The international economic environment today is increasingly characterized by its dynamism and globalization. Trends such as the increasing interdependence between countries, the formation of regional blocs, the emergence of emerging economies in Asia and Latin America, as well as surprising technological advances in different sectors, shape an increasingly competitive and changing world environment.
As a consequence of these trends, the phenomena of globalization of markets and internationalization of companies have become even more accentuated, making it essential for entrepreneurs to have a cosmopolitan and international vision of economic activity and to rethink economic concepts and strategies within a model so open economy.
In an environment of these characteristics, internationalization appears as a pressing need for companies.
However, it should be noted that this is a difficult, complex and costly process, which can even harm the company that undertakes it if it does not previously carry out a serious and rigorous strategic analysis before making such a decision.
Just thirty years ago, the corporate policy of most countries was by no means to conquer the world; but to earn money within the limits of the nation; without thinking of accessing, at least massively, the international market and competing with other companies that were on the other side of the borders. At the international level, tariffs were prohibitive and employers, in a general sense, focused on their own countries. The division of the world into isolated fragments also conditioned mentalities. (Álvarez, E., 1995)
However, in a short time, this situation has undergone momentous changes. The international economy of the second half of the century just ended has evolved considerably, adopting a series of trends that implicitly carry the idea of economic internationalization, among which are:
- Progressive growth of trade and production. Growth in the prices of merchandise in dollars worldwide, mainly due to the increase in the price of basic products and variations in the exchange rate. Growth of manufactured products in international trade. Incessant progression of direct investment abroad Constant development of international technology transfer Progressive increase in international capital movements Increasing economic significance of international cooperation
Today, the international economic environment is increasingly dynamic and global; This is reflected on the one hand, in the enormous growth of world trade in the last decades of the 20th century, and on the other, in the boom in direct investment abroad, which has also grown at unforeseen rates. (Forsner, H.; Ballance, R., 1990)
The internationalization of a company implies expenses, and to compensate them, it is necessary to add value to the company. The goal of a company being international must be to obtain competitive advantages that allow it to overcome the competition. Most of the companies that decide to internationalize adopt the old trial and error scheme.
The decision about what and how many markets to address, how to enter them, the type of organization to adopt there, are incremental decisions that require rigorous analysis of a strategic nature. A large number of companies face internationalization as a way to grow, without realizing that selling abroad can reduce their profits and involve risks that are not run in the national market. Being international is expensive, because the goal is not to be bigger but better. (Canals, J., 1996)
The internationalization process: general aspects
The process of internationalization of the company has been studied historically, from very different perspectives, highlighting among them two main approaches: the economic or rational and the sequential approach. Within the economic approach, the two most recognized theories give a leading role to transaction costs that derive from the mobilization of intangible assets of the company across national borders. In one case, the theory of internalization, to build on them the explanation of the investment phenomenon; in another, the eclectic approach, to integrate them into an aggregate consideration of the various partial aspects involved in the internationalization decision. Regarding the sequential model, two currents can be distinguished: the Uppsala model and the innovation approach.(University of Vigo Research Team, 2001, 34)
The term internationalization largely received its current form, from Kindleberger, in exposing his theory of big business, which is based on that of a monopoly right over five specific asset classes: access to technology, team management skills., economies of scale at production sites, better marketing ideas, and generally well-known brands. (Kindeblerger, CP, 1969)
Regarding the first approach (internalization theory), it refers to the advantages in ownership, which in turn is based on the fact that the possession of assets of an intangible or immaterial nature and the imperfections in the market for these assets cause the existence high transaction costs.
These costs have their origin, among other reasons, in the need to establish coordination and control mechanisms on the part of the “selling” company, as well as in the uncertainty in the fulfillment or not of the terms agreed in the license contract. The company, aware of such dangers, will try to integrate under its hierarchy and organization all those activities of which it is capable, taking into account both the limitation of resources to which it is subjected, as well as the opportunities and threats that the environment offers.. Therefore, the company will only outsource part of its activities when one of the following conditions is met: when the internalization costs are notoriously higher than the transaction costs; the less specific your property advantages are;the greater the relationship between the activities; and the more stable, competitive and dispersed the market you want to access.. (University of Vigo Research Team, 2001, 35)
The second attempt to build a general theory about internationalization comes from a more pragmatic option: the one that results from adding the various elements considered, in the previously existing partial approaches.
