International Expansion Strategy for Jackson Wealth Management

1 New International Venture Hailey Jackson The University of Arizona Global Campus BUS 638: International Business Instructor: Moustafa Ahmed July 17, 2023

2 Introduction Expanding a company internationally is no small feat. There is much to consider and to expect when the acquirer is arranging business plans. In just five years, Jackson Wealth Management will be expanding internationally to Luxembourg. In this paper, I will present an executive summary, an overview of the host country will be provided, the business strategies to include marketing, financial, and human resources will be discussed, and the corporate social responsibility action will be applied. Executive Summary Jackson Wealth Management is growing, and we want to spread our successful client chronicles globally. We have to ideal opportunity to expand; Luxembourg offers stability, diverse financial services, and investor protection, making it an ideal location for offshore wealth management. With no restrictions on non-resident bank accounts, this country offers exceptional investor protection and meets JWM standards. Luxembourg, a landlocked nation in western Europe, boasts a stable economy and ranks as one of the wealthiest countries in the world in terms of GDP (Gross domestic product) per capita. There are obstacles that may arise. As Peng (2023) states, inadequate screening and zero achievement of strategic fit are the primary pre-acquisition problems. JWM is required to complete the due diligence each time there is an acquisition. Another issue that may come with acquisitions is failure to integrate, which is during the post-acquisition. There are companies that do not put an effort or thought into cultural differences and barriers that may arise. Jackson Wealth Management requires a connection to the acquisitions to create a blooming network of

3 individuals all around the world. The company also prioritizes having a diverse and multilingual integrations department located at HQ to ease the transition and make everyone feel welcomed. The goal is to close this acquisition by February 1 st , 2028, and the purpose is to expand JWM globally to provide the best financial services to as many clients as possible. A timeline of the expansion is below. Alliance Capital will be the acquired company with a revenue is $2 million. The total cost of the acquisition will range from $11.6 million to $20.3 million. The total costs of the acquisitions include but are not limited to:  Purchase cost (agreed price for purchasing the company)  Transaction costs (legal fees, marketing, salaries for acquired staff, building costs such as rent and supplies, IT costs, etc.)

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4 This will be the first ever international acquisition for Jackson Wealth Management with an expected close date of February 1, 2028, with a total cost of up to $20.3 million. There will be challenges along the way, but we have the solutions and the network to make a smooth transition. Expanding to Luxembourg is a terrific opportunity for JWM, reaching our company goal of revenue to $16.4 billion, growing our company, and reaching more clients in need of our services. Jackson Wealth Management (JWM): Starting out in 1924 with just seven employees, JWM now employs over 5,000 and has twenty-six locations in the United States. JWM expands by acquiring other well-established wealth management firms. We offer comprehensive financial advice to clients with high net worth with services such as investment management, financial planning, tax planning and estate planning. We consider all financial factors and help organize finances, ensuring clients reach their financial goals. The organizational structure is bureaucratic due to the need for consistency, organization and strict procedures that allow continuous business and growth. The bureaucratic management located in JWM follows formal rules, structures, and processes, with clear hierarchy and expectations for employees, with managers enforcing rules and maintaining order (Indeed Editorial Team, 2023). JWM expands by completing acquisitions of already established firms in other states, which is the same strategy that will be used to expand internationally. Acquisitions work well for the company because of the time and care put into each situation. Host Country As previously mentioned, this country offers stability, diverse financial services, and investor protection, making it an ideal location for offshore wealth management. With no

5 restrictions on non-resident bank accounts, this opportunity offers exceptional investor protection and meets Jackson Wealth Management standards. Luxembourg, a landlocked nation in western Europe, boasts a stable economy and ranks as one of the wealthiest countries in the world in terms of GDP per capita. Its skilled multilingual workforce and well-developed transportation infrastructure make it easy to conduct business. Companies are required to understand the nation's laws, rules, and regulations to succeed. Luxembourg's strategic location and business- friendly regulations also make it desirable to global businesses. Some of the advantages include information and communications technology, developing biotech industry, and solid banking/financial services (CT Corporation Staff, 2020). Expanding a business to this location is challenging, mostly due to numerous steps involved, including incorporation which takes at least 4 weeks, obtaining a business license that will take 2 weeks with added requirements, securing credit remains complicated due to limited available information, construction permits that can take up to 157 days, and property registration which requires a local registered public notary. However, with proper assistance, the process can be smooth and provide numerous benefits once a company is established (CT Corporation Staff, 2020). The mode of entry to is to acquire a financial service company that is already located in the country, Alliance Capital. The SOAR analysis is below which represents the strengths, opportunities, aspirations, and results of Luxembourg’s environmental overview. Strengths Luxembourg has a stable economy, a strategic location, business-friendly regulations Opportunities There is not an abundance of wealth management firms located here with our capabilities

