theinternationalizationprocessandtheasset-lightapproach：的internationalization过程和asset-light方法

184TheInternationalizationProcessandtheAsset-LightApproach

THEINTERNATIONALIZATIONPROCESSANDTHEASSET-LIGHTAPPROACH

GeorgianaSurdu*

Abstract

Today,regardingallindustries,nothingismeanttolastforever:Ifwelookatindustrytrendsintermsofcorporatestrategy,weclearfynoticethatmostmajorcompaniesaregearingtonardanasset-lightapproachtoremaincompetitive

Theinternationalizationprocesshasdeterminedcompaniesmorldwidetofindsolutionstominimizetransactioncostsandtheexpansionscostsonforeignmarkets.

Inthematuritystageoftheinternationalizationprocss,manycompaniesfromvariousbusinesssectors,havechosenthe”assetligbt"approach,abusinessmodelfocasingonminimizing“in-house”resouresandmaximizingusageofoutsouringopportunities

Keywords;internationalization,asset-lightapproach

JELClassification:M14,M16

1.Introduction

Thetariffreductionandeconomicglobalizationmakesallkindsofresourcesflowmorefreelyaroundtheworld,theglobaleconomyisboundtoundergomajorrestructuringoftheindustrychain.Thispaperpresentsthatthecompaniesworlwidecanuseasset-lightoperatingstrategytofocusresourcesonproductdesign,R&D,sales,serviceandbrandpromotionahigh-profitindustrialchainstageandtoestablishacompetitiveadvantageforthosecompanies.

"Assetlightbusinessmodel",alsoknownas"virtualbusinessmodel",isabout

tooutsourceitsnon-corestrengths,relyingonsupplychainserviceproviderstoconductrapidexpansionofsaleschannels,theirfocusonthedesignandmarketingtoamuchshortertime,lesscapitalandfixedassets,thedevelopmentoffasterandearnmorelucrativeindustrialprofitchainlink.Afteryouunderstandthisprincipletoknow,whowillbetheircorestrengthsofnon-chainoutsourcingindustry,andfocusontheircorestrengthsoftheoperatingmodearecalledassetlightbusiness.

Astheindustrydivisionoflaborin-depthandnon-tariffbarriersincreasinglyweakenedtheflowofassets,alsohasbecomeincreasinglyfrequentandmorecloselyinter-firmdivisionoflabor,businesstotheirrespectiveadvantageoftheareatopoolresources,industryrestructuringcontinuedtodeepen.Therelationshipbetweenbusinesspartiestothetransactionisnolongerconfinedtotraderelationsbetweenordinarysense

*GeorgianaSurduisassistantlecturerinInternationalBusinessManagementattheRomanian-AmericanUniversityinBucharest.E-mail:srdgeorgiana@

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ofthewayorbylinkingaseriesofinvestorrelations,andmoreisincludedstrategicalliancesandotherformsoftechnicalcooperation,andOEMrelationships,includingdiversity,whichisdirectlyithasgeneratedanewbusinessmodel-asset-lightbusiness

model

Theso-calledasset-light,asopposedtothere-occupyalotofmoneyintermsofassets,includingtheexperiencesofenterprises,standardizetheprocessmanagement,corporatebranding,customerrelations,humanresources,andequipment,plant,andrawmaterialsthantheoccupationoftheseassetscostslessbutseemlightandflexible,socalledassetlight.Theasset-lightoperationscanbeunderstoodasfollows:underconditionsoflimitedresources,leveragetheuseofotherresourcestothelowestinputtoachievetheStrategicManagementofmaximizingshareholdervalue.

Thecoreideaofasset-lightoperationsistoleveragethefulluseofexternalresources,toreducetheirowninvestment,focustheirresourcesonthemostprofitablestageoftheindustrialchaintoimprovecorporateprofitability.Asset-lightbusinessmodeltocompetewiththetraditionaltheory,themajordifferenceisthat:thetraditionalcompetitiontheoryisbasedonlow-costordifferentiationtogainmarketshareandvolumegrowthinacompetitivefundamental,whiletheasset-lightbusinessmodelisbasedoncustomersandprofitstothinkaboutcompetitivestrategyasthecentral,mostconcernedabouttheclient'svalues,high-profitindustrialchainstagesandleveragetheuseofotherresources,maximizeshareholdervalue.

Toasset-lightmodelofexpansion,andself-comparedtotheslowaccumulationcangetmoreprofitabilityandafasterpaceofdevelopment.Infact,itwasdeterminedtogiveupbecauseoftheneedtospendalotofmoneyandthelowvalue-addedofheavyassetmanagementlinks,companiessuchasNikewereabletomoveforwardwitheaseandrapiddevelopment,andbecometheworld'sleaders.

2.Examplesofcompaniesimplementingtheasset-lightapproachintheirinternationalizationprocess

Almosttwoyearsago,Motorolasaiditwouldoutsource50%ofitsCMOSsemiconductormanufacturing,astrategythecompanydubbed"assetlight."Asthefirstphaseofitsasset-lightstrategy,Motorolaannouncedamajormanufacturingconsolidationandtheeliminationofmanyinternalmanufacturingjobs.

