Diversifying Risk through International Expansion

Play It Safe, Or Take a Risk?

Should Coe's Expand Internationally? Is Mexico the best place for expansion?

As Chu (2012) points out in the case study, Coe’s needs to diversify its risk and Latin America is an inexpensive place for doing that. From that angle it makes sense to expand internationally into Mexico—plus, there is demand from consumers for the type of business Coe’s can provide, as one consumer points out. In Mexico, Coe’s would be providing something no other store is providing. And it would be good to give some competition to Walmart in Mexico. The regulatory environment in the US looks to be tightening and the same goes for Europe, so it helps to have another income stream in an environment that is potentially more regulatory friendly.

Globalization has led to a more interconnected world, and businesses have taken advantage of this by expanding into new markets (Steger & James, 2019). However, international expansion comes with risks, and it is important for businesses to diversify their risk by expanding into multiple markets. Mexico is an attractive market for expansion due to its large population and growing economy. Furthermore, Mexico is in close proximity to the United States, which makes it easier for companies to expand into than more distant markets. By diversifying their risk through international expansion into Mexico, Coe’s can tap into a new market while mitigating the risks associated with doing business in a foreign country.

Do you expect Coe's to have to adapt its successful model in another country?

There is no one-size-fits-all answer to this question, as the appropriateness of adapting a business model to another country depends on a variety of factors. One key consideration is the nature of the product or service being offered. If the offering is relatively new or unique, it may be more difficult to find success by simply replicating a successful model from another country. Another important factor is the level of competition in the target market. If there are already a number of established businesses operating in the space, it may be difficult for a new entrant to gain a foothold. Finally, it is also important to consider the cultural landscape of the target market. Certain countries may have values or norms that are incompatible with the business model, making adaptation necessary in order to be successful. Ultimately, whether or not it is smart for a business to adapt its successful model in another country depends on a number of individual factors.

For Coe’s, some aspects of the business may be able to stay the same—such as renting out products to consumers since there is nothing like it in Mexico at the moment and it would fill a consumer need. However, other aspects may need to change, such as the type of product offered, or loan terms, and so on. Some cultural adjustment is likely to be required (Bose et al., 2020). Culture refers to the shared values, beliefs, and customs that define a group of people. It shapes their worldview and influences their behavior. When expanding into new markets, businesses must take care to learn about the local culture and adapt their products and services accordingly. Failure to do so can lead to misunderstanding and conflict. For example, companies that sell food products must be aware of religious and cultural dietary restrictions. Those that sell clothing must be aware of local dress codes. And those that offer services must be sensitive to differences in etiquette. A business that show respect for local culture is more likely to be welcomed by the community and be successful in its venture. In contrast, a business that ignores or disrespects local culture is likely to face resistance and find it difficult to prosper. Culture matters when expanding internationally because it provides critical insights into how best to operate in a given society. Businesses that take the time to learn about the culture of their new markets are more likely to succeed than those who do not.

If you were in Stan Wyndham's shoes what would you do next?

I would move forward with the expansion into Mexico. The consumer seems to want it. It makes sense from a risk management perspective. And there is an opportunity to do so from a market perspective. Although the expansion of a business into international markets is a complex undertaking that requires a deep understanding of the societies in which the company will be operating, Mexico is not so far from the US that it would require a huge transformation of the business model.

One could even list a number of other good reasons to justify expansion into Mexico. Mexico is a rapidly growing market with a lot of potential for US companies. The Mexican economy has been expanding rapidly in recent years, and is expected to continue to grow. This makes Mexico an attractive market for US companies looking to expand their operations. Plus, the Mexican market is relatively close to the United States, making it easy to transport goods and services. Mexico has a large population, which provides a potential customer base for US companies. The Mexican government is friendly to foreign investment, and offers a number of incentives for US companies to expand into the country. And, finally, the infrastructure in Mexico is improving, making it easier for US companies to do business there. These factors make expanding into Mexico an attractive option for Coe’s. Since there is demand on top of all these factors, if I were Stan Wyndham I would say full speed ahead to expansion into Mexico for the good of the company.