Specifically, there are three factors that are considered necessary to explain the capacity and willingness of the company to internationalize: (University of Vigo Research Team, 2001, 36)
- The company must have some advantage over its competitors in the host country to offset the disadvantages of producing in a little-known environment.
These advantages, called "ownership advantages", can be given by the existence of economies of scale and specific technological knowledge and management capacity and business management - marketing and distribution of goods and services, organizational and managerial capacity, capacity to create new technology- and possession of resources and assets in general, generating income.
- It should be more beneficial for the company to internalize the aforementioned advantages through Foreign Direct Investment than to externalize them through the sale of patents or licenses to other companies.
This type of advantage is called “internalization advantages” and can be generated by imperfections in the markets for goods and productive inputs, which make it difficult to set prices for them, due to the desire to hide specific information about a certain product, protect its quality, or avoid public intervention in the form of tariffs, taxes, etc.
- The investment destination market must have some localization factor - “locatíc advantages” - of its own such that, associating it with the specific advantage of the investing company, it prefers to invest versus export.
These location factors can be based on cost elements or factors related to demand. In the first case, both the cost, as well as the availability and abundance of natural resources and productive factors, will be the variables to take into account. Regarding factors related to the market, the current and potential demand level, government policies, the degree of rivalry, the existence of trade barriers or political instability, will be, among others, the elements to take into account.
The eclectic approach integrates in a single proposal the specific advantages of the company -property advantages-, the advantages of internalization and the characteristics of the receiving market -location advantages-. Each of these three concepts encompasses theories about the factors that motivate a company to be multinational, so that each of them as an independent theory is incomplete. Also, the interplay of these benefits may work differently for each individual company.
Despite the indisputable capacity of suggestion of the two previous approaches, there are limitations that hinder their direct use as useful theoretical instruments to analyze the complexity with which internationalization processes appear today. In general, we can say that these are static approaches that have large companies as their preferred subject and have an acceptable establishment in international markets. Hence, in order to study the sequence followed by small medium-sized companies, it is convenient to pay attention to the contribution made to the analysis of the internationalization process from a different tradition: the theory of development phases.
The study of a series of European multinational companies, particularly Nordic ones, led some authors, grouped around the Uppsala school, to attribute the internationalization process to a fundamentally evolutionary nature: the company ascends to higher levels of international commitment, after settling and accumulate experience in the previous sections. (University of Vigo Research Team, 2001, 37)
Johanson and Wiedersheim were the first authors to recognize that the absence of resources and knowledge about foreign markets generated a level of uncertainty that could only be reduced through incremental decision-making, that is, a series of cumulative steps. Over time, due to the learning of the organization, they develop an increasing international commitment. Thus, the first model of the internationalization process was constituted that offered a certain dynamic character by including feedback in the form of learning.
This decision-making model is expressed as an “entry chain” that represents a progressive expansion of operations from non-regular exporter to exporter via agent, to sales subsidiary, to end in production subsidiaries. (Johanson J.; Wiedershein P., 1975, 322) The theory of development phases provides an interpretation of the process that is especially useful in the case of SMEs or companies that are in the early stages of internationalization, since it is easier for big business to dispense with the proposed gradualism. In short, from this point of view, internationalization has a broader meaning than export, since it means relating to the outside world from a richer plane: importing - exporting products or services, technologies, outsourcing,collaborate with external companies and of course invest abroad.
There are different coordinates when facing the challenge of internationalization. One of the most classic perspectives is in risk analysis and the scope associated with basic internationalization decisions. A solid position abroad is possible through investment, although it implies greater risk.
