The company is considering expanding its operations internationally and needs help in determining first if they should, and second how to go about doing so. You explain that you’d like to take the engagement but have no experience in international business consulting. They’re about to hang up when you propose doing a study for them that would help identify the issues they will need to address. In return for them letting you do this, you offer to work on an hourly basis at half your normal rate. This appeals to the president, a son of one of the two founders, who has his reservations about the cost of such an expansion and would like to find out more without spending a lot of money. It also resonates with his son, who is certain that the future of the company is dependent on such growth and that this study will prove his point.

When you ask each of the men why they hold their different beliefs, the president says, “My son believes we have manufacturing systems that can be replicated easily and that expansion across the globe is readily done. I think there’s more to it than that. Besides, just because we can take our window technology international is no reason to do so.” His son takes you aside and says, “We have no choice but to go international if we want to be in business in the next ten years. We have state-of-the-art manufacturing processes, to be sure, but so do the other big players, and they’re beginning to take their businesses beyond our borders. It seems to me that we have no choice but to follow or watch our business erode over the next decade.”

You think each of these men has a point, but you’re not sure if one is right and one is wrong. You decide that your first step is to determine if the technology of window manufacturing is driving the industry to internationalization, or if it simply enables it.

ACdc Windows Inc. was founded in 1947 and grew rapidly through the next decade as post-WWII economic expansion occurred. At one point, ACdc was the third largest window manufacturer in the country. Since those heydays, however, annual growth has been under 2% on average, with negative growth in years when recession affected the housing industry.

For the past decade, the company has lived on low income housing and serving natural disasters by aligning itself with major insurance companies and government agencies. This has resulted in products that are mid-line quality and lower cost. The life of the company has been to continually produce moderately priced windows at lower cost. The father-son management team has its differences, but both men are committed to understanding how becoming an international player might fit in their strategy, or how it might even be necessary to their survival.

In your initial research, you discover that of the approximately 4,000 manufacturers in the United States, more and more of them are moving off shore for new business opportunities. Those that aren’t seem focused on consolidation, and mergers and acquisitions continue to headline Door and Window magazine. It seems that the manufacturing processes easily can be duplicated in many parts of the world. In Europe, the window industry is a mature industry, and competition is fierce for a shrinking market. Eastern Europe seems to be a better opportunity, but government stability and economic challenges give rise to questions about viability. Besides, many western European manufacturers have established factories in Eastern Europe to take advantage of lower labor costs. In short, Europe seems a tough market for a new venture. You discover that the greatest opportunity lies in China and the rest of Asia, where it’s predicted that the annual market in 2003 exceeded 50% of all 500 million global window units.

Researching the archives of the industry’s publications, you’re not surprised that many companies have moved off shore. But they’ve done so in different ways. Some have become exporters of their domestic products. Others have entered into licensing agreements with host country companies who offer their products under the company name and meet standards established by the licensor. Still others have established joint ventures with foreign companies. Finally, a few have established wholly owned subsidiaries. While this all seems pretty straightforward, you also find there are many variations on each of these basic approaches.

So, at the end of the first week, you report back to ACdc. The first challenge is to explain that the manufacturing processes and technologies they employ are not unique. They already know this in relationship to the U.S. market, but you need to explain that the technologies have also made their way overseas. In fact, in the case of Europe, many of their processes were incorporated in this country. In other words, the technology of window manufacturing is ubiquitous.

There is still hope, however, especially as it relates to opportunities in China, and you suggest that your research project focus on that opportunity. Both men agree.