MBA 540 Module 6 Project Milestone Three Buy Build Ally example

Milestone Three: Build, Ally or Buy? Choosing How a Composite U.S. Filtration Company Enters Mexico

[Student Name]

Southern New Hampshire University

MBA 540: Organizational Strategy in a Global Environment

Module Six Project Milestone Three

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Milestone Three: Build, Ally or Buy? Choosing How a Composite U.S. Filtration Company Enters Mexico

The Growth Goal and the Resource Gap

Northfield Water Technologies' board wants international revenue, now about 49 million dollars from Canada, to double within five years. The earlier milestones concluded that Mexico should be the next market and that Northfield should compete there through focused differentiation: certified under-sink and whole-home filtration, installed by trained professionals and supported by a cartridge subscription, sold to urban middle-class households that currently rely on jug delivery. The target for Mexico is about 25 million dollars in annual revenue by year five. The obstacle is a resource gap. Northfield's advantage at home is its installer network, and in Mexico it has no installers, no brand recognition, no customer relationships and no managers with local experience. The choice among building, allying and buying is really a choice about how to close that gap while protecting the differentiation that the strategy depends on (Porter, 1985).

Three Options

Build. Northfield would establish a Mexican subsidiary, hire a country manager, recruit and train independent installers in two cities, and sell under its own brand. It would keep full control and all profits, but it would start from nothing.

Ally. Northfield would form an alliance with a regional water delivery company, a composite firm here called AguaRuta, which delivers jugs to about 180,000 households in two metropolitan areas. AguaRuta's route drivers and technicians would offer and install Northfield systems, and the partners would share installation and cartridge revenue. AguaRuta gains a product for customers it might otherwise lose to filtration; Northfield gains access to homes and trust.

Buy. Northfield would acquire a small Mexican water treatment company, a composite firm called Hidrotec, which installs reverse osmosis systems through about 60 technicians and has annual revenue of about 4 million dollars. Northfield would gain an existing team and customer base immediately.

Testing the Options

Capron and Mitchell (2012) suggest choosing among these modes by asking a sequence of questions about the resources needed. First, are the company's internal resources relevant? Northfield's products and certification are relevant, but its most important resource, the installer network, is not transferable, and its managers know neither the market nor the channel. That weighs against building alone. Second, can the needed resources be obtained through a contract? Access to households and local trust cannot be bought in a simple contract, but they can be shared through a deeper partnership. Third, how close must the relationship be? A partner's route drivers can sell and install systems without full integration, so an alliance is sufficient at first. Fourth, is integration of an acquired firm feasible? Hidrotec's technicians are skilled, but its business is built around a different technology and a different customer, and its value lies in people who might leave after a sale. The resource Northfield most needs is access to households that already trust someone, and that resource is easier to borrow than to buy or build.

Comparison

Table 1 compares the options on the criteria that matter most to the board.

Table 1

Comparison of Entry Options for Mexico

Note. Composite estimates for illustration.

Recommended Five-Year Strategy

Northfield should pursue a staged strategy that begins with an alliance. In years one and two, it should form an alliance with a delivery company such as AguaRuta in two cities, training its technicians to install Northfield systems and sharing revenue on installations and cartridges. A small Northfield country team would manage quality, certification and the subscription platform. The target is 10,000 installed homes by the end of year two.

In year three, Northfield should review the alliance against clear criteria: installations, cartridge renewal rates, customer satisfaction and the partner's commitment. If the alliance is working, the partners could form a joint venture to expand to more cities, with Northfield holding an option to buy a majority stake. If the partner's effort is weak, Northfield should use what it has learned to build its own installer network in the proven cities or acquire a local installer, now knowing the market well enough to integrate one.

In years four and five, the goal is expansion to five metropolitan areas and about 25 million dollars in revenue, with cartridge assembly moved to Mexico once volume justifies it, reducing currency risk. This path limits early investment to about 2 million dollars, reaches customers faster than building alone and preserves the option to take full control later, when the company has the knowledge to use it (Rothaermel, 2021).

Governance of the Alliance

Because an alliance gives up some control, its structure matters. The agreement should specify installation standards and audits, the division of installation and cartridge revenue, exclusivity in the two pilot cities, ownership of customer data and Northfield's right to terminate or buy out the alliance if performance targets are missed. Both partners should appoint managers whose incentives depend on alliance results. These terms protect the brand promise of certified safety, which is the heart of the differentiation strategy, while giving the partner a strong reason to commit.

Cultural and Ethical Considerations

Operating through a Mexican partner also raises cultural and ethical questions the plan must address from the start. Business relationships in Mexico often rely heavily on personal trust built over time, so Northfield's senior leaders should expect to invest in the relationship directly rather than managing the alliance only through contracts and reports. The partnership must also be honest with customers. AguaRuta would be selling a product that reduces its customers' need for its own jugs, and the offer must be presented truthfully, with accurate claims about what the filters remove and clear information about cartridge costs, rather than pressure selling by route drivers paid on commission. Finally, both companies should agree on how used cartridges will be collected and recycled, since a strategy that replaces plastic jugs with plastic waste would undercut the environmental case that makes filtration appealing.

References

Capron, L., & Mitchell, W. (2012). Build, borrow, or buy: Solving the growth dilemma. Harvard Business Review Press.

Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. Free Press.

Rothaermel, F. T. (2021). Strategic management (5th ed.). McGraw Hill.