There are previous steps, for example trade, that is, export and import. What we call getting involved, that is, internationalizing through franchises or joint ventures could also be considered a step further. Even recognizing that this last route is superior to pure commercialization, it does not reach the future prospects that can be derived from a well-made investment. (Canals, J., 1991)
Therefore, the process of accessing foreign markets does not necessarily have to take place following the previous sequence, although it is usually the most common scheme of progressive introduction in these markets. Each phase requires greater capacities, fundamentally strategic, without prejudice to the financial ones, since with the passage of time the commitment increases and with it the risk incurred.
The internationalization process can also be understood as an innovative process inasmuch as it reports a change in the organizational structure, in the strategic objectives, in the marketing program and, eventually, in its previous production conditions for the company. In many respects, increasing international commitment implies for the company to make an innovative decision, so it is not surprising that both processes present notable similarities. Three are of special relevance: (Alonso, JA, 1994, 128)
- In the first place, in both cases they are creative decisions that are adopted in accordance with the conditions imposed by the market and with the possibilities, always limited, of an organization operating under uncertain conditions. Secondly, it must be recognized that in both processes involve factors that are governed by a manifestly cumulative sequence, and thirdly, both processes are far from following a deterministic route (as could be derived from a simplifying view of their cumulative nature) and from a fully random one That could lead to the uncertainty of the decisions that support it.
Only when the company is clear about the advantages to be achieved through internationalization, can it begin to answer the strategic dilemmas: (University of Vigo Research Team, 2001, 37)
- What markets to enter? With what market strategy? With what type of organization?
Markets
Which market to target first is a decision in which the company cannot be carried away by fashion or by the decision of competitors. Nor is it based solely on the results of the analysis of variables such as market size, tariffs and tariff barriers, freight costs, level of competition, taxes, to name a few.
The relevant variables for the selection of countries are those that respond to the competitive advantages that the company seeks to emphasize or obtain. For example, Bodegas Torres de España chose to establish itself in Chile due to its comparative advantages (climate, soils, vines) to produce wines and export from there. He did not care about the size of the domestic market, or local competition, but rather the quality of the raw materials, the positive image of Chilean wines and the ease of foreign investment that this country provides.
Likewise, if a jewelry manufacturing company seeks prestige and international recognition, it should settle in New York or Geneva and if it is looking for volume in Tokyo.
Faced with the decision of how best to do it, if gradually advancing in the process, first entering one country and then others, it is again crucial to know what competitive advantage is sought and what resources the organization has to make that decision.
If the company seeks learning, gradualism is advisable, if it seeks to export volume and achieve economies of scale, simultaneous entry into several countries may be advisable to quickly reach an efficient size.
Strategies
There is a variety of strategies or ways to enter economically and commercially in other countries. The best known are:
- Exports Direct investmentJoint Venture or joint ventures with local or foreign partners Licenses Franchises • Management and / or production contracts
From the point of view of strategy, three major aspects come into play in the internationalization process, which imply the leap of the company from the area-country of origin to the area-country of destination where the target market is located. They are the following: (University of Vigo Research Team, 2001, 40)
- The conditions of the base of operations where the company is located.
The company is influenced by the base of operations. The conditions of the area, both specific and global, the dynamics of the industry and the rest of the companies with which it relates are essential elements when facing internationalization.
A company will hardly be able to internationalize without an adequate base of operations. It is as if to make the “leap outwards” a consistent springboard is needed. On the other hand, the base of operations sets the conditions for establishing cooperative agreements - vertical and horizontal - that make it possible to tackle the internationalization process.
- The conditions of the destination area or country.
The study of the destination country-area is the focus of interest in the internationalization process since it will be where the corresponding action will be applied. Here the entry and exit barriers in the corresponding markets, the global and specific conditions of the destination country-area and the conditions of the other companies that already operate in the aforementioned area are fundamental.
- The decision to go international.
The third of the elements refers to the decision to internationalize. A company that has a certain advantage, through the provision of services or the realization of certain products, must try to exploit it in the foreign market.
The strategy must logically be defined on the basis of the goal or competitive advantage to be obtained being international. It is often observed that the strategy chosen by companies is copied from others in the sector, or responds to taking advantage of a conjunctural opportunity that is believed will not be repeated.
