SARA Lee Bakery Group

International expansion is obviously a necessary and useful step in the life of any company. First of all, international expansion gives the possibility for the company to expand its clientele and enlarge its future potential for growth. Basically speaking, it would be a chance for Sara Lee to increase its revenues. On the other hand, revenues are less important if they are not counterbalanced by low costs. The moment seems right, because Sara Lee is already a bug name on the internal market, a market which is already quite saturated and international expansion would seem the right choice in terms of looking for other markets where the company can develop anew.

In order to be able to answer this question, in terms of costs we need to take into consideration two issues: the cost of labor and the cost of distribution (and any related costs). In terms of labor costs, it is obvious that an international expansion for Sara Lee would mean a relocation of its workforce and, additionally, the possibility to employ much less costly labor. On the other hand, we need to make an important observation here, something which often comes into discussion when referring to labor costs: relocation would only lower the rate with which the labor is paid, not necessarily the overall labor costs. This is a productivity-related discussion: if the new, lower paid workforce is producing much less than in the country of origin, then Sara Lee could find itself in a situation where relocation was actually less economical than perceived. In this sense, the choice of country is important, because the new workforce needs to be professionally competitive so that efficiency and productivity can remain at the same levels.

In terms of distribution and related costs, we need to consider the fact that the entry costs in the new country (including here distribution and administrative costs) may be quite high. Additionally, each country has its own specifics related to distribution networks (Japan is a good example in this sense). International expansion needs to consider any issues related to cultural differences and to problems that may occur due to the need to expand to another country.

So, evaluating those said previously, international expansion, through the possibility to increase the targeted market, through an increased perception at a global level, even through economies of scale and lower costs that may often occur in this case, is still a move to be wisely and thoroughly considered, because the difficulties associated with market expansion abroad may prove costly for the company.