6 Aspirations Acquire at least three of the existing financial service companies located in Luxembourg Results Utilize analytical data for marketing, determine increase in revenue based on clientele increases Political Economic Social Technological Legal Environmental one of the world's highest GDP per capita  stable economy  low corporate taxes social welfare system comprises many benefits “Continuously improves its ICT infrastructure seen as a center of excellence for any data management activities”  Great labor laws  only remaining sovereign grand duchy  renewable energy sources  Climate law The next analysis is PESTLE, which stands for political, economic, social, technological, legal, and environmental in terms of Luxembourg’s environment. Overall Business Strategy The overall business strategy is to globally expand Jackson Wealth Management, making it the #1 wealth management company in the world offering financial services to high-net-worth individuals which include athletes, entertainers, generational wealth individuals, and more. The goal is to acquire as many companies as possible, at least one in every country. Marketing is a key factor for any company, with an acquisition it can be more complicated. Due to the latter company being in business for several years, they have marketed their logo, slogan, etc. for all this time, therefore JWM will need to create an email and/or event (Luxembourg, 2021)

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7 to the clients, vendors, and employees (separately, clients are proprietary). An email must contain information on the acquisition detailing that the current flow of business and processes will not change drastically. The location will be able to maintain the same standard they have been with for years. This is the key to JWM when finding new companies, they already fit into the standard and may operate as they have, they are just renamed and have new titles. Another aspect of marketing is holding events for employees, clients, and vendors to have open communication and present the mission and background of the company, the purpose for the acquisition and time for questions or concerns. Finally, there will need to be changes to the website, social media pages, and new stationary orders due to logo changes. The logo change is below: “Research consistently shows that familiarity breeds liking in human-to-human interactions. There's something about seeing someone several times that makes them likable and trustworthy” (Kim, 2022). This relates to the acquisition goals set by Jackson Wealth Management. As we acquire more businesses and spread our logo, the more people will trust us and choose us.

8 In terms of financial strategy, there is a strict budget of $30 million for an international venture, especially due to this being the first one for the company, but JWM aims to be below that budget with negotiations causing the total to be up to $20.3 million. The acquisitions done in the United States have the range of costing between $3-8 million with a budget of $10 million, therefore we see this as attainable. A financial strategy is essential, “it helps you develop a vision for your company’s success and becomes a set of controlling principles under which the company operates” (Pacific Crest Group, n.d.). There is quite a difference between acquiring a company that is well-established in the desired location as opposed to construction of our building, recruiting new employees, and more in terms of costs. The average price for constructing a new building, furnishing it, setting up IT equipment for all employees, supplies, services such as coffee, shredding, printers, mailing machines could cost as much as $500,000. This does not include the process of required actions to be completed by the country and the costs of those actions, which can include but is not limited to incorporation, business license, construction permits, property registration which all are associated with fees. It makes more sense to acquire rather than build from the ground up because the employees are already hired, the clients are positioned with the company, the building has been up and running for several years, and the obstacles are limited. Something to consider about currency fluctuations and exchanges: "Currency risk is the potential for loss associated with fluctuations in foreign exchange movements. From an institution-based view, knowledge about foreign exchange rates and international monetary systems (including the role of the IMF) helps paint a broad picture of the rules of the game that

9 govern financial transactions around the world” (Peng, 2023). There are some solutions to overcome the challenges of currency fluctuations provided by Picardo, (2021): 1. Stay informed on the level and direction of the exchange rates. 2. Sourcing flexibility would be a backup plan to having an alternate source in the case that one location turns out to be more expensive or not making enough. 3. “Diversifying financing: Having access to capital markets in several major nations gives a company the flexibility to raise capital in the market with the cheapest cost of funds.” The graphs below showcase the trend of the exchange rates from Euros to USD for a twelve-month period and a three-month period for reference. Figure 1: 12-Month Period Figure 2: 3-Month Period The human resources portion of this process is quite simple compared to other processes. The main thing that keeps employees at JWM is loyalty. When acquiring these companies, we do not fire the original employees, that defeats the purpose for this venture. These employees have shaped the existing company and they have a career, families, and are located right where they

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10 are needed. Again, the standard has been met, these are the employees that JWM wants and needs. Therefore, the employees are meant to remain as they have been, nothing changes except a title to make it universal with the other companies acquired. If more employees are needed, we will allow the existing location to hire personnel as they see fit after we have communicated the need for such employees. There are three options for hires that Peng (2023) mentions will be below. There is not a preference on host, third, or parent country nationals. Each location can choose how they would like if the person were the right fit for the position and the standard of JWM, there are many benefits and disadvantages that could take place with any of the options below. For Luxembourg, we would encourage host-country nationals and parent-country nationals to unite the HQ and international locations more effectively.  host-country nationals (HCNs): "Individual from the host country who works for an MNE" Cultural and language barriers would not be an issue but career opportunities and international experience faces limitation.  third-country nationals (TCNs): "Individual who is from neither the parent country nor the host country of the MNE" Would be less expensive but adaptation may take longer.  parent-country nationals (PCNs): "Individual from the parent country of the MNE who works at its local subsidiary" They are the most qualified yet expensive and the adaptation may take longer. A requirement for JWM is to hire an individual or relocate an existing employee to HQ that speaks the language for new locations. This allows for seamless communication; it also