The strategy must obey the objective intended by the company: If economies of scale are sought to achieve an efficient minimum size, the most logical thing would seem to be to export. If it is intended to amortize the high costs of research and development of products, and there is no interest or there is no possibility of entering external markets, the most appropriate seems to be to grant technology licenses to other manufacturers. However, when the chosen destination market is larger than that of origin, is complex in its commercial and distribution practices, has different customs and consumption habits, presents tax obstacles, and a significant state bureaucracy, the best will be to access at the same, get a good local partner and make a Joint Venture.
When a company starts its internationalization process, it must carry out a deep analysis of the competitive advantages that it could achieve at the international level, which once identified will allow it to make much clearer and more logical decisions regarding the process.
Among the fundamental advantages that the company could achieve by internationalization are: efficiency, flexibility, learning, prestige and support to clients. (León, C., Miranda, M., 2003)
- Efficiency: This has 3 main sources of obtaining: comparative advantages, economies of scale, and own systems.
Comparative advantages do not allow us to face international trade with a strong competitive position today, but they allow us to exploit them worldwide and offer efficiency to the company.
Economies of scale understood as savings in the cost of production of a good or service, due to the decrease in fixed costs, are an important source of efficiency and competitiveness at the international level.
Their own systems, including the Know How that companies develop based on their experience in various countries, allow them to be successful in developing international strategies. This is the case of multinationals such as NESTLE, UNILEVER, PROCTER AND GAMBLE, whose accumulated knowledge is applied with costs in the countries where they enter.
- Flexibility. Companies can achieve a better competitive position by gaining flexibility through their international expansion. The first way to obtain it is by diversifying, which reduces geographic risk by no longer depending on a single market. In addition, by operating in several markets you can better defend yourself from the competition since you no longer have to do it only in your home country. The learning that companies develop in foreign markets is another important source of competitive advantages, since other ideas and other innovations about products, services, distribution, marketing, advertising, etc. are known there, which can only be learned by competing there. Moreover, companies can always be more competitive if they are in the most demanding markets. Prestige. For a company,Being international adds prestige and value to your customers who appreciate those products already referenced in the best markets. You cannot compete internationally in wines if the product is not in the best restaurants in the European capitals. Accompaniment to clients. Many companies must follow their clients, such is the case of auditing and consulting firms, and banks.
Organize
The nature of the competitive advantage that is sought to achieve through internationalization determines the type of organization to assume.
If the company seeks to take advantage of its Know How by applying it in other countries, the most logical thing would be during the first stage of the process, sending trained personnel at home and once the technology has been transferred, local personnel are chosen. If the company seeks to penetrate another country basically to learn from it and its competitors, and diversify the risk, having a good base there, the most advisable thing to break into the market would be to have an autonomous subsidiary, managed by a person with a profile entrepreneurial, enterprising and knowledgeable about the market. If the only thing that the company wants is to export to a country, without penetrating it too much, the most logical thing is to centralize the decisions in the parent company and have a manager with an administrator profile in the market chosen.
(J. Canals, 1991)
Causes that lead to the internationalization of a company
From a more strictly business perspective, the most important causes that motivate a company to enter and remain in foreign markets are the following: (University of Vigo Research Team, 2001, 23-25)
1. Saturation of the domestic market of the country of origin.
In general, in Western countries, there are markets for certain products that are becoming saturated, some of them have even reached that state. Mainly, the low rate of population growth suggests that demand will not grow at the desired rate, so many companies in many industries are looking for new markets for their products. This is what happened to US cigarette traders when they realized that their sales were stagnant, turning to the search for outside opportunities trying to find new attractive markets. This was the reason for said industry to tackle the Indonesian market.
2. Facing new markets from abroad.
Some companies go abroad in reaction to an attack from an international competitor that threatens their local position and wreaks havoc on their cash flow. When Michelin, the large French tire manufacturer, aggressively penetrated the US market with very low prices, Goodyear, the American giant, did not respond by protecting its local market, which was its main source of funds and was Michelin's target.