ExecutionofthisstrategyhasresultedinSPStodayoperatingonly10ofitsoriginal28manufacturingfacilities.MotorolareinforcedthisstrategybycuttingcapitalexpendituresforSPSdramaticallyin2002.

Recognizingtheneedforadvancedtechnology,MotorolainMarch2002enteredintotheCrolles2AlliancewithSTMicroelectronics,Philips,andTaiwanSemiconductorManufacturingCo.Ltd.(TSMC)forthedevelopmentofnext-generationtechnologyat90nmandsmallergeometries.ThisallianceaugmentedMotorola'sinternalmanufacturingcapabilityatitsMOS-13fabinAustin,Texas.

ThesemovessuccessfullyslowedthebleedingfromSPS'sbottomline.Afterlosing$1.3billioninthefirsthalfof2002,SPSonlyreportedalossof$125millionduringthefirstsixmonthsof2003ona5%decreaseinsales.

186TheInternationalizationProcessandtheAsset-LightApproach

iSupplibelievesthatifSPSistobecomeasuccessfulspin-outthatcanprofitablymanufactureandsellhigh-valuesemiconductorproducts,itmustcontinuedowntheroadofmanufacturingconsolidation.ThepresenttrendamongsemiconductorIntegratedDeviceManufacturers(IDMs)istoconsolidateolderfacilitiesandrelocatethemtolower-costmanufacturingregions.

DowChemicalsCompanywaskeentoimplementtheasset-lightstrategyforitschlorinebusinessaftercompletingethyleneandstyrene.

Onimplementingtheasset-lightstrategyforbasicchemicals,AndrewLiveris,company'sCEO,stressedthathewas"notinahurrytogetitdoneatthewrongvaluation"especiallyasthebusinessgeneratedanEBITDAof1.7lastyear.

"Thatisinatrough,demandledtroughandgreatrecessionofalltime.Soweknowwehaveaveryhighperformingasset.Thepartnerswearetalkingtoareallstrategic.Thereisthreeofthem,"hesaid.

DowChemicaliscontinuingitsseriesofdivestituresaspartofitsefforttobecomeamoreassetlightbusiness.Thiswilllimitthecompany'srelianceonrawmaterialsandaidinpayingthedebtfromitsacquisitionofRohm&Haas.DowhasachievedUS$118mlninsavingsbyleveragingsuppliercontractsbetweenRohm&

HaasandDow.

Dow'sUnionCarbideCorporationsubsidiarywillsellitsownershipstakeintheOptimalGroupofCompaniestoPetronasforUS$660mln.

DowagreedtosellanacrylicacidandestersplantandtheNorthAmericanunitofitsUCAREmulsionSystemsspecialtylatexbusinesstoArkemaforUS$50million.ThesalewasrequiredtocomplywithFederalTradeCommissionrequirementsfollowingitspurchaseofRohm&Haas.

DowhasannouncedtheUS$1.7blnsaleofMortonSalt,expectedtocloseinthesecondhalf,solditscalciumchloridebusinesstoOccidentalPetroleumforUS$210mln,andsignedadealtosellitsstakeinTotalRaffinaderijNederlandforanexpected$725million,alsoexpectedtocloseinthesecondhalfof2009.Dowalsorecentlyannounceditwasclosingthreeethylene-relatedplantsinLouisianatocutcostsandfocusonspecialtychemicalsproduction.

InChina,thecompanyiscollaboratingwithShenhuaGroup(thecountry'slargestcoalminingcompany)toimprovecatalystefficiencytoallowviableconversionofcoaltoolefins.DowisalsoseekingtoexpanditsR&DpresenceinAsia,adding600jobsinShanghaibytheendof2007,andthecompanymayopenupalargeR&DcenterinIndia.

ThejointventuresplannedforAsiaaretypicalofDow's"asset-light"approach,whichworksbyofferingacombinationofintellectualpropertyandmoneyinexchangeforashareinaworld-scaleproductionfacility.Atthesametime,thecompanyisconsideringsellingashareofsomeofitsexistingassetsinordertofreeupcash.

Maintainingalowdebt-equityratiohelpsthesecompaniespreservetheirinvestment-gradecreditratingsandincreasestheirdebtcapacityinordertofinancefutureprojects,therebystrengtheningtheirfinancialflexibility.Furthermore,to

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financetheirgrowth,hotelcompaniesprefertouseinternallygeneratedfundsratherthandebt.Inthisrespect,majorasset-lightcompaniesdonotreallyneedthepublicequitymarketstogrow.Theircapitalrequirementsareusuallylow,eveniftheyoccasionallyrequireminorityequityinvestmentsto"purchase"managementcontracts.Thismeansthatthelogicforbeingpublicwithregularaccesstotheequitymarketsislesscompelling,

InEurope,theasset-lightstrategyhasbeenapopularwaytounlockcapitalbysellingtheassetwhileensuringcontrolwithlong-termleasebackandmanagementagreements.During2005,anumberofbothsingle-assetandportfoliotransactionsinvolvedtheuseofmanagementcontracts.

