The purpose of this document is to reflect on the importance that companies should give to cost management and the knowledge of their operational structure if they intend to enter foreign trade activities or if, on the contrary, they are already developing them, with the In order for them to become competitive and efficient in the management of their resources and to meet the demands that different markets demand of them. This in light of the proposals made by Ronald Coase and his proposals on diminishing marginal returns and transaction costs, which these days has become a subject for reflection by our companies in the face of the current behavior of international markets.
Cost Structures In International Trade:
Today, foreign trade, the opening of markets, the operational and financial efficiency of companies are spoken and written as modern tools and mechanisms that allow them to grow and reach the highest levels of production.
Within the economies; Governments, together with the participation of companies that are producing in the different economic sectors, contribute to the development of paradigms and mental schemes that are often contrary to the models that we currently find; Also in the environment are different ideas and theses about what the management of economies should be, such as those indicated in certain sectors as the idea of economic opening, quite controversial by the way, some propose it as the salvation of economies and the prosperity of companies, while other positions indicate that the idea of opening will be catastrophic for companies, some even argue that it is the loss of national sovereignty, obviously each one argues it from their points of view;This does not indicate that the process is good or bad, what we must ask ourselves is that modernity evidently arrived and with it all its own processes, leaving us as a reflection the premise that we must adjust to modern changes… and we could continue listing a number of ideas that we could collect in two fundamental theses, those who are in favor of international exchange with an evident vocation to risk taking and adventure, but with the fixed idea of trying to conquer the world; but in the same way we find those who promote a more conservative thought who, on the contrary, seek the protection of the markets, resorting to economic theories such as those of the mercantilists or the classics, the same that at the time had some kind of validitybut today it is regaining strength according to the change in the markets.
This exercise is indisputably from an academic point of view, as it largely allows us to reflect and begin to take an exam that allows us to identify what our strengths and weaknesses are and thus be able to project ourselves in space, time and economy… however not We must forget that from the macroeconomic aspect we also have to analyze what our comparative and competitive advantages are and thus achieve a real projection of who we are and where we are going.
This consideration is important only if the companies are able to carry out an individual examination and then a collective one according to the sector to which they belong, this in order to observe how and how each of the productive resources that can be used is being used. own the companies (land, work, capital and technology); But this examination must be complete and for this you must conclude on the management of resources and direct a serious strategy that allows their optimization.
As the integration processes advance, concerns and questions arise about the management of companies in different scenarios, among which we find the financial one, which for many, what they are looking for imperatively is to know about the return on investment and to know about the profitability of this in a certain business, it is also tirelessly sought to know what are the benefits that the environment provides to companies to contribute to the enhancement of this financial aspect, such as the possibility of achieving tax exemptions, the management of CERT, among other aspects… these aspects are linked in an almost inseparable way with the slogan of exporting, looking for the best destinations,markets and economic conditions that prevail in the economies of the world… although in this aspect it is important to highlight that many merchants and entrepreneurs consider that the exercise is as simple as making contact, packing production and dispatching taking advantage of the monetary policy conditions that the government you are driving at a certain time (like a devaluation policy…).
… However, in view of these poorly structured processes, a question arises that seems quite important to us in the face of export processes to achieve the optimization of productive resources by companies, and is whether companies have defined their cost structure?… this question, although simple, is the initial fee for other questions in this regard…
Does the company identify its production chain? Do companies have possibilities for growth through vertical integration forward or backward?… Does the organization know in detail what the behavior of its value chain is? If the companies are really efficient in managing their costs or are the benefits of the system (devaluation policies, tax benefits, production subsidies…) that allow profits to exist? Are our companies competitive with managing of cost and expense? Are companies able to adequately integrate into production chains that maximize and enhance their productive, competitive and export capacity?…
All these questions are important points for reflection, especially with regard to cost structures, however, some economic thinkers have already gone ahead in some way to identify these operational aspects of companies. This is the case of COASE and its theory of increasing and decreasing marginal returns, compared to the management of costs and income respectively… the theory is obviously important and somehow picks up the questions that we previously asked ourselves, calling all modern entrepreneurs and exporters to reflect on managing costs and the combination of production factors within organizations in order to maximize and optimize them.
The issue of costs is supremely important in today's companies, but it is such a broad topic that we talk about topologies, methodologies, procedures, processes and different ways of application and organizational development in this sense… so Ronald's discussion coase part of the identification of the nature of the companies…. The questioning starts from two important premises; What is the company ?, What is the raison d'être of the company ?, which leads us to a third question: How does the company integrate into the real-world business sector… ?; These aspects are considered from a broader perspective than the conventional one, since here it is not interesting that you identify the company as:"A unit capable of developing an economic activity that generates profit" or identify in a very hasty way that companies have as a reason to be "customers" and that they are integrated into the market through the offer of products and services… the approach is a little deeper because according to the case, the definition of a company must be more than an individual or a thing within the business context, on the contrary, the definition of a company starts from the identification and characterization of the system… very well defined, since the company itself is nothing, it could resemble an island in the ocean, which would even go unnoticed if it were not for the restless looks of some of the users of its services… but focusing on the approach that concerns us,It is important to highlight that companies arise from the need to carry out exchange transactions for products, goods and services that undoubtedly have costs and that for people in normal terms would be difficult to assume and these in the first place would be the costs of organization (price mechanism, identifying which of them are more relevant), even for companies these are difficult to eliminate, but it is possible to reduce them significantly; after these we go through the costs of negotiation and contracting separately for the exchange transactions that the market has; Although these seem simple, they have a significant impact on the operations of the organization… the question to ask is: Are companies being efficient in this regard…?Although these seem simple, they have a significant impact on the operations of the organization… the question to ask is: Are companies being efficient in this regard…?