Goodyear's response was to aggressively attack the French market, dealing a severe blow to Michelin in its own stronghold. In other words, it used the strategy of fighting it in its own market of origin.
3. Search for less competitive markets or at a different stage in the product and / or service life cycle.
This is the case of a product that in its country of origin has reached the maturity phase, faces many competitors and the market growth rate is very low. Given this situation, it is convenient to export to other countries where the product is not yet well known. This is what Phillip Morris or Coca-Cola, who have penetrated developing country markets early, have done. The North American multinational Gillette sells double-edged razors (an old-fashioned product) in the Chinese market, which is in a growth phase, while this product is in a decline phase in the more developed markets.
4. Appearance of new highly attractive markets.
Southeast Asia has gradually become an area with strong push from both the supply and demand sides. During the 1980s, the fastest growing economies were South Korea, Singapore, Malaysia, Thailand, Hong Kong, and Taiwan. This force emerging from the Pacific is both a promise and a threat to Western international traders. A threat, in the sense that they have become fierce competition, both for the domestic market and for the exchanges of Western companies. In fact, in 1987, Matsushita (Japan), Sony (Japan), Toshiba (Japan), Hitachi (Japan) and Samsung (South Korea) became the main producers of color television sets in the world.The promise comes from the emergence of a market of more than two billion potential consumers. However, international traders must be cautious, as Asians are modernizing not "westernizing", that is, they are buying goods and services from the West but are not buying values and culture.
5. Government incentives and trade deficit.
Currently, there are many countries with a high trade deficit, which forces their governments to encourage exports in order to obtain foreign exchange to buy or that the country needs and that is not within it. This is the case of Belgium or Japan whose export rate is higher than 80% of what is produced in the interior of the country.
6. Search for broader markets on which to take advantage of economies of scale.
A significant number of industries are undergoing profound changes in all their structures, as a consequence, above all, of technological advances.
This causes changes in the optimal dimension of the size of many companies, who are in need of looking for more buyers for their products, in order to reach the minimum efficient size and find the possibility of distributing R&D costs on a larger basis.. This is what has happened to all those industries highly dependent on technological advances.
7. Diversification of the risk of operating in the same market.
It is possible that the country of origin may be exposed to various economic, political, financial, demographic, etc. circumstances. that promote the need to internationalize. It is a way of not concentrating the success of the company in a single country, whose advances could succumb to it.
8. Follow up with an important client on his international adventure.
For those companies whose business is concentrated in a small number of large clients, the decision to go international occurs when one of their key clients decides to enter foreign markets. This is the case of many American manufacturers of parts and components for the automotive industry that have accompanied Ford and General Motors in their international expansion, first exporting them and then settling close to them in other countries.
This is also the case of major banks such as Citibank and Chase Manhattan, which have gone international to better serve their clients, many of which are large North American multinationals.
9. Search for easy access to technological advances and raw materials.
Relevant examples: European car manufacturers led the technology of gasoline injection devices, which helped those American companies that had an active presence in Europe. American steel plate manufacturing companies moved their plants to Canada, due to the easy access to raw material and avoiding the high costs of transporting it.
When labor is an important proportion of costs, it seeks to expand operations where labor power is cheapest.
This is what Intel has done by settling in Malaysia. This option is short-lived, as labor is increasingly less important in total production costs.
10. International vocation of its managers.
It is given by the tendency of business managers to open up to new markets. This vocation is usually given when they have a pleasant experience in foreign countries, are fluent in languages, have studied or taken a course abroad, etc.
Competitiveness in a globalized economy.
The current international economic environment is becoming increasingly dynamic and global. Trends such as the growing interdependence between countries, the formation of regional blocs, the emergence of emerging economies in Asia and Latin America, as well as the surprising technological advances in different sectors, shape an increasingly competitive and changing international environment. As a consequence of these trends, the phenomena of globalization of markets and internationalization of companies have been accentuated, making it more necessary to have a cosmopolitan and international vision of economic activity and to rethink economic concepts and strategies within an open economy model.
