|New Threads Only:|
|New Threads & Replies:|
Forum List » Guru News and Commentaries|
Guru News, Stock picks and commentaries
Why the Best Companies Expand Internationally
Posted by: smithpaul (IP Logged)
Date: June 19, 2013 04:45PM
There are only two methods to drive revenues: A company can increase its price to the consumer (but this doesn’t always come across as being prudent, especially given the current low interest rate and inflation period). And then there’s the more viable way, which is to expand into foreign markets. Companies can expand nationwide or internationally like many of the world’s multinational companies. Just take a look around and see how many American companies are found outside of our borders and spread across Europe, Asia and Latin America.
Whole Foods Market Inc. (WFM) has the majority of its stores in the U.S., but also has a small presence in Canada and the UK. The company just made its first foray into Detroit, Mi. Now at first glance it doesn’t seem odd but as my stock analysis suggests, given that the “Motor City” has a massive unemployment rate of 17.5% (source: U.S. Bureau of Labor Statistics, June 18, 2013) and Michigan has more people looking for work than the national average, you have to wonder why the company has decided to expand there. While there may be more economically viable places for expansion, the reality is that the company is searching far and wide for places to expand, as it doesn’t want to face growth issues down the road, as my stock analysis indicates.
The need to expand internationally has made many American companies into global brands and has rewarded shareholders along the way, as my stock analysis suggests.
Expansion is what companies need to do in order to grow and become much bigger companies. Maintaining a market within America’s borders alone means limiting your market to 300 million people and ignoring the other 500 million people in the eurozone and 2.4 billion people spread across China and India, based on my stock analysis.
My stock analysis indicates that U.S. companies tend to expand internationally into our neighbor to the north, Canada, as a first move.
McDonalds Corporation (MCD) is now a global powerhouse and one of the most recognizable brands in the world, according to my stock analysis. The company first moved into Canada in 1967 (read “The Secret to Success in the Fast Food Sector”).
In the home supplies sector, The Home Depot Inc. (HD) expanded into Canada in 1994, which was followed by Lowe's Companies Inc. (LOW) in 2007.
Retail giant Wal-Mart Stores Inc. (WMT) expanded into Canada in 1994 via its acquisition of Woolco Canada. The company has become a retail icon in Canada and is expanding aggressively into China and Brazil to drive revenues, based on my stock analysis. And it’s odd that it took nearly two decades before Wal-Mart’s rival Target Corporation (TGT) launched its first stores in Canada this past April. Target still doesn’t have any exposure outside of North America, which makes the company an inferior stock to Wal-Mart and its aggressive foreign exposure, based on my stock analysis.
I favor companies that look outside of their base country’s borders for growth. As my stock analysis suggests, other stocks that fit this profile include The Gap Inc. (GPS), Starbucks Corporation (SBUX), Chipotle Mexican Grill Inc. (CMG) and YUM! Brands Inc. (YUM).
Stocks Discussed: SPY, DJI, QQQ,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.