With so much cross-industry emphasis placed on the challenges of globalism, the role of regionalism in business strategy often receives scant attention. But even global companies — and those that aspire to become such — are well-served to examine the advantages of a regional approach to growth. Why? Because as past Toyota Vice Chairman Fujio Cho once explained, “We intend to continue moving forward with globalization … by further enhancing the localization and independence of our operations in each region.” Cho’s insight underscores the paradox that global or country-focused growth depends on robust regional strategies. It also highlights the extent and persistence of regionalization in economic activity and its vital role in a company’s business model and broader strategy.
At Pivot International, we are a US-based global leader in one-source product design, engineering, manufacturing, distribution, and supply chain solutions. With offices throughout North America, Europe, and Asia, DFM expertise that spans fourteen industries, and 320,000 square feet of manufacturing space, we help companies launch profitable products that position them for market leadership. Pivot brings more than 50 years of proven experience. Since 2016, Pivot has driven stratospheric growth with the acquisition of nine subsidiaries whose success is supported by strong regional strategies. For companies looking to scale with the launch of a new product, regional strategies can play a critical role in market success, and in this piece, we’ll examine four different types.
Four Regional Strategies for Driving Growth
1. The Headquarters Strategy
Typically, companies ease into international expansion by focusing on geographically proximate markets, concentrating their R&D, workforce, and often manufacturing facilities in or near their headquarters. A headquarter strategy can be highly effective when market forces favor geographic concentration over dispersion. Say, for instance, that a company in Ohio can design and produce sporting goods in two to four-week cycles near its manufacturing and logistics hub and can rapidly truck these goods throughout the continental US market. Although the upfront costs of domestic manufacturing are greater than offshoring, the headquarters strategy gives the company greater agility to pivot production to meet seasonal demand. It also works out in the company’s favor by lowering distribution costs, increasing supply chain security, enhancing inventory management, and reducing the incidence of markdowns. These benefits are among the reasons that many of Pivot’s clients take advantage of our domestic manufacturing options.
2. The Acquisition Strategy
When companies are aiming to establish a presence beyond the markets that are profitable to serve from their headquarters, the acquisition of companies that lie beyond their regional bounds is a common strategy. This is the approach Pivot took to establish itself as a global leader with expansive capabilities across multiple continents.
The acquisition strategy can result in exponentially accelerated growth by instantly providing access to a whole new set of competencies and customer bases. Herein lies its strength and weakness. (If growth isn’t effectively managed, it becomes a liability.) Another advantage of this strategy is a potentially dramatic reduction in risk via portfolio diversification and a greater ability to weather disruption. But while the acquisition strategy seems simple enough in theory, it is often a highly complex undertaking and can require multiple years to implement successfully.
3. The Hub Strategy
McKinsey & Co. is known for being the first to popularize this value-add strategy that involves building regional hubs that supply diverse resources, capabilities, and service offerings to the country in which these hubs are located. Essentially, the hub strategy is just a multiregional version of the headquarters strategy. (If conditions warrant a headquarters strategy, there’s a good chance a hub strategy will also be effective.) If regions are subject to very different requirements, hubs need not share resources and policies and can operate independently of one another. Conversely, when regions share similar requirements, the more it makes sense for them to operate in a mutually aligned, coordinated fashion.
4. The Specialization Strategy
This strategy draws its strengths from economies of specialization and scale. Companies that deploy this strategy rely on certain regions to perform particular roles or provide specific capabilities for the whole organization. Along with the acquisition strategy, this strategy has been central to Pivot’s growth and our ability to serve clients worldwide with a broad range of advanced expertise across medical, industrial, sports and entertainment, security and defense, construction solutions, and agricultural markets. For example, Wideblue, one of Pivot’s Scotland-based subsidiaries, specializes in sensor and photonics development, system engineering, and electronics design. Castle Creations, Pivot’s Kansas-City-based subsidiary, is our after-market specialist for electronic speed control and premium brushless motors for hobbyist and industrial applications. EDM is Pivot’s Nebraska-based ISO registered, full-service custom and contract manufacturing company, specializing in electronic assemblies with through-hole and surface mount circuit boards. And Pivot UK, a sophisticated global supply chain operation, was established to support all companies under the Pivot umbrella. It ensures that only the highest quality components are used in product design with an eye to customer pricing expectations, product reliability and performance, and protection against longer-term obsolescence and counterfeiting risks.
Gearing Up to Launch a New Product?
Thinking small — that is, thinking regionally — can be a key to greater growth. If you’re gearing up to launch a new product, Pivot is the partner you’ve been looking for. With our integrative NPD process, a portfolio of internationally award-winning products, and a highly collaborative approach to doing business, we’ll help you make your product vision a winning reality. If you’d like to learn more about how Pivot can support your growth goals, contact us today for a complimentary consultation.