Reference no: EM133178550

Australians Mark Harbottle and Matt Mickiewicz founded 99designs, a website where people needing design work such as logos can post a request, receive bids from designers, and select a designer to work with. They based the company in Melbourne, Australia, but soon realized that most of the site's business was coming from elsewhere, especially the United States.

To take advantage of the potential of the much larger U.S. market, 99designs hired another Australian, Patrick Llewellyn, to open an office in the United States. The company selected Oakland, California, to be near the large pool of high-tech talent in Silicon Valley. Implementing that decision was a challenge because the cost of living and working (including compensation costs for employees) is very high in northern California. However, the location gave 99designs access to hotly demanded talent, as well as to investors interested in backing high-tech start-ups.

In California, Llewellyn built up the U.S. business and attracted a $35 million investment from Accel Partners. He was appointed CEO of 99designs, which moved its headquarters to Oakland, where Llewellyn continued to lead its global expansion. Based on his U.S. experience, Llewellyn determined that success would require a local touch in every country served. Customers wanted not only websites in their own language, but also support via email, phone, and online chat. In each market, 99designs provides the local touch by hiring a country manager with an entrepreneurial spirit to take responsibility for understanding the local culture and making all marketing decisions. As it enters a market, 99designs tests staffing needs by signing up local freelancers to provide customer support before the company hires employees.

In 2012, 99designs acquired a Berlin-based design marketplace that was already serving customers in several European languages. Applying Llewellyn's principles, the Berlin office hired a country manager in Paris for the French business and one in Madrid for the Spanish business. To enter South America, the company acquired a design marketplace based in Rio de Janeiro. To enter Asia, 99designs hired a Japanese-speaking country manager to serve its fast-growing Japanese market.

Now 99designs operates offices in Oakland (with 50 people), Melbourne (50 people), and Berlin (20 people). It has experienced double-digit growth for eight years in a row, and Llewellyn is planning for the possibility of taking the company public, which should provide the capital for further expansion.

1. Identify two advantages and two challenges of 99design's strategy of growing by adding employees in local markets rather than in a single corporate headquarters.

2. If you were advising 99 designs on HRM issues, would you recommend the same level of compensation for country managers in all locations? If so, why? If not, what adjustments would you recommend?