The Global Expansion Strategy
K-Nart, Inc commonly known as K-Nart is an international organization based in the US.
Its primary business activity is in the manufacture, distribution and selling of beauty, household
and personal products. It has representatives in more than one hundred and forty countries
worldwide with an annual turnover of over $10.7 billion dollars. Its present CEO is Shwan. S.
McGregor who took over from Peter Shulz in April the year 2012. Brazil is the largest market for
K-Nart’s products after surpassing the US in the year 2010.
K-Nart’s decision to expand in emerging markets in Sub-Saharan Africa and other parts
of Asia and Latin America has been necessitated by the pressure to expand its market following
the tough competition it faces at home and the harsh economic environment prevailing at the
moment in the US.
In Africa, K-Nart has targeted Nigeria as one of the most promising country for its entry
and expansion strategy in Africa. Nigeria is officially known as the Federal Republic of Nigeria.
It has a population of over one hundred and seventy million making it the most populous country
in Africa. It has a stable economy with a Gross Domestic Product of $268.7 billion dollars in the
last financial year i.e. the year 2012 with a per capita of $1657.292. These may provide the extra
income needed for the purchases of beauty products and the market required to sustain K-Nart
profitability in the market.(Falola and Heaton, 2008).
Politically Nigeria has had a share of politically instability during the military coups of
the year’s 1966s and the subsequent civil wars. However, in the late 1970s a legitimate process
of conducting general elections was restored and currently Nigeria enjoys peaceful and
democratic election seasonally. This political stability is a pre-requisite for an environment that’s
favorable for the success of any business operation.
The legal and regulatory environment in Nigeria is favorable for the promotion of the
foreign direct investment. K-Nart can utilize the friendly tax advantages to set their distribution
centers in Nigeria.
The technological environment in Nigeria is very advanced. Following the launch of
NigComsat-1, a satellite built by the Nigerian government that was launched by the Chinese
Long March 3B rocket carrier on 13 th may in the year 2007 at Xichang Satellite Launching center
in China. Other developments have taken place since the launch of NigComsat-1 which failed in
2008, which have already replaced the initial advancement in technology.
The ethical systems have been organized in a way that each industry regulates and sets its
own rules that they have to contend with. For K-Nart beauty products must have certain levels of
certified contents that are not harmful incase of frequent use of the product.
The Social responsibility entails all the applicable corporate social responsibility systems
whose major intension is to give back to the society as a way of promoting the activities of all
the stakeholders. These activities act as a way of promoting the welfare of the immediate
community and the natural environment. (Falola and Heaton, 2008).
The cultural dimensions in Nigeria may the only set of alarm as the constant cultural
conflict and tension between the Muslim North and the Christian South. Most of the religious
conflicts border between the Muslims and the Christians. K-Nart has to study the market and
take advantage of the sectarian conflicts by branding the products according to their preferences.
The other emerging markets are Botswana and Ghana. Botswana at one time between the
1960s and the late 1990s, had the highest economic growth rate in the whole world. Botswana’s
successful economy is based on the mining of diamonds. Its other factors relate directly to the
conditions in Nigeria only that Botswana Cultural and religious environment are very friendly
and they have no sectarian divisions like the Nigerian case. While Ghana has the same
investment climate and also relies on mining as its major export earner, it also enjoys a peaceful
political climate and also a favorable and friendly cultural environment.
The major economic, social, cultural, technological, political and legal aspects of the
international business stem from efforts to successfully achieve rapid and increased sales growth
and exploiting a cost advantaged sourcing, moving into new markets and expanding off shoring
and manufacturing productions. These arrangements of simultaneous business activities exert a
lot of pressure on the management which increases complexities and the general need for global
cross organizational and functional collaboration in decision and deployment.
Some emerging markets have very complex and highly complicated operating
environment. For instance, the expatriate, unfamiliar and foreign legal and employment
practices, pervasive cultural and religious differences all add to the tensions of international
trade. MNC must learn to function together with other local companies and grow while
competing with lower and low cost firms with adequate ties to manage effectively the regulators
and deciphering rapidly developing rules and regulation to counter any threats posed by the local
firms. The key to all market expansion is determined by the demand of its product.
The key challenges in international business that K-Nart will face when entering these
markets are the resources required to mobilize the team needed to strategize on the market entry,
logistics, market research and determination. Going global requires a lot of time and money. The
major strategy to gain global advantage depends on the creation of global resource network by
forming alliances with suppliers, customers and even some competitors.