Exhibit1.Opperatingcompaniesvaluedriversaffectingassetdisposition

LightenBalanceSheet/ImproveFinancialRatios

CashFlow

Requirements/Market

Expectations

GrowthFinancing

MaintainSolidCreditRating

FocusonCoreSkills

ASSET-LIGHT

STRATEGY

Inthehospitaliryindustry,hotelssuchasHilton'sorMerriottareapplingsuccesfullyasset-lightbusinessmodel.Asthemarketsaregettingmoreandmorecomfortablewiththehotelindustry,wecanwonderhowlonghoteloperatingcompanieswillbelistedonmajorexchangesandifprivatizationislikelytocontinuesince“size”doesn'tseemstomatteranymore.Thequestioniswhetherhotelcompanies,giventheasset-lightstrategy,aregoodbusinessestobeownedbythepublicmarkets.

AccordingtoMarkAbramson,ifcompaniestaketheasset-lightapproachtoitsfurthestlogic,theywouldfind(inmostcases)thattheremaininghotelmanagementbusinessesdonothavesufficientscaletobefullyvaluedaspubliccompanies.Ahoteloperatingcompanythatiscompletelyasset-lightneedstohavesuchalargenumberofhotelsundermanagementinordertohavethecashflowandvaluationsufficienttobelistedinamajorexchange(e.g.,NYSE)thatthisisunachievableinallbutasmallnumber

188TheInternationalizationProcessandtheAsset-LightApproach

ofcases.Soapureasset-lightcompanywillneverbevaluedtoitsfullestasapubliccompany.“Forprivateequityfirms,thismeansincreasedinterestratesandless-favorablerepaymentterms,whichstrikesattheheartofthedealinleveragedbuyouts.Ifnothingelse,privateequityfirmswillhavetoreachdeeperintotheirpocketsorfaceaslowdownindealvelocity.

Thus,thenearfutureofthedebtmarketswillbeamajordeterminantinwhetherprivateequityfirmswillcontinuetoseekoutnewinvestmentopportunitiesinthehospitalityindustryasthemajorhotelcompaniescontinuetheirasset-lightpokerplay.

3.Conclusions

Regardlessoftheinternationalizationmethod,weseewhithintheanalysismadeonthebasisofexamplesoflargecompanies,thattheasset-lightapproachisabusinessmodelthatcanbeappliedinthematuritystageoftheinternationalizationprocess.Companieswhichapplythisbusinessmodelmusthavecapital,marketawareness,negotiationskillsandpossessknow-how.

Thetheoriesofindustrialorganizationandstrategicmanagementdescribenecessaryconditionsforfirmstoobtainasustainablecompetitiveadvantage,andsuggestappropriatestrategiesforcorporationstoobtainsuperiorfinancialperformance

Thefundamentalquestionofsuchtheoriesistheutilityindevelopingmeaningfulmanagementtoolsandactionablestrategiesfortheirpractitioners.

Althoughasset-lightbusinessmodelisnotnew,ithasnotbeendefinedproperlyintheliteratureandatabriefanalysisitseemsmultisectoral,applyingtobigcompanies,regardlessofsector.

Inadynamicenvironment,wherecompaniesseekcompetitiveadvantage,asset-lightapproachbecomesincreasinglyused,especiallybycompaniesthatinvestinAsiaortheMiddleEast.

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Tocontinuouslystrengthenlearning,improvetheircomprehensivequality.Withgoodcomprehensivequalityisthepreconditionofcompletesthelaborofdutyandconditions.Ayearalwaysputlearningintheimportantposition,tryingtoimprovetheircomprehensivequality.Continuouslearningprofessionalskills,learnfromsurroundingcolleagueswithrichworkexperience,equipthemselveswithknowledge,theexpandedaspectofknowledge,effortstoimprovetheircomprehensivequality.

ThesecondDobest,strictlyperformtheirresponsibilities.Setupthecompany,tomaximizethecustomertothesatisfactionofthecompany'sproducts,doagoodjobintechnicalservicesandproductpromotiontothecompany.Andcollectedonthepropertiesoftheproductsofthecompany,inordertomakeimprovementintime,maketheproductsbettermeettheusingdemandofthescene.

Threetolearntobegoodatcommunication,coordinatingassistance.On-sitetechnicalservicepersonnelshouldnotonlyhavestrongprofessionaltechnology,shouldalsohavegoodcommunicationability,alotofaproductduetoimproperoperationtoappearproblem,butoftennotcustomersreflectthequalityofno,sothistimeweneedtofindoutthecrux,andcustomercommunication,standardizedoperation,toavoidcustomer'smistrustoftheproductsandeventhedamageofthecompany'simag