China: To Build or to Buy?

Whether to increase market share, satisfy shareholders or increase service offerings, it is inevitable that a successful company will eventually look at expansion from its current position as a means to achieve corporate goals. In the localization industry, the desire for expansion typically manifests itself in the establishment of an overseas office.

However, expansion to a foreign market often puts a company squarely into the middle of an age-old quandary, "Is it best for a company to build an office in its likeness, or should it acquire an existing operation and merge best practices?" Benefits and drawbacks for both approaches can be debated, but the choice often comes down to the very uniqueness of the individual companies facing this decision. For one company, Moravia Worldwide, "Build or Buy" became the focal point of debate when the company made its decision to expand its corporate presence eastward into China.

Moravia Worldwide chose "homegrown" in 2002 when it opened an office in Nanjing, China as a way to better meet its clients' needs for linguistic quality control and cost-efficient software assurance testing. Although an arguably slower process, Moravia chose to follow the "build" route upon completing an audit of its internal production capabilities, as well as a strategic needs assessment on where the company wanted to be long-term.

The data harvested from this self-critique showed that it needed to be vigilant in its push to keep production costs down. However, because of the company's roots and entrepreneurial spirit, it felt that absorbing another corporate culture could potentially offset the working environment that Moravia had so vigorously tried to maintain throughout its history. Another key factor resulted from its comparison of the Chinese and Indian marketplaces with regard to potential cost savings and future growth. Once the data was gathered and sequenced, Moravia evaluated its options and ultimately settled on Nanjing, China as the location that best suited its requirements.

Building a presence in China was no easy achievement for Moravia as, obviously, it found that doing business in and with China required much diligence and a specific understanding of local culture. But why did Moravia willingly take on this challenge?

Like many of its clients and competitors, Moravia watched as the mounting pressures of the global economy severely affected production budgets with "the need to do more for less" as the oft-repeated mantra. While Moravia already operated a production headquarters in the Czech Republic - which, when compared to America and Western Europe, offered significant cost benefits - it recognized that its current cost advantage would rapidly disappear with Eastern Europe's impending accession to the European Union. As a result, Moravia decided that the rewards outweighed the risks and tackled the difficulties of entering a market as unique as China.

To continue reading, please go to the full online version of this article, published in the March 2004 issue of the The LISA Globalization Insider.



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