(Llamazares, O., 1999)
In recent years, additional facts have appeared that in turn accentuate the globalization process, such as: (University of Vigo Research Team, 2001, 30)
- High indebtedness in international markets by governments and companies, due to internal credit restrictions and the abundance of resources abroad Financial flows from the growth of investments in short and long-term portfolio, by institutional investors such as: pension funds, insurance companies, investment funds, etc. Financial flows related to the development of new financial instruments and foreign exchange risk coverage The internationalization of technology due to the accelerated process of technological innovation and its costs, through: franchises, licenses, patents, etc. The importance acquired by the management of human talent, since companies have been forced to seek and train managers with international mentality and leadership capacity.
Globalization: a new order to act.
At some point a dividing line was crossed, most economists say that it occurred in 1973 with the first oil crisis, others refer to the revolution experienced by the media and information technology, the truth is that In recent years there has been a momentous change that has led to a profound conceptual remodeling. In other words, in a relatively short period of time, the perception of the world from the perspective of the economy is increasingly focused on relationship and interdependence.
As a phenomenon, globalization has its basic impulse in technical progress and, particularly, in its ability to reduce the cost of moving goods, services, money, people and information. This phenomenon of "reducing economic distance" has made it possible to take advantage of existing opportunities in the markets for goods, services and factors, reducing, although not eliminating, the importance of trade barriers. (V. Donoso, 1997,108)
Although globalization factors are multiple, four large groups of explanatory elements can be distinguished:
(Forsner, H., Ballance, R., 1990)
- Social and governance factors Factors derived from cost pressure Factors related to the market and demand Factors derived from competition.
Among the social and government factors, the most notable aspects are:
- Free trade policies, since globalization means that international trade is first of all possible (greater opening of borders), more feasible (international free trade agreements) and less costly (increasingly lower tariffs) Logic and reasonable harmonization This technique is slowly but inexorably occurring in almost all sectors of the world economy.The economic integration of large areas such as the European Union, MERCOSUR, NAFTA, which represent a process of creating internal markets free of customs barriers, but also of unification of the technical, regulatory, social, fiscal and monetary conditions of the activities of the member countries.The role of information and communication technologies that have brought human and commercial relations together in an unthinkable way a few years ago.
In relation to the factors derived from cost pressure, it refers to the need for companies to increase market shares in order to reduce total average costs (economies of scale) and at the same time achieve lower direct costs through the experience effect (experience curves) and the greater ease of reaching any point due to the reduction of logistics and transport costs.
On the other hand, research and development is another element that presses in favor of globalization, since technological advance, capable of changing the competitive configuration of entire sectors, requires being at the center of innovations since no country is self-sufficient since a technological point of view. Also, the difference in costs between different countries causes some industries to settle in different countries or companies from countries with lower costs try to tackle desirable markets with more attractive margins.
In the group of market and demand factors, the pressure to grow stands out, that is, it is about increasing the volume of business through access to a broader market, with the aim of responding to new needs of consumers each time with more similar tastes although with different customization requirements. Other elements are the existence of a new more global demand and the use of new global distribution systems.
Finally, in the group of factors derived from competition is the increase in world trade, which motivates companies to participate in greater internationalization in their activities. On the other hand, the interdependence of nations mobilizes the natural increase in the flows of goods and services. Also the existence of multinational competitors and the globalization of competition itself require responding on all possible fronts.
The growing globalization of markets is reflected in the strong increase in world trade in the last three decades, which has comfortably outpaced the increase in world output, and in the boom in direct investment abroad that has grown since 1970 at unsuspected rates. It is also reflected in the integration of the markets themselves, the development of cooperation agreements between countries and the lifting of some types of controls.
On the other hand, the strong need to gain competitiveness encourages companies to operate in broader markets, cooperating and competing in a game that is perceived as mutually beneficial.