The key management factors that K-Nart needs to consider when planning wider global
expansion into international markets.
The following five factors have to be taken into account when a company is turning global. The
dimensions and decisions of developing, researching, implementing and maintaining a global
and competitive advantage. These decisions also determine the focus on the actual continuous
strategy. These other factors are the product market participation, Products and services, Focus
and intensity of the firms activities, the existing legal and political challenges, the government
role and influence on the export market, coordination in decision making in the market. (Daniels,
Radebaugh and Sullivan, 2007
The market participation determines the countries to operate in, the number of countries, and the
regions the firm has to operate in and the competition they are facing. Few firms can actually
afford to enter and participate in every available market. Every company has to implement a
strategic discipline when deciding the choice of markets that weigh the relative or real
advantages of either direct or indirect presence in a specific country. Some companies expand
after assurance of direct opportunity and an assurance of a long term and relatively stable
competitive advantage. (Baldwin and Wylosz, 2004)
Products and services are generally adapted to mainly local demand. As tastes or preferences
and norms for a particular product becomes more homogenous many firms looks for chances to
standardize their products and services. The other factors to consider are the ones that target key
activities that add value to the firm, the existing political environment and the general attitudes
and cultural differences and religious affiliations that may affect the business. The availability of
industrial activity support, the nature, location of the product’s demand and the available
competitors play a big role in determining a firm’s strategy to go global. (Johnson & Vahlne,
Tax differentials and taxation laws present also problems for the firms planning to enter the
global market. The other factors to be considered are the facilities available to repatriate the
benefits or the utilities earned, the risk in currency fluctuations and devaluations, political risks
and also the availability of other physical amenities, infrastructures like roads, electricity, and
internet facilities. The firm also has to factor the ability of the company to coordinate different
levels of management in different locations and all other factors that may interfere with the
achievement of the company’s objectives and its targeted strategic growth.
The government’s role in the recipient country’s export market, its policies for
commerce, regulations, competitors and the available subsidies the government offers and to
which sectors. The regulations and laws of the host country can frustrate globalization in several
ways. A country can impose quotas on exports and imports or tariffs or even prevent foreign
The degree in which the procedure of decision making is integrated in the global market
portrays the success of implementation in globalization. The existing forces compel firms to
think globally. The pressure to go global is led not only by diversification or the competition in
local market but also by necessities or the preferences. (Joshi, 2009)
For a firm to operate in an ethical and socially responsible manner in global markets a clear
guideline needs to be designed and adopted for its implementation. When entering developing
markets, the firms have to develop a clear vision and set its targets. A decision must have been
reached on lawful market entry and the methods of the precise entry plans. An effective
coordination plan across the entire business operations that engages all its units has to be
effective and well understood. The firm needs to identify the local opportunities and manage all
negotiations with the central and local government regulators, potential target corporations and
interested partners. On its internal operations, the firm needs to set global allocation and
processes while making a decision on optical allocations and coordinating its investments. The
company needs to set and secure reliable long term access to its input supplies and manage local
innovations together with customer strategies. (Birkinshaw and Hood, 1998).
Global expansion has been facilitated by the constant and very fast and efficient flow of
information around the world which has resulted in people becoming more conscious of their
tastes, habits, lifestyle and preferences of other foreign people in other countries. The economic
perspective of this flow of information to the global citizens translates to more countries opening
their borders to deal in trade or invest abroad. To turn a global vision into a successful reality
requires a careful outline and an effective strategy for the business to successfully turn global.
Globalization compels a firm to redesign its strategies, central competition, and its product and
service mixture. These results affect the way a firm conducts its business operations and who it
deals with, how and why.
Baldwin, R. and Wylosz, C. (2004) The Economics of European Integration. New York:
Falola, T., Heaton, M. (2008). A history of Nigeria . Cambridge University Press .
Daniels, J., Radebaugh, L., Sullivan, D. (2007). International Business: environment and
Operations, 11th edition. Prentice Hall.
Joshi, M. (2009) International Business, Oxford University Press,
Johnson, J., and Vahlne, J (1960) Internationalization process of the firm- model knowledge
development. Journal of international business studies, 8, 23 – 32
Birkinshaw, J., and Hood, N. (1998). Multinational Subsidiary evolution. Capability and charter
change in foreign owned subsidiary companies. Academy of Management Review, 23(4) 773-