11 allows for more inclusivity and diversity. The following languages have at least two personnel employed at JWM, and one located at HQ. English Mandarin Chinese Hindi Spanish French Arabic Russian Portuguese Indonesian German Japanese Tagalog Korean Italian Many businesses are expanding their markets to other countries and better serving their local clients and customers thanks to the assistance of multilingual employees. Additionally, according to research conducted by Ipsos Public Affairs for the American Council on the Teaching of Foreign Languages, nine out of ten American employers say they depend on American workers who speak languages other than English. The survey also revealed that there is a growing demand for workers who can speak a foreign language during the workday, particularly for those who can speak Spanish, Chinese, or French (Lobell, 2022). Corporate Social Responsibility Actions Corporate social responsibility (CSR) refers to “consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks” (Peng, 2023). The actions for Luxembourg that Jackson Wealth Management will apply will be yearly donations to

12 the Luxembourg Red Cross and Women in Distress Luxembourg. The yearly donation will depend on the outcome of business for the year as well as addition donations through the vending machines located in the Luxembourg office. JWM will purchase the snacks and drinks for the vending machine, any revenue made from the machines will be donated directly to these non- profit organizations. More information about the Red Cross and the Women in Distress Luxembourg are below. Luxembourg Red Cross: “The Luxembourg Red Cross is an association of public utility engaged in numerous humanitarian missions.  Youth services (foster care center, adoption service, children’s vacation camps, psycho- therapeutic service, etc.),  Social services (meals on wheels, outreach social service, migrant and refugee service, etc.)  Health services (blood transfusions, home help and services, first aid training, integrated centers for the elderly, etc.),  International services (international solidarity, education for sustainable development, etc.).” (JustArrived, n.d.). Women in Distress Luxembourg: “This association offers women, their children, and young girls effective protection against violence through the development and management of houses for women and young girls in distress, information, and consultation centers. It contributes to

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13 improving the living conditions of women, helping them to integrate into economic and social life while guaranteeing them psychological, legal, and social assistance and offering them specific training” (JustArrived, n.d.). Conclusion This paper has reviewed the company, Jackson Wealth Management, in depth regarding size, industry, organizational style, and more. The company is ready to expand to an international location. Included in this paper, an executive summary was presented and an overview of the host country that discussed matters relating to an analysis of the viability, mode of entry, and challenges that may arise that must be planned or expected were provided. Business strategies were created in categories such as overall business, marketing, and human resources, and finally, the corporate social responsibility actions were applied. Expanding to another country for the first time or tenth time will be challenging, but the opportunities that await are worth it.

14 References Antweiler, W. (2019). Fx charts & plots (v2.16). University of British Columbia http://fx.sauder.ubc.ca/plot.html CT Corporation Staff. (2020, May 8). Doing business in Luxembourg. Retrieved from https://www.wolterskluwer.com/en/expert-insights/doing-business-luxembourg Indeed Editorial Team. (2023, March 10). 7 Organizational Management Styles and Their Importance. Retrieved from https://www.indeed.com/career-advice/career-development/organizational-management JustArrived. (n.d.). Non-profit organizations and volunteerism. Retrieved from https://www.justarrived.lu/en/working-in-luxembourg/volunteering-luxembourg- solidarity-integration/ Kim, G. (2022, April 22). The Importance of An Effective Marketing Strategy in Reaching Your Business Goals. Retrieved from https://www.entrepreneur.com/growing-a-business/the- importance-of-an-effective-marketing-strategy-in/422521 Lobell, K.O. (2022, May 9). Why Are Companies Hiring More Multilingual Workers? Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/employee-relations/pages/why- companies-hire-more-multilingual-workers.aspx

15 Luxembourg. (2021, January 19). LUXEMBOURG'S CUTTING-EDGE INFRASTRUCTURES ARE A BREEDING GROUND FOR CORPORATE DEVELOPMENT. Retrieved from https://luxembourg.public.lu/en/invest/innovation/technological-environment.html Pacific Crest Group. (n.d.). Importance of a Financial Strategy. Retrieved from https://www.pcg- services.com/importance-financial-strategy/ Peng, M. W. (2023). Global business (5th ed.). Cengage Learning. Picardo, E. (2021, October 21). Exchange Rate Risk: Economic Exposure. Retrieved from https://www.investopedia.com/articles/forex/021114/exchange-rate-risk-economic- exposure.asp#toc-what-is-economic-exposure

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Week 6 New International Venture BUS638

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