what re the arguments for Halogen Analytics going international?

260 CASE FOR ANALYSIS Halogen Analytics113 At the age of 39, after working for nearly 15 years at a leading software company on the West Coast, Alex Schaaf and his soon-to-be-wife, Emily Rockwood, had cashed in their stock options, withdrawn all their savings, maxed out their credit cards, and started their own business, naming it Halogen Analytics. The two had developed a new software package for root cause analysis (RCA) applications that they were certain was far superior to anything on the mar- tive for use in design engineering organizations because it a way to eliminate problems in new markets. Part 3: Open System Design Elements enter new international markets or get eaten alive. Others, isn't alone in her belief that Halogen has no choice but to however, are concerned that Halogen Analytics isn't ready for that step. The company's resources are already that rapid global expansion could spell disaster. Halogen stretched to the limit, and some advisors have warned isn't even well established in the United States, they argue, and expanding internationally could strain the company's ket at that time. Halogen's software was particularly effec- capabilities and resources. Others have pointed out that and the company would have to hire someone with none of the managers has any international experience, new digital manufacturing processes, including product significant global exposure to even think about entering Although Emily tends to agree that Halogen for the time being should stay focused on building its business in the United States, Alex has come to believe that global to foreign distributors as a route to international a decision--should Halogen Analytics go global? And would give Halogen enough participation and control awareness while keeping a tight rein on expenses. Alex likes the low-cost approach, but he wonders if licensing another day winds down, Schaaf and Rockwood are no closer to a decision about global expansion than they development, software engineering, hardware design, man- ufacturing, and installation. The software, which could be used as a stand-alone product or easily integrated with other software packages, dramatically expedited problem identification and corrective actions in the work of design expansion of some type is a necessity. But if Halogen does engineering firms. The use of Halogen's RCA software eventually decide on global expansion, he wonders how on earth they should proceed in a huge, complex worla and provide 20 to 30 corrective actions that lowered defect environment. Sam, the sales manager, is arguing that the rates by 50 percent, saving tens and sometimes hundreds of company should set up its own small foreign offices from thousands of dollars with each application. scratch and staff them primarily with local people. Building The timing proved to be right on target. RCA was just a U.K. office and an Asian office, she asserts, would give getting hot, and Halogen was poised to take advantage of Halogen an ideal base for penetrating markets around the the trend as a niche player in a growing market. Schaaf and world. However, it would be quite expensive, not to men- Rockwood brought in two former colleagues as partners tion the complexities of dealing with language and cultural and were soon able to catch the attention of a venture cap differences, legal and government regulations, and other italist firm to gain additional funding. Within a couple of matters. Another option would be to establish alliances or years, Halogen Analytics had 28 employees and sales had joint ventures with small European and Asian companies reached nearly $4 million. that could benefit from adding RCA applications to their Now, though, the partners are facing the company's suite of products. The companies could share expenses first major problem. Halogen's head of sales, Samantha setting up foreign production facilities and a global sales Jenkins, has learned of a new company based in Norway and distribution network. This would be a much less costly that is beta testing a new RCA package that promises to outpace Halogen's--and the Norway-based company, operation and would give Halogen the benefit of the exper- FastData, has been talking up its global aspirations in lengthy negotiations and would certainly mean giving up tise of the foreign partners. However, it might also require 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 lower-cost approach, that of licensing Halogen's software One of Halogens partners is urging still a third, even an international strategy to deal with this kind of competition." expansion. By giving foreign software companies rights to produce, market, and distribute its RCA software, some control to the partner companies. In a series of group meetings, off-site retreats, and one-on-one conversations, Schaaf and Rockwood Halogen could build brand identity and customer have gathered opinions and ideas from their partners, employees, advisors, and friends. Now they have to make if so, what approach would be most effective? There's a growing market for RCA software overseas, and new companies such as FastData will soon be cutting into Halogen's U.S. market share as well. Samantha Jenkins to successfully develop its international presence. 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