Organizations should also ask themselves how they are developing the hiring processes and in what legal terms they apply, or are these to the detriment of the company or the people or is the balance really achieved… win, win between employees and companies… What costs are being assumed against the suppliers, in terms of supplies, financing rates, payment periods and contracting…
At the business level, production bottlenecks are managed, the company is able to carry out negotiation processes efficiently, effectively, according to market requirements, leaves to specify details at the time that they must be done without the risk of incurring waste of time and wasting of resources… and the costs of market exchange… the company is managing them properly…
This in order to make an x-ray in light of the approaches of coase, but we would have to add to these arguments, the management of production processes such as the administration of raw materials, the state of investment (machinery, buildings, vehicles…) for production, the management of internal and external financing, the opportunity costs of the company and of the shareholders, such as the process of generating value for the company, value is created or destroyed… what is the turnover of assets… if there is constant renewal of investment, there are serious processes of technology and knowledge transfer… one could continue listing factors to take into account to complement Ronald Coase's observations; but where does this lead us?…
… Logically to the determination of the efficiency in the operation of the business and to identify the Size of the company, which can be analyzed from the following points of view:
"Under normal conditions a company will tend to be larger when:
1. The lower the organization costs and the less these costs grow with the increase in organized transactions.
2. The lower the probability that the entrepreneur is wrong and the fewer the mistakes increase with increasing organized transactions.
3. When the prices of production factors are lower to the largest companies. ”
To return to the initial approach, it only remains to indicate that these elements are quite important since within the normal operational gear of the companies they are part of the financial, operational and obviously cost structures, to re-project the central approach of coase; which indicates "In the general context of the problem of the" cost curve of the company "more than once it has been said that the size of the company has a limit if, under conditions of perfect competition, a cost curve has a positive slope,in imperfect competition the size of the firm will necessarily be limited by equality between marginal cost and marginal revenue - but since it is obviously possible for a firm to produce more than one product, there does not seem to be any a priori reason for the growth of the curve of costs in perfect competition or the relationship between marginal cost and marginal revenue in imperfect competition sets a limit to the size of the company. "
This approach what he proposes to us is that companies to the extent that they grow and develop their activities towards activities of a commercial nature and more when it is towards international trade in conditions of market competition, they must know what is the maximum point of production in which are efficient and in which their marginal income is equal to their marginal costs so that the results obtained from the combination of the productive factors are the most optimal and in which case it is not in this way the fact of knowing the structure and operation of the organization will allow to take the corresponding measures to comply with said premise and allow the company to maintain, endure and position itself in the world market for the exchange of merchandise, goods and services.
This reasoning is important and invites the reflection and evaluation that companies or organizations within it can do, in order to potentiate their productive capacities and make the most of the productive factors that are under their control, thus avoiding simply these the expectation of the ineffectiveness of the other competing institutions, or waiting for the benefits or concessions that the interventionist governments can provide them at a given moment or even the charities that the markets provide, to give little lives to the inefficient companies in the commercial exchange with the markets; It is essential that companies in today's world care about being competitive and optimize their resources while minimizing their costs,taking advantage of the operating and financial structures that they have, achieving a high and rapid return on investment, making companies solid in the market and with high competitive profiles, while generating well-being for shareholders, workers and society in general through the services they provide.
Finally, it is important to emphasize that companies must clearly identify where they are going, what will be the level of growth they want to achieve, since this depends to a large extent on the growth of costs and how complex processes become inside and outside. of companies; In short, an intense analysis of the operation of the companies must be made; an identification of the cost structures and a serious and systematic evaluation of the generation of value that is being achieved through the use of the productive factors to which one has access.
Conclusions
- It is imperative that companies clearly identify what the cost structure is (management of production processes, transaction costs…) so that the measures that make the operation of the business relevant as well as viable at the national level are taken and international. It is indisputable that, in addition to the fact that organizations grow, their costs do so in an almost identical way, for this reason, if they are fully identified, resources can be optimized, allowing companies to grow by making important controls on cost growth. For the development of foreign trade by companies, it is not only important to control costs, it is also necessary to clearly identify how productive factors are being used (land, work,capital and technology) that are available to the organization. In international trade operations it is important to achieve customer satisfaction, but it is equally important to achieve internal customer satisfaction by generating value in companies, which leads us to propose that all companies should seriously review that they are generating with its installed capacity and verifying identically if its production level is the maximum and adequate, in which its marginal income is equal to its marginal costs.which leads us to propose that all companies should seriously review what they are generating with their installed capacity and verify identically if their production level is the maximum and adequate, in which their marginal income is equal to their costs. marginal.which leads us to propose that all companies should seriously review what they are generating with their installed capacity and verify identically if their production level is the maximum and adequate, in which their marginal income is equal to their costs. marginal.
Bibliography and notes used
Ronald Coase. Political Economy Readings.
