Future Global Corporate Strategy and International Management
The emergence of strategic management has always been attached to military history (Tallman, 2007). Studies in this area reveal various examples where the strategic management of offensive and counter-offensive led to decisive victories. Within the corporate sphere, it emerged following the Second World War. The dramatic growth of world nations such as China, Japan, and the U.S.A. served a beneficial environment for large international corporations that needed evolution in their planning and thought process. In fact, the competitive climate has created challenges for global corporations to sustain the success chart without meeting the changing requirements of business and adopting a strategy to counter these changes. Strategic management is an art that uses the processes and principles of management to create the mission or objective of any business. It identifies a proper target to meet the objective, established current opportunities and constraints in the business environment and creates methods to achieve the objectives. The operation of any business in the global arena is highly dependent on the quality and implementation of its strategic management. This document synthesizes major trends that shape the future strategic management in global corporations.
Drivers of Change
The shifts in strategic landscape that modify the transferability of resources across nations accrue from complementary internal and external forces.
Globalization
Greater global integration via market liberalization, trade, investment, and migration have not led to convergence but intensified the gap between rich and poor, powerful and powerless nations in the world order. Therefore, it has been accompanied by issues of inequality and development, which remain central to the reality of globalization.
Dhillon and Ebrary Inc. (2001) explore global challenges in the new Millennium. They discovered that organizational and technological capabilities are benchmarked against contenders worldwide, and business models are crafted to exploit global integration and linkages. International operating companies create pressures on competitors to invest on staying ahead in core business where they may secure market leadership and hence to global focus (Vrdoljak et al. 2016). Such competitive pressures shift up and down the value chain, particularly when consumers shift towards global marketing or global sourcing. Global operations become imperative when markets transcend national boundaries, and customers pursue diversity and competitors operate internationally at various points around the globe.
White (2004) found that these markets dynamics trigger different pressures for customers and international companies. Given that rival firms cut their prices via global integration, it would create pressure to exit or strengthen operational capabilities. On condition that consumers pursue global sourcing, suppliers will be forced to expand their global scope to sustain their globally operating customers. Many entities in business-to-business industries might hence be pushed to invest overseas following the internationalization of their customers. Manufacturers of consumer goods face varying consumers in each country and might find it easier to expand their brands to related items and thereby to prosper through diversification strategies.
Devinney et al. (2010) predict the future of international business and strategic management. They reveal that globalization has challenged how managers have to conceptualize their business strategies. In the 70s, international firms had to choose between being a small fish in a big pond and posing as a big fish in a small pond. Today, they do not hold this choice; globalization has led to one big pond, where nearly every firm, regardless of its magnitude, contends with any other company that seems to offer similar goods (Devinney et al. (2010). Therefore, the strategic challenge is to observe the industry internationally and to identify threats and opportunities on that level. Often, new business opportunities emerge with new business models that merge operations at varying locations worldwide. While seeking to identify and apply such opportunities, global companies must seek new organizational capabilities and structures across the company. Such a model must make interaction across borders a culture for people in various functional departments, not only in leadership positions. Often, this global organization can be built via mergers and acquisitions; these are often accompanied by leadership challenges of integration management cross-cultural and cross-border contexts. Hence, the management challenge is to devise corporate capabilities, particularly communications infrastructure and human capital that creates and exploits global linkages. This demands leaders with an international perspective, coupled by cross-cultural competencies to function across large geographic distances.
Market Liberalization
A nation’s institutional framework entails all the formal and informal laws that guide business corporations, and thus it moderates how businesses grow, compete, fail or survive. When these rules fail to secure efficient operation of the markets, companies might organize transactions within an organization (Oakey, 2008). For instance, they may develop human capital internally rather than externally. Therefore, reputable entities benefit from access to the best talent, which later are allocated throughout business based on needs. Other resources that may be shared across a conglomerate include bargaining positions and network relationships. International growth grounded on sharing these resources might hence be appropriate growth strategy in weakly transparent and network-oriented contexts.
Changes in institutional contexts are characterized by legalities targeted at making the market efficient for instance, reducing tariff or non-tariff barriers to global business. This liberalization makes it easier for foreign investors or importers to compete (Oakey, 2008). Besides, information about prospective employees and partners becomes readily available thus reducing the incumbent’s advantage from their nation specific networks and knowledge. Thus, market liberalization reduces costs of moving goods across borders and thereby creates opportunities to create capabilities based on international operations. Within such a liberalized context, international companies can easily attain a competitive edge with business structures that integrate and coordinate geographically disperse operations.
Managing Diversity
Managers typically see cultural diversity in businesses as being an issue to be handled. In fact, it can be a drawback or it can be an important source to improve competitive advantage. Failing to handle diversity can create many problems for an organization. The first important issue is economical price due to high turnovers, absenteeism, and legal cases. Organizations lose all the money spent in hiring and training when a disappointed worker exits. Moreover, high turnover indicates workers are regularly in the learning stage instead of executing at full potential. Absenteeism results in a significant cost: there is a positive relationship between employees’ views of being respected and cared for and their attendance. Moreover, legal cases on racial bias can also cause fiscal cost to the company
By capitalizing on the prospective benefits of employee diversity, organizations will have added value and aggressive benefits over organizations, which do not react to this challenge. Companies can drive company growth and improve customer support by including their different workers. This implies making use of cultural sensitivity, language skills, information of business systems in their home nations, and industry information. With these key resources, organizations will have aggressive benefits in promoting products or services to a progressively migrant community as well as to the international market. For instance, the Avon Company was able to turn around its unprofitable inner city markets in the U.S. by placing Hispanic and African-American managers in charge of marketing to these populations. Just as cultural minorities may choose to work for companies who value diversity, they may also choose to purchase from such organizations
A case of Coca-Cola
Organizations have been looking for various ways of handle workplace diversity, which has drawn some difficulties. However, leading corporations like Coca Cola have done their best to deal with this phenomenon. The company operates in different countries characterized by completely different cultures. Therefore, in every nation that Coca-Cola functions in, its culture has to be taken into consideration in developing the organization framework. To efficiently handle diverse employees as well as continue to promote its diversity culture, Coca-Cola organized various outreach and monitoring groups to educate employees and functions as a device to address diversity difficulties as well as guide employees through the both in their personal lives and at work. For instance, the Coca-Cola Lesbian, Gay, Bisexual, Transgender and Ally (LGBTA) aim to promote an inclusive work environment. It fosters a platform for sharing where workers feel comfortable with their ethnic background and contributes to the business success. Another initiative is The Coca-Cola African-American Business Resource Group aimed at advocating for a winning inclusive culture where individual diversity is respected.
