Finding success in the global marketplace can be daunting—especially when you have to decide whether you’re ready to take your domestic business international. Once the decision is made, there are numerous avenues—direct investment, joint ventures, mergers, and the like—to consider in the pursuit of international expansion and growth.
Midea, a Chinese electrical appliance manufacturer, decided to take the M&A route in order to jumpstart the company’s global expansion. Last year, Midea acquired Kuka, a Germany-based robot maker, about 3.7 billion euros ($3.9 billion) in cash. The move faced both political opposition in Germany and scrutiny by the U.S. government over concerns about industrial data ending up in China’s hands.
“We’ll continue using this M&A approach to go global, but it obviously presents a lot of challenges,” said Midea CEO Paul Fang on Thursday at the Fortune Global Forum in Guangzhou, China.
Fang alluded to expansion challenges including cultural clashes, governance changes, and poor execution in a new market. Yousef Al-Benyan, the vice chairman and CEO of SABIC, said one of the biggest mistakes executives can make when acquiring a new company is to try to change the culture and make it fit with their own.
“Don’t focus on changing the culture,” he said. “Going after the culture of a business is the wrong strategy. The culture always wins.”
SABIC is based Saudi Arabia, and Al-Benyan says he always reminds colleagues to “think global, but act local.” In other words, the business needs to have a strong local strategy once acquiring a company in a new market. “You need to pay attention to the specific business model in each region,” he said.
To do that, he established an executive exchange program where leaders from the company spend several years in another region to better understand the market. “The beauty of it is to cultivate leaders that understand your business globally,” he said.
Erik Fyrwald, CEO of Syngenta International, echoed the sentiment: “The benefit of being global is that you can share best practices from around the world.”
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