Managing international expansion in a KIE venture: Going global in Alpha Composites

In 2009, Alpha Composites, a small innovative European company specialising in glass fibre composite materials, announced a startup of a new production unit in China. This was a big decision for Alpha’s CEO, whose parents established the company together 30 years ago. Despite having sales internationally almost from the inception of the venture, Alpha developed, produced and supplied composite profiles only from their home base in Europe. Now, all of that was about to change, as the company was entering a new stage in its international development by changing its operations configuration and establishing its base in China.
On the one hand, the decision seemed like a no-brainer. While many other countries fell into an economic coma after the recession struck in 2008, China continued to grow at a double-digit rate, proving the country’s potential to be the world’s growth engine in terms of output and consumption. On the other hand, the business environment in developing countries, China among them, was still very demanding, both in terms of market entry and day-to-day management. Many CEOs of Western companies were losing sleep over partners’ predatory behaviour, competition from cut-price copycats of their own products and bewildering and arbitrary legislation.
Dealing with these caveats would be difficult even for large companies that had operated internationally for decades. Alpha hadn’t. Moreover, as an SME (small-and-medium size enterprise), it had rather scarce managerial resources for developing and implementing an effective strategy for the startup in China, arguably the world’s most complicated and competitive market. However, the founders and the CEO firmly believed that if Alpha did not try to establish a new venture in international setting, it would be pushed aside by rivals, old and new, that were already using fast-developing emerging countries to transform their competitive positions.
There were other important factors Alpha had to consider in its global move—company’s values, unique knowledge and technology that over the years helped the company to develop its innovative profile and become one of Europe’s leading providers of pioneering composite profiles solutions. To a large extent, these strategic assets were a result of extensive investments the company had made into its engineering organisation, as well as long-term collaboration with its customers and more than 20 research centres and universities from all over Europe. If managed appropriately, Alpha’s strategic assets could become one of the most important determinants of success and competitive advantage in their international expansion. As examples of many other companies show, that’s often easier said than done.
Alpha’s case, presented in the chapter, describes an international expansion journey and its underlying dynamics. The case highlights how the operations configuration and the relationships between key players do not stay constant over time. Rather, they shift and adapt to internal and external stimuli. The case explores these stimuli in retrospect and describes how the company attempted to reconcile changing requirements with its knowledge resources and capabilities. By exploring Alpha’s production startup in China, this case sets out to uncover how to manage development and international expansion in KIE ventures, including issues related to knowledge intensity and new products and services. The case can support discussions related to international expansion and development of KIE ventures (especially in emerging markets).