Future Trends in Strategic Management
In the new business environment, the top-down management approach is fundamentally disappearing. Gen X, Gen Y and baby boomer managers are bringing different management approaches and thinking to international organizations. 20 years ago, Gen Xers started pressurizing baby boomers to experiment with electronic media and virtual relationships following the increased use of e-learning, websites, video conferencing and email. Today, managers must understand and implement various strategic management concepts to maneuver companies across real-time issues. During et al. (2001) hold that managers should decide on the magnitude to which they will be involved in the operational and strategic decision-making procedure. The problem facing organizations is both external and internal to the company’s operational environment. They demand that managers must incorporate decisions made regarding emerging concerns into operations objectives. The strategic management skills of a manager extend applying tactics, evaluating the purpose and guiding the organization. Besides, the management should determine the context in which the company operates. Vrdoljak et al. (2016) reinforced the argument that the manager’s tasks are complex, massive and full of conflict because the playing rules and field have become less certain. This implies that for the managers to take an organization through complex strategic decisions, they must capitalize on emerging strategic management patterns. Two strategic management trends are discussed:
Emerging Technology and future work
Todays emerging technologies are a cause of a headache for managers as they ponder on how to reject it, accept it and integrate it into business functions. Tulder, Verbeke, and Drogendijk, (2015) looked into the future of globalization. They ask what is it regarding the way international companies are structured, led and managed that will most imperil their capability to thrive in the future? This simple question leads us directly to what global firms place on top of their priority lists for business growth and sustainability, not often, what they are doing to maximize returns. Warren (2008) investigated dynamic capabilities of global corporations addressed the renewal of capabilities to advert obsolesce and adapt emerging technologies. He cites that these organizational dynamics is the renewal of competencies and resources to counter changing business environments. From the shifting markets, which are moving towards global emersion faster, company leaders must put emerging technologies at the top of all strategic management decisions and priorities.
This has become important because the adjustment to the proper technology could imply the difference in a company moving ahead, changing the future product requirements and becoming irrelevant. Vrdoljak et al., (2016) demonstrated why businesses needed to move ahead with emerging technological trends. In the 80s and 90s, Smith Corona Company made a collection of improper decisions that orchestrated the demise of the business in 1995. According to Danneels (2010), Smith Corona is a good case study of a company that required renewing its resource pool following environmental changes. It obsolesced their product group; typewriters. This shows that the company made a series of strategic decisions that made them disposition themselves. They did not capture the proliferation of new technologies in time like personal computers. The demise of their primary product line challenged the organization to practice dynamic capability, failure to which it would have declined and eventually collapsed with the product.
From a strategic perspective, today, managements are in the same position with one exception, the proliferation of cutting-edge technologies is moving at breakneck speeds. Before an organization can integrate innovation, new developments have replaced it. Tallman (2007) asks how on earth where waves of creative destruction blow at a gale force can an organization innovate faster and boldly enough to remain profitable and relevant? He advises managers to put emerging technologies at the heart of their organizational priorities as a business cannot be done without it. It can be incorporated into supply chain systems, people systems and other aspects of business operations like environmental controls.
Towards Shared Value: Is Porter’s Shared Value Concept Viable?
Porter and Kramer popularized the Creating shared value (CSV) concept, which seeks to address the challenge of regaining trust in business in the present age of economic turmoil. “The capitalist system is under siege.learning how to create shared value is our best chance to legitimize business again.” This implies that CSV transforms social issues relevant to the organization into business opportunities hence contributing to the overcoming of crucial societal challenges while concurrently driving higher profitability. According to Porter and Kramer, CSV “can give rise to the next major transformation of business thinking, drive the next wave of innovation and productivity growth in the global economy’ and ‘reshape capitalism and its relationship to society.”
Today, international managers confront a new set of unforgiving environments, problems and product volatility (Howes & Tan, 2003). The question is how then do managers create international companies that are adaptable and efficient in an age of rapid change? Here, Porter’s Shared Value Concept comes in handy. This can be found in how companies treat environmental factors. Howes & Tan (2003) focused on how strategic management is applied to international construction. From this perspective, companies tend to ignore or forget the fact that environmental controls have become part of today’s business norm and ought to be addressed to operate a routine business. For example, Howes & Tan (2003) point out that production companies should take into account pollution abatement operating costs (PAOC) that entail wages and salaries, fuel and electricity, parts and materials as well as other operating costs related to abatement. Largely, environmental regulation prevents organizations from externalizing the expenses of fouling water and the air (Howes & Tan, 2003). Markets and prices as well could help companies make proper choices, albeit if they only reflect the full consequences and costs of those decisions. Here, the argument is that unless a company places environmental controls at a higