AI and the New Geography of Strategy: Rethinking Global Expansion in the Age of Intelligence

AI and the New Geography of Global Expansion

A few years ago, when we helped international companies decide where to expand globally, the playbook was clear. We looked at market demand, regulatory environment, operational costs, talent availability, infrastructure, and alignment with strategic goals. That was enough to make a case for setting up in India, Europe, or the UK.

But now, things have changed.

Now, these decisions are no longer made just by humans — or made for humans alone. Artificial intelligence, particularly generative AI, is rewriting the logic of global business. It has changed the fundamental question of how companies work- why, where, and whether they expand across borders at all.

The big questions today aren’t just about how to enter a market. They’re about how intelligence itself travels. About which countries offer the best environments not for factories, but for data. Not just for capital, but for code. And what this means for the Indian tech firm eyeing Europe, or the European healthcare player exploring India.

The New Geography of Value Creation

For decades, the formula for international expansion followed a few well-worn paths. Go west to sell, go east to save. Tap into lower costs, abundant talent, or growing consumer demand. And on paper, it worked.

But AI—especially in its generative and predictive forms—is slowly ununravelling those equations.

We’re beginning to see a new kind of geography emerge. One where value isn’t created just by presence, but by proximity to the right data, access to smart infrastructure, and alignment with digital governance norms.

Take data, for instance. In sectors like healthcare, fintech, logistics, or education, expansion decisions increasingly hinge on where companies can legally and ethically access rich, usable data. A country’s data protection law, its openness to public-private AI pilots, or its digital public infrastructure might now matter more than its tax rate or average salary.

The EU’s recently enacted AI Act doesn’t just regulate AI—it actively shapes how global firms think about launching AI-enabled services in the region.

India offers a high-talent, high-velocity digital environment, with initiatives like ONDC, UHI, and the Account Aggregator framework. For global firms, this isn’t just a sourcing destination—it’s a test bed for inclusive AI at scale.

A notable example of this shift is HD Hyundai’s collaboration with Palantir Technologies and Siemens to build the world’s first AI-powered shipyard. The project uses advanced digital tools—data analytics, robotics, and virtual reality—to optimize shipbuilding while embedding automation and compliance from the ground up.

The partnership reflects a broader trend: value creation is increasingly tied to where intelligence can operate safely and efficiently, with strong regulatory frameworks and cutting-edge infrastructure. This isn’t just about digital transformation—it’s about strategically choosing the right geography to enable it.

What does all this mean?

It means global expansion can no longer be seen through the lens of cost arbitrage or manpower scale alone. AI has introduced a third dimension: strategic intelligence alignment. And those who grasp this early—companies, countries, and consultants alike—will move faster and more securely into the next frontier.

AI is Redefining the “Comparative Advantage” of Nations

For much of modern economic history, a country’s competitive edge came from its natural resources, labour costs, or proximity to trade routes. The logic was straightforward: you built around what you had — oil in the Gulf, coders in Bangalore, precision engineering in Germany.

But AI disrupts this logic in subtle, powerful ways.

In a world where intelligence is programmable, advantage comes not from what’s in the ground — but from what’s in the cloud, on the network, and inside a nation’s digital institutions. We’re entering an era where comparative advantage is increasingly built on things like:

• Access to data ecosystems — not just volume, but quality, interoperability, and regulatory clarity
• AI research & innovation density — think of clusters like Paris, Toronto, or Bangalore
• Ethical governance and regulation — countries with clear, predictable AI laws attract responsible innovation
• Public digital infrastructure — open APIs, interoperable identity layers, health records, and financial rails

India with its Aadhaar-powered stack, now offers a living case study in public digital infrastructure at population scale. The Digital Personal Data Protection Act, 2023, the IndiaAI Mission, and the proposed AI Governance & Innovation Bill together show how the country is creating a trustworthy, scalable, and innovation-friendly environment.

The EU is positioning itself as the ethical superpower of AI. With its recently enacted AI Act, it’s offering market access along with clarity. For companies navigating a patchwork of global AI policies, this regulatory predictability can become a strategic asset.

“Data is the new oil,” we often hear. But today, refined, governed AI is the new fuel.

Of course, not every country is catching up at the same pace. Some are racing ahead in compute capacity (like the US), others in ethical leadership (like the EU), and others in implementation scale (like India). But what’s clear is this: the factors that define “strategic location” are being rewritten—and AI is holding the pen.

AI Is Reshaping International Business Models

When companies think about global expansion, they often focus on products, people, and presence—What are we selling? Who’s going to run it? Where will we set up?

But AI is subtly rewiring each of these dimensions—and doing so in ways that traditional market entry playbooks don’t fully account for.

Let’s start with people. In an AI-augmented world, roles that previously required physical presence or manual oversight—like customer service, legal reviews, even basic coding—are being reshaped. Companies are designing teams where humans and AI work together across time zones, with virtual co-pilots that reduce onboarding time, automate documentation, and suggest actions in real time.

Then there’s product. Many firms, especially in tech and services, are shifting from delivering fixed solutions to building AI-powered platforms that learn, adapt, and co-create with users. This means ongoing localisation, constant feedback loops, and even country-specific fine-tuning of AI models.

And finally, presence. The old notion of needing a large regional office or full-stack team to “be in-market” is giving way to modular, AI-enabled expansion models. With AI, it’s possible to conduct demand analysis, test micro-markets, or simulate distribution channels without sending a single person abroad.

For international strategy teams, this changes the tempo. Expansion is no longer a slow, capital-heavy decision. With AI in the mix, it can become iterative, adaptive, and insight-driven from day one.

Here’s a practical example: TCS and Infosys, two Indian giants traditionally known for IT outsourcing, are repositioning their narratives in Europe and North America around AI-powered transformation. Their AI suite, like Infosys Topaz, are becoming core to how these firms sell services, integrate with client workflows, and navigate data residency laws.

On the European side, companies like Schneider Electric are embedding AI into manufacturing and energy management, often requiring transnational data flows and partner ecosystems. These firms now face strategic choices not just about where to operate—but where their AI models can train, learn, and be trusted.

As detailed in Competing in the Age of AI by Iansiti and Lakhani, AI-native companies aren’t layering intelligence onto old systems—they’re building around it. This mirrors how global expansion strategies are being reshaped from the ground up by generative AI.

Implications for Indian and European Companies

For firms on either side of the India–Europe corridor, AI is a technology trend to watch and a structural force that demands a strategic response.

Let’s break it down.For Indian Firms Going West

Many Indian software and IT service companies have built their international businesses on efficiency, delivery excellence, and cost-value ratios. But with AI at the forefront, those strengths alone may no longer be enough.

Now, firms must lead with compliance, explainability, and cultural alignment—especially when targeting highly regulated, trust-sensitive markets like the EU.

Some practical implications:

• Compliance-first becomes credibility-first
  With the EU AI Act now in force, buyers will expect vendors to proactively address risk categories, transparency, and algorithmic fairness. Indian firms must demonstrate not just capability—but conformity to ethical and legal expectations.
• Explainability is the new differentiator
  In sectors like healthcare, fintech, or public services, being able to explain how an AI system works, where it gets its data, and how bias is addressed could win more deals than raw speed or cost.
• Find your wedge in the value chain
  The sweet spot might not be end-to-end AI platforms, but middleware, responsible AI toolkits, or AI + RPA bundles for SMEs. There’s room for smart, compliant, modular solutions.

Wipro’s AI Ethics Framework Wipro developed a comprehensive AI ethics framework specifically for European clients, including bias detection tools and explainable AI dashboards. This compliance-first approach helped them secure several large-scale AI transformation projects with European banks and healthcare providers.

The mindset shift is this: Indian firms must not only sell AI with trust—but in many cases, sell trust as the product.

For European Firms Coming to India

European companies looking at India often do so for cost efficiency or market access. But in the AI era, India offers much more than that—it offers scaleable experimentation, regulatory flexibility, and a rich innovation culture.

Here’s what that could look like:

• Tap into India’s “AI for Bharat” momentum
  Government-backed initiatives like the IndiaAI Mission, the AI Safety Institute, and digital public goods like ONDC and UHI are not just policy projects—they’re platforms for innovation. Smart European firms can co-create or pilot inclusive AI solutions here and export them globally.
• Use India as a testbed for regulatory-light innovation
  Unlike the EU, where AI regulation is tightly defined, India still offers some regulatory agility—a window to try new models, provided ethical boundaries are respected.
• Build local partnerships that go beyond back office
  Think co-innovation hubs, joint AI safety initiatives, or AI skilling programs aligned with your product pipeline—not just captive centres.

SAP’s AI Development Center SAP established its largest AI development center in Bangalore toleverage India’s AI talent pool and regulatory environment for developing inclusive AI solutions that work across diverse markets.

The new question isn’t “how cheap is it to build in India?” but “how fast and flexibly can we innovate with India?”

Strategic Takeaways: The New Playbook

As the landscape shifts from physical trade routes to digital intelligence flows, it’s clear that global business strategy needs a refresh—one that accounts for AI not just as a tool, but as a terrain-shifter.

1. Data Diplomacy is the New Tradecraft

The ability to move, process, and protect data across borders is becoming as important as tariffs or IP law once were.

• Companies must stay alert to bilateral data transfer rules, cloud sovereignty, and AI export controls.
• Governments, meanwhile, are using AI policy to shape foreign investment, cybersecurity norms, and even immigration.

Microsoft’s Data Residency Strategy Microsoft restructured its Azure operations to comply with varying data residency requirements across India and Europe, creating localized AI services that meet regulatory demands while maintaining global scalability.

🔍 Watch for how digital agreements (like India’s proposed FTA chapters on AI with the UK or EU) evolve into real policy levers.

2. AI-Augmented Market Entry is Already Here

Generative AI and analytics tools are quietly transforming the way companies research markets, scan competition, and identify local partners.

• Instead of static country reports, firms can now run simulations, test micro-expansion strategies, and tailor pitch decks in days.
• Entry strategy isn’t a once-a-year PDF—it’s becoming real-time and iterative.

Flipkart’s AI-Driven Expansion Before expanding to new Indian tier-2 cities, Flipkart uses AI to simulate local market conditions, predict demand patterns, and optimize supply chain positioning—reducing expansion risk and time-to-market.

🧠 Indian mid-sized firms, in particular, should invest in AI-enabled decision support—not just for coding, but for strategic foresight.

3. Digital Trust is a Differentiator, Not a Box to Tick

As AI becomes core to business offerings, winning trust across jurisdictions is no longer optional.

• That means clarity on AI explainability, data usage, bias mitigation, and even worker augmentation policies.
• The more “high-risk” the use case (e.g. health, HR, legal tech), the more trust is a front-line sales tool—not just a legal safeguard.

🤖 “Do we need this AI?” will be replaced by “Do we trust the AI, and those behind it?”

4. Think Ecosystem, Not Enterprise

No company—whether Indian or European—can go it alone in the AI era.

• Success now comes from participating in ecosystems: data alliances, AI safety forums, open innovation platforms, and regional talent coalitions.
• Strategic partnerships will move from just sales channels to shared learning environments, especially when scaling AI globally.

Partnership Models The India-UK AI partnership initiative connects startups, universities, regulators, and corporations in joint innovation projects, creating ecosystems that benefit all participants rather than individual company advantages.

🤝 Startups, universities, regulators, and big tech are now equal parts of your global expansion plan.

Conclusion: It’s Not Just Tech. It’s Terrain

Artificial Intelligence is often framed as a breakthrough in productivity, automation, or customer engagement. And that’s true. But for international businesses, AI is also something deeper—it’s a reconfiguration of global terrain.

Just like container shipping reshaped trade in the 20th century, or the internet redrew supply chains in the early 2000s, AI is now reshaping how, where, and why companies expand across borders.

In this new era, countries become not just markets—but platforms. And firms become not just exporters—but orchestrators of talent, data, and intelligence across geographies.

For Indian and European businesses alike, the challenge isn’t just catching up with AI adoption—it’s developing an international strategy that’s AI-literate, geopolitically aware, and trust-ready.

And for those of us advising companies through this shift, the old frameworks still help—but they need to evolve. We must start treating AI not only as a vertical—but as a horizontal force, cutting across every expansion plan, partnership decision, and policy conversation.

Because AI isn’t just about speed. It’s about knowing where to go, how to land—and how to thrive when you get there.