The concept of globalization is based, therefore, on a series of fundamental aspects such as: economic interdependence and the physical integration of markets, the standardization of products, the homogenization of national demands and the view that competitive advantages do not they are achieved by the sum of the countries but by the integration of coordinated activities at the global level. (Ventura, J., 1994)
This phenomenon of the globalization of economic life affects all social partners. In the first place, companies are presented with new opportunities to introduce their products in foreign markets; but at the same time, they also face important challenges since they will have to face foreign companies in their local markets, which means growing domestic competition and greater pressure to improve quality and price. It also poses significant challenges for company executives as they have to operate in different geographic markets and with different clients. Globalization increases difficulties and makes managerial tasks more difficult. It imposes restrictions on the government when it comes to designing its economic policy, reducing its room for maneuver. (Baraba, V., Zaltman, G.,1992)
The process that presupposes internationalization associated with economic globalization and competitiveness in the international framework, are elements considered of the first order when carrying out an in-depth study on this subject. Under this internationalizing pressure, it is increasingly difficult for competitors, suppliers or customers to access markets from abroad. Economic globalization is forcing companies to compete in world markets and hence the interest in international competitiveness.
As the economy globalizes, companies have the need to operate in foreign markets since they are supporting the action of competitors from third countries. In this way, they are forced to expand their markets, either by exporting, establishing agreements or manufacturing products abroad. (Forsner, H., Ballance, R., 1990)
To the extent that the boundaries between the national and foreign markets dissolve at high speed, companies in a certain area or country find themselves with the possibility of operating in another area or country, bringing this with it that the intensity of the competition grows and with it the demand for competitive improvement and the search for new markets. Consequently, the economic health of a country depends on its own strengths, capabilities, advantages and level to compete. In today's open world economy, competitiveness is therefore a key variable in ensuring business success.
(University of Vigo Research Team, 2001, 17-18)
The globalization of international economic life directly affects companies, creating challenges fundamentally due to the complexity it imposes on the management of entities, the restrictions it imposes on national economic policies, as well as the growing presence of foreign companies in the national market.
In an environment of these characteristics, internationalization appears as a pressing need for companies. However, it should be noted that this is a difficult, complex and expensive process, which can even harm the company that undertakes it if it does not previously carry out a serious and rigorous strategic analysis before making such a decision. Both the process and the problems that arise from it are issues that deserve the attention of government, businessmen, academics and the media. (J. Canals, 1991)
Competitiveness in the international framework.
he internationalization is almost always linked to the problem of competitiveness with the outside world. It is necessary to project the company abroad with the aim of generating competitive advantages that allow it to face the future with guarantees of success.
A company cannot be competitive locally, without being it internationally. Therefore, companies that intend to be competitive must begin their internationalization process. On the other hand, only those companies that are competitive at the national level will be able to successfully promote an internationalization process. Profit and even growth can only be considered necessary attributes of the competitive company, but they are no longer sufficient. Only the active and growing presence in international settings, through own investment and alliances of various kinds, constitutes valid proof of sustained competitiveness. Competitiveness fosters growth and success. (Forsner, H., Ballance, R., 1990))
Competitiveness and internationalization of the company are therefore closely related. Internationalization hardly occurs without the first, the internationalization process cannot be started if the company is not competitive at the national level, and, in turn, internationalization makes the company more competitive by being able to produce in larger series and, consequently, allow you to benefit from economies of scale. They are, therefore, factors that feed each other, but at the origin is, without a doubt, the competitiveness of the company. (Kotler, P., Armstrong, G., 1996).
Furthermore, entering the international scene requires analyzing international competitiveness as an indicator of the competitive position of a country and its companies.
This concept has been used and defined from different perspectives, although it can be understood generically as the ability to withstand international competition obtaining a certain level of profitability, or as the ability of companies in a country to create, produce and distribute goods and services in international markets.
Three fundamental sources of the development of international competitiveness can be distinguished: the country, the sector and the company. (Forsner, H., Ballance, R., 1990)
Many studies have been developed with an emphasis on the competitiveness of countries, that is, on determining how national environments are beneficial or detrimental to the competitiveness of the companies that operate in them.
Within this approach would be the meanings of foreign competitiveness that are connected with the orthodox vision of the principle of comparative advantage and, therefore, understand that international competitiveness is expressed exclusively in terms of relative costs and prices. According to this meaning, the evolution of the competitiveness of a specific country with respect to another country or group of countries, over a period, would be evaluated on the basis of the comparison of the evolution of their respective costs or prices expressed in a common currency. (Ventura, J., 1994).
If only these factors are considered in the analysis of competitiveness, it is not possible to explain why companies in the same industrial sector present different competitive patterns among themselves.
There are studies carried out in the field of industrial economics that indicate that the average profits of the sectors differ from each other, which means that the results of the companies are conditioned by the sector or industry to which they belong. Industry is the primary focus of competitive forces; its structure is what primarily conditions the conduct and performance of the company, and is the convenient logical unit to study the conduct and performance of the company. (Alonso, JA, 1994)
The conjunction of these two types of variables - those of a macroeconomic nature related to an area and those associated with the structure of the sectors - does not offer a complete vision of the phenomenon of competitiveness either because they do not thoroughly analyze the role of the company in competitiveness.. Within each sector, companies, through their management and internal organization capabilities, determine their own competitiveness. In light of modern strategy theory, this is the critical determinant of the competitiveness of every company.
In this sense, the theory of resources and capabilities places the company at the center of the competitive game, by sustaining the vital role of company-specific factors in generating competitive advantages, especially intangible assets largely unrelated to transactions. in the market. For resources and capabilities to be transformed into competitive advantages, they must not be generalizable to the rest of the companies. (O. Llamazares, 1999)
In the first place, it is necessary to consider that resources are not homogeneous, so that companies can differentiate themselves based on the resources they control; obtaining a competitive advantage those that are capable of accessing superior resources, especially if these are limited, which would cause the remaining companies to have to use resources of lower value in their production.
But to guarantee the advantage in the long term, the other companies must not find a way to increase the supply of the input or to supply it with another; In other words, there must be mechanisms that isolate the company from possible imitations.
This can be achieved in several ways, the first is that the necessary resources cannot be found in a factor market to which any competitor could go, but rather are generated in the company itself. However, this does not guarantee the maintenance of competitive advantage, as the possibility of imitation by other companies must be considered. It will be necessary, therefore, to make this imitation more difficult and the best way to do it is that the causes of the success of a company are not known exactly, because if the resources and capacities used are not identified, they can hardly be imitated or replaced.
Ultimately, the best resources are those that are scarce, assessable, little substitutable and difficult to imitate, since they provide the company with the possibility of obtaining an income that it can appropriate if, in addition, those resources are not salable or their sale involves high costs. transaction. (Ventura, J., 1994).
Once the importance of resources for the competitive advantage of the company has been analyzed, it is worth questioning their relationship with internationalization processes. International strategy is nothing more than a specific vector - of greater or lesser importance, depending on the case - of the company's general competitive strategy. Internationalization can be understood as a form of geographical diversification of the company and precisely the profile of resources of the company determines not only the existence of growth but also its direction. (J. Canals, 1991)
Bibliography and notes used:
- Alonso, JA (1994). The process of internationalization of the company. ICE, Madrid, Baraba, Vincent P. - Zaltman, Gerlad (1992). The Voice of the Market. Mac Graw Hill. Harvard Business Scholl Press. Interamerican of Spain. SA, Canals, Jordi (1991). International competitiveness and company strategy. Ariel, SA, Barcelona, Canals, Jordi (1996). The internationalization of the company. Editorial Mc Graw Hill - IESE. Madrid Donoso, V. (1997). Foreign trade in the global economy. Economistas, V.74, pp.104-112. Research Team (University of Vigo), Jorge González Gurriarán, José Cabanelas Omil and others. (2001). The internationalization of small and medium-sized Galician companies: Analysis, diagnosis and possible strategies. Editorial Estudios1.Forsner, H; Ballance, R. (1990) Competing in a global economy. Unwim Hyman, London.Johanson J.and Wiedershein-Paul, F. (1975). The internationalization of the firm: Four Swedish Cases. Journal of Management Studies, October 12, pp. 305-322, Kindeblerger, CP (1969). American Business Abroad: Six Lectures on Direct Investment. Yale University Press, New Haven.
