Video Title: Mygym (Mexico): Entry Strategy and Strategic Alliances
Video Title: MyGym (Mexico): Entry Strategy and Strategic Alliances
Run Time: 6:16
Classroom Application: Instructors will find this video useful in the study of business expansion in foreign markets. MyGym serves as an excellent case study for this topic because the company has 250 franchises in 31 different countries. Providing students with such knowledge can help them to appreciate and better understand the issues associated with global expansion.
Synopsis
MyGym was started by childhood development and fitness experts and provides expert trainers that are able to guide kids in structured play to develop skills and confidence. The first MyGym location was opened in the 1980’s in Los Angeles, California. The company became franchised in 1995 and now has 250 locations in 31 different countries. This video discusses the language and cultural challenges that global expansion creates for a business.
Discussion Questions
1.Discuss why the owners of MyGym felt that their company was a good candidate for global expansion.
In the 1980’s, a group of childhood development specialists and fitness experts decided to open a gym for children in which expert trainers would be available to guide kids in structured play that could help them become fit while developing skills and confidence. The first MyGym location was opened in Los Angeles, California. The owners saw prospects for expansion and decided to franchise. Expanding within the U.S. was fairly simple because it did not involve putting franchises into locations with different cultural values and expectations. The owners felt that MyGym could overcome any cultural difference problems because at its core the company dealt with something that all cultures share — children want to run and play and their parents, wanting the best for their children, realize that providing them with exercise is extremely important. Therefore, though the owners knew that they would encounter problems, they felt that the basic idea of MyGym would translate well to other cultures, which it indeed ended up doing quite well.
2.Describe what is involved with scanning potential markets for expansion. Then describe how a company like the Huffington Post might go about expanding into Mexico.
Before expanding globally, it is necessary to complete a market analysis of potential areas of expansion. Scanning potential markets is necessary to find those markets most receptive to the business model and to find the best fit with the fewest variables. Scanning factors to be analyzed include benefits, costs, and risks. Potential risks may include the political climate of the region, as well as, vulnerability to economic hardships.
The Huffington Post would first need to see whether there is a large potential audience for its news services in Mexico. Specifically, Huffington would need to determine how many people have access to the level of Internet service that is required to make its product work effectively — capable of such things as slide shows, links, video clips, and so on. Next, Huffington would need to determine whether Mexicans would be interested in the type of product that it provides, posing questions such as: Are Mexicans interested in the same things as Americans — do Mexicans primarily want a view of American news translated into Spanish or do they want original features that are particular to Mexico and its problems and concerns? Would translations of American bloggers and news columnists work for a Mexican audience, or again would Huffington need to cultivate a whole new network of content providers? Finally, Huffington would need to assess risks and opportunities in the Mexican market. Opportunities might include using Spanish translation to travel to other Latin American countries. Risks might include problems dealing with political leaders, crime (would drug bosses threaten journalists?), and possible market collapse due to economic instability.
3.What challenges did MyGym encounter when expanding into Mexico? How might a company like Voodoo Doughnuts use the lessons learned by MyGym to expand into foreign markets?
When MyGym began the process of expansion into Mexico, the company encountered a few language and cultural barriers. MyGym did not wish to spend a great deal of time and money on translation. However, customers in Mexico wanted communications to be done in Spanish rather than English, making translation necessary. Also, MyGym was unprepared for certain cultural issues related to education and the celebration of birthdays. Children in Mexico start school at a younger age and go to school for longer days than children in the United States. This had an impact on the number of kids available for daytime classes at MyGym. Also, customers in Mexico wanted birthday parties to last at least four hours, rather than the customary two-hour parties held at MyGym locations in the United States.
The most important lesson that MyGym learned from its expansion was not to try to control things from its home base, but rather to establish a master franchise in Mexico and then to empower that franchise to make changes that are responsive to the local market. Voodoo Doughnuts could accomplish the same thing in a country like Mexico, establishing a master franchise and then allowing that franchise to develop such things as doughnut varieties, décor, slogans, websites, advertising and promotion, social media sites, and so on. Using the feedback from the master franchise, Voodoo could create a model that it could clone through out Mexico with a substantial prospect of success.
Quiz
1.How did MyGym address the challenge of understanding the culture and language issues in foreign markets?
a.by deciding to expand domestically rather than globally
b.by establishing a master franchise within the foreign market to serve as an intermediary between local franchises and the main office in the U.S.
c.by continuing with the same business model used in the United States and hoping foreign markets would adapt to this example
d.by establishing a new department in the main office in the United States to deal solely with cultural factors affecting franchisees in the foreign market
Answer: b
Explanation: In Mexico, MyGym established a master franchise to serve as an intermediary in the new market. The staff at this master franchise office was hired from the employment market in Mexico. The main office in the United States and this master franchise office work together in a partnership to address cultural and language barriers.
2.Which of the following tasks is most likely to be completed by the master franchise in a foreign market?
a.translation
b.policy creation
c.equipment ordering
d.provision of legal services
Answer: a
Explanation: The master franchise is responsible for translation and localization issues. The master franchise is expected to create synergy with the community in which the franchise is located. Translation is a job of the master franchise since its managers would be locals who would speak the local language and be much more in touch with local values and concerns than people in the main headquarters thousands of miles away.
3.When MyGym Enterprises decided to expand into Mexico, which physical, social, or competitive factor in the operating environment presented the greatest challenge to the company?
a.political policies and legal practices
b.cultural factors
c.economic forces
d.number and comparative capabilities of competitors
Answer: b
Explanation: When MyGym began the process of expansion into Mexico, the company did not wish to spend a great deal of time and money on translation. However, customers in Mexico clearly wanted communications to be done in Spanish rather than English, making translation necessary. Also, MyGym was unprepared for cultural issues related to education and the celebration of birthdays. Children in Mexico start school at a younger age and go to school for longer days than children in the United States. This had an impact on the number of kids available for daytime classes at MyGym. Also, customers in Mexico wanted birthday parties to last at least four hours, rather than the customary two-hour parties held at MyGym locations in the United States, causing scheduling problems in Mexico that were eventually corrected.
4.Which of the following factors was not mentioned in the video as a scanning factor considered when evaluating potential markets?
a.benefits
b.costs
c.climate
d.risks
Answer: c
Explanation: The three factors considered when scanning a potential foreign market for expansion include benefits, costs, and risks. Climate can have an impact on investment, but it is not usually considered to be a scanning factor.
5.Which advice might MyGym be most likely to give to another company that is thinking of expanding into foreign markets?
a.Treat your franchises as subordinates.
b.Treat your employees as partners.
c.Treat your franchises as partners.
d.Treat your partners as franchises.
Answer: c
Explanation: One of the keys to success of MyGym’s expansion was to empower its franchisees and treat them as partners rather than subordinates. This empowerment allowed the franchise owners to implement a variety of different changes and innovations that ultimately ended up making the franchises successful.