Alex and Mary: The Next Step?

At the age of 39, after working for nearly fifteen years at a leading software company on the
West Coast, Alex and his soon-to-be-wife, Mary, had cashed in their stock options, withdrew
all their savings, maxed out their credit cards, and started their own business, naming it TopDog
Software. The two had developed a new software package for customer relationship
management (CRM) applications that they were certain was far superior to anything on the
market at that time. TopDog’s software was particularly effective for use in call centers because
it provided a highly efficient way to integrate massive amounts of customer data and make it
almost immediately accessible to call center representatives as they worked the phones. The
software, which could be used as a stand-alone product or easily integrated with other major
CRM software packages, dramatically expedited customer identification and verification,
rapidly selected pertinent bits of data, and provided them in an easily interpreted format so that
call center or customer service reps could provide fast, friendly, and customized service. The
timing proved to be right on target. CRM was just getting hot, and TopDog was poised to take
advantage of the trend as a niche player in a growing market. Alex and Mary brought in two
former colleagues as partners and were soon able to catch the attention of a venture capitalist
firm to gain additional funding.
Within a couple of years, TopDog had twenty-eight employees and sales had reached
nearly $4 million. Now, though, the partners are facing the company’s first major problem.
TopDog’s head of sales, Samantha, has learned of a new company based in London that is beta
testing a new CRM package that promises to outpace TopDog’s—and the London-based
company, FastData, has been talking up its global aspirations in the press. “If we stay focused
on the United States and they start out as a global player, they’ll kill us within months!” Sam
moaned. “We’ve got to come up with an international strategy to deal with this kind of
competition.” In a series of group meetings, off-site retreats, and one-on-one conversations,
Alex and Mary have gathered opinions and ideas from their partners, employees, advisors, and
friends. Now they have to make a decision—should TopDog go global? And if so, what
approach would be most effective? There’s a growing market for CRM software overseas, and
new companies such as FastData will soon be cutting into TopDog’s U.S. market share as well.
Samantha isn’t alone in her belief that TopDog has no choice but to enter new international
markets or get eaten alive. Others, however, are concerned that TopDog isn’t ready for that
step. The company’s resources are already stretched to the limit, and some advisors have
warned that rapid global expansion could spell disaster. TopDog isn’t even well established in
the United States, they argue, and expanding internationally could strain the company’s
capabilities and resources.
Others have pointed out that none of the managers has any international experience and
the company would have to hire someone with significant global exposure to even think about
entering new markets. Although Mary tends to agree that TopDog for the time being should
stay focused on building its business in the United States, Alex has come to believe that global
expansion of some type is a necessity. But if TopDog does eventually decide on global
expansion, he wonders how on earth they should proceed in such a huge, complex environment.
Sam, the sales manager, is arguing that the company should set up its own small foreign offices
from scratch and staff them primarily with local people. Building a U.K. office (in London)
and an Asian office (in Tokyo), she asserts, would give TopDog an ideal base for penetrating
markets around the world. However, it would be quite expensive, not to mention the
complexities of dealing with language and cultural differences, legal and government
regulations, and other matters. Another option would be to establish alliances or joint ventures
with small European and Asian companies that could benefit from adding CRM applications
to their suite of products.
The companies could share expenses in setting up foreign production facilities and a
global sales and distribution network. This would be a much less costly operation and would
give TopDog the benefit of the expertise of the foreign partners. However, it might also require
lengthy negotiations and would certainly mean giving up some control to the partner
companies. One of TopDog’s partners is urging still a third, even lower-cost approach, that of
licensing TopDog’s software to foreign distributors as a route to international expansion. By
giving foreign software companies rights to produce, market, and distribute its CRM software,
TopDog could build brand identity and customer awareness while keeping a tight rein on
expenses. Alex likes the low-cost approach, but he wonders if licensing would give TopDog
enough participation and control to successfully develop its international presence. As another
day winds down, Alex and Mary are no closer to a decision about global expansion than they
were when the sun came up.