A few decades ago, organizations could afford to ignore the international environment. However, today the number of companies doing business on a global scale is increasing and the limitation to national borders or protectionist barriers is decreasing. But why has the global experience become so important to organizations? Because the current business dynamics require them to react quickly to changes in the environment and therefore require material and human resources that allow them to achieve a better position in the market. Strategies like cost leadership, differentiation, and even value creation are revolutionizing the way transactions are conducted globally.
Cost leadership strategy:
Cost leadership is a strategy that, while focused on offering competitive prices within the market, is quite broad, since the sources to achieve a cost advantage are extremely diverse: from the efficiency of managing financial resources, incentives government, technological or logistical infrastructure, economies of scale, and even even preferential access to raw materials. However, it must be borne in mind that this strategy does not seek to trigger a pitched price battle in which companies lose their economic sustainability, but rather tries to take advantage of all those opportunities to be able to offer customers products or services at a reasonable value..
There are many and very diverse examples of companies that have emerged through these types of strategies, which not only seek to revolutionize the purchasing process of their clients, but also transform the perception of their products and / or services towards their clients. For example: the efficiency in the supply chain of large self-service retail companies, as well as the aggressive commercial agreements with suppliers, allow them to position themselves as leading companies in this sector and even advertise under low-price strategies.
Differentiation strategy:
Another strategy is that of differentiation, with which companies seek to print on the product or service that offer some attribute or characteristic that may be perceived as unique. In this it is possible to introduce the concept of "value proposition", that is, the power to provide customers with something unique and differentiated about the offer of competitors. The key is to carry out a market analysis or research to identify the attributes that can be considered important and that are not being served within a particular market niche. It should be noted that the exclusivity that this strategy requires can be offset by a higher price. For this strategy we can also think of a large number of companies, such as the technology sector,which have been able to offer a product as attractive to consumers, either because of its design, quality or even the trend that they mark in the market, which has allowed them to offer their product at prices as high as the profitability margins. that they also bring with them.
These strategies, together with many others, are tools that will allow companies to achieve a competitive advantage in the global market. Additionally, advances in communications, technology, transportation, etc., have allowed most products to be manufactured and offered literally anywhere in the world, which is why companies today cannot isolate themselves from the global influence. The domestic market and protectionist policies can bring about a certain economic and commercial stability, however, the key is to accept the risk of crossing borders and being part of the dynamism and complexity of international trade. Such is the case of large corporations whose commercial success depends to a greater extent on their international sales than on domestic sales.The author Richard Daft (2015), in his publication “Organizational Theory and Design” points out that on average international firms obtain 55% of their profits from abroad and it is expected that in a decade this percentage will increase to 70%. Therefore, different economic, technological, commercial and competitive forces combine to drive the evolution of local companies to transnational companies.
It is possible to identify four types of companies depending on their organizational models, which are characterized by carrying out activities beyond their borders and differ in the way they are organized internally. Taking this into consideration, companies can be: multinational, international, global and transnational.
1. Multinational:
In the multinational company, the parent company is located in the country of origin, while the autonomous subsidiaries are located in others. The company has extensive experience in international markets and has been able to establish marketing, manufacturing or research and development facilities in various foreign countries. The parent has dominance over the subsidiary, however, the latter is capable of making its own decisions.
2. International:
We can say that a company is international when it carries out activities in at least two countries and transfers its knowledge or experience from the parent to the subsidiary. One of the main characteristics of this type of firm is that the parent transfers its knowledge to the subsidiaries and the subsidiaries seek to learn from the parent.
3.Global:
Global firms are characterized by the fact that the parent company and the subsidiaries form a whole and never work independently, in other words, the company transcends beyond any country. Global companies no longer think of themselves as existing in one country, but their market is the world. Another difference is that in this type of company, the subsidiaries are fully decentralized from the parent.
4. Transnational:
The last class of company is the transnational company, considered as the new management modality. These organizations think globally, but act locally, these types of companies exploit the potentials of their subsidiaries, however, they make their own decisions.
As can be seen, there are many roles that companies can carry out in the global arena. Faced with an increasingly globalized world, thinking about local trade, protectionist policies or the closing of trade barriers would seem to be concepts that are already in the past and even on the verge of obsolescence. Historically, international trade has proven to be one of the engines for the growth of the world economy. This has not only been a promoter of the economic development of companies and even of the economies themselves, but also of cultural and social enrichment, which has in addition brought a boost at the international level and the strengthening of diplomatic relations between different countries of the world.
Today's globalized world requires organizations to go one step further through value creation. The success of this new competitive advantage will be defined by the actions that companies may incorporate, such as: efficiency in cost management, new sources of differentiation, waste reduction, process optimization, etc. However, the virtuous circle involving more customers, higher productivity, higher profitability, will generate great opportunities for value-oriented companies to venture into new categories of products and services globally. The real challenge is learning to react to the fast-paced dynamics of the environment and the ability to incorporate or cope with such changes in organizational processes.A company that is unable to open its borders to the international environment is doomed to failure and even extinction.
Organizations today are experiencing a host of challenges. The first is adaptability, being able to react to changes and dynamism in the environment; the second is innovation, finding a way to do things in a better way or through differentiation; and the third is commitment, making employees able to impress creativity and passion into their daily activities. There is a phrase that states "more trade, more development", which becomes stronger when trade is used as an engine for economic progress, since it can be used with benefits such as: higher sales, a higher profit margin., higher quality, better prices and ultimately a greater competitive advantage.
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Bibliography:
Daft, Richard (2015). Organizational theory and design. (10th Ed.). Mexico: CENGAGE Learning.
Hamel, G. (2013). Leadership Excellence. EBSCO.
Company Manager's Manual (sf).. Recovered from < https://upaep.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_96232826_1&content_id=_8626638_1&mode=reset >.
