It is rare to see an Australian multinational announce two international expansion moves in the same week. And it’s even rarer when said moves are to two different continents.
Shopping centre giant Westfield made two such announcements this week, with joint ventures signed in firstly, Brazil, and today, Italy.
As I wrote about in a book chapter on Westfield a few years ago, the firm has typically been reluctant to seek opportunities beyond the English-speaking world. The firm entered the US way back in 1977, with a portfolio of properties slowly emerging over the coming two decades.
Westfield succeeded in the US by buying run-down malls that no one visited anymore and turning them around through innovative redevelopment projects. Most competitors in the industry preferred building new malls.
By the late 1990s Westfield had emerged as the dominant player on the US scene, and continued to grow right through to the global financial crisis.
In the broader world, they have been more cautious. As we argued in the chapter:
“Westfield’s internationalisation was never a story of extreme risk-taking. Frank Lowy saw little value in acting as the pioneer in environments where the payoffs were too low. As long as there were opportunities to be had in the US, then Europe, Asia and New Zealand could wait. Eventually in 1997 the group took over the management of ten St Luke shopping centres in New Zealand. In 2000 Westfield Trust and St Lukes Group merged and the New Zealand centres were re-branded as Westfield centres. Attempts to enter the UK market in the 1970s and 1980s were unsuccessful. Lowy expressed considerable frustration with the lack of dynamism in the UK investment houses and lack of planning enthusiasm (Margo, 2000). Not until early 2000 did Westfield finally obtain access with a 75 per cent stake in a centre at Broadmarsh, Nottingham. The firm has made considerable headway since, with seven centres on the books, and is set to open the largest centre in Greater London in early 2008. Westfield briefly entered Asia in 1998 with a ten per cent share of Suria Kuala Lumpur City Centre in Malaysia. This investment was short-lived, however, with the company withdrawing in 2000 after the Asian currency crisis.”
So why has the firm moved now?
On the Brazil front, the firm is tapping into one of the most exciting and fast-growing large economies in the world. The firm may see some useful urban similarities to Australia and tthe US (i.e. more ‘wide, open spaces’ in the ‘burbs), and Brazil may also be seen as far less challenging than China and India for example (with much less government intrusion likely).
At the same time the firm may see far fewer prospects in the moribund US economy and its close-to-saturated Aussie home.
Bringing a local, experienced joint venture partner is a very sensible move for a multinational with no experience in the market. While Westfield hasn’t typically hooked up with shopping centre management firms before (preferring instead to court construction firm and funds management partners – i.e. in essence, supply partners), local adaptation is clearly front of mind here. There should also be an appetite for knowledge acquisition on both sides of this equation.
The Italian move looks a little riskier, with patchier economic conditions and a reputation for bureaucratic randomness. There may be an argument for very localised attractiveness here, as the firm is targeting one of the wealthier and more retail-savvy parts of the nation – Milan (also home to some of the oldest shopping arcades in the world). Indeed, this could also be a brand-building exercise in a city/region with no shortage of brand champions, especially in the luxury and masstige segments Westfield is keen to attract across its empire.
The final piece of this strategic puzzle might well rest on the role of individuals in both constraining and driving choices.
Firm founder Frank Lowy finally handed over the reins to his baby about five months ago (stepping down as Executive Chairman). His sons appear to stamping their mark on the firm’s future with these two bold (but tentative) moves.