Westfield gets a Brazilian… and goes Italiano

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.

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The rise and fall of globalisation

I just stumbled across a nifty new Google tool called the Google Labs Books Ngram Viewer, which allows users to compare the occurence of particular words or phrases over time within the enormous repository of scanned books with Google land.

I thought an International Business readership might be interested in the rise and fall of some of our most important terms over recent decades (click on the graphs for larger versions and the full search parameters).

Here’s globalisation:

And with the US spelling, and also capitalised (i.e. globalization, Globalization, Globalisation):

The latter graph is for a longer timeframe (right back to 1900). Both figures show the steep rise in the use of the term from the late 1980s (coinciding with a surge in foreign direct investment and increasing numbers of newly multinational firms).  A plateau and then decline in usage around 2003 is certainly noticeable.  I’m guessing the phenomenon has become much less discussion-worthy as the various features (greater connectedness, trade, investment etc) became more commonplace (or perhaps less controversial).

Here are the various single word versions of multinationals (since 1960):

It is quite surprising that the term rose considerably earlier, but did not grown along with globalisation. The two-word versions look very similar:

International business, global strategy, multinational strategy, transnational strategy all peaked around 1990 too. Global strategy had the most substantial dropoff, reflecting perhaps the splintering of terminology and concepts to more fine-grained conceptualisations of competitive advantage:

Foreign direct investment rose up through the literature from the early 1970s, shot up in the mid-1980s, but fell in this millenium:

What other terms should we look at?

A much more global World Cup

Watching the World Cup football in the wee small hours, I have been struck by something (other than the horrific refereeing and those damn horns): the tournament sponsors.

This Cup may go down as the real turning point in the global economy where emerging market brands (i.e. those from non-First World nations) stepped out into the public eye. Look at the list of official FIFA partners and sponsors (the ones exciting me are in green):
– Adidas (Germany)
– Coca-Cola (US)
– Emirates (UAE)
– Hyundai-Kia (South Korea)
– Sony (Japan)
– Visa (US)
– Budweiser (US-Belgium-Brazil)
– Castrol (UK – it’s BP-owned)
– Continental (Germany – auto parts and tyres)
– McDonalds (US)
– MTN (South Africa – telecoms)
– Mahindra Satyam (India – IT and consulting)
– Seara (Brazil – foodstuffs)
– Yingli Solar (China – solar/energy)

This contrasts very markedly with the list from just 4 years ago: Adidas, Budweiser, Avaya, Coca-Cola, Continental, Deutsche Telekom, Emirates, Fujifilm, Gillette, Hyundai, MasterCard, McDonald’s, Philips, Toshiba, and Yahoo!.

The BRICS firms (well, actually BICS) have stood up in joining the Emirates on the scrolling billboards etc. Building powerful, recognised brands will be the next important step for firms from these emerging giants.

Of course, hosting the tournament is a big rite of passage also (Brazil’s up next), and brands can piggyback on this opportunity. Disappointingly the local South African sponsors (beyond MTN – they are listed on the FIFA link) have not been particularly interesting or international in their focus.

I’m sure we’ll see more familiar brands come Brazil 2014 – Havaianas anyone?

The sad passing of a highly competent pyramid builder

I was saddened to receive the news today of CK Prahalad’s untimely passing. His influence was felt across the strategic management and international business fields for several decades.

With Gary Hamel he defined and popularised the idea of core competencies as a driver of firm success. This was a wonderful operationalisation of the resource-based view, and helped to shift attention away from external environmental forces (a la Michael Porter).

His earlier work with Yves Doz on multinational headquarters’ control of subsidiaries was just as influential in international business circles, and he integrated strategy and literature very effectively when looking at the role of cooperative strategic alliances.

Hopefully the most influential and world-altering work he produced will be his exploration of the scope for multinationals and entrepreneurs to build advantages through servicing the billions of currently impoverished in the developing world. He coined the bottom of the pyramid concept and worked hard in proselytising on this issue. Here’s a short video of Prahalad explaining his perspective on globalisation and its potential:

It is rare for academics to be so active in their engagement with and pursuit of the ideas they talk about. Prahalad worked with many firms, governments, investment houses and communities. He cared about the future for India’s poor (and beyond). His death is a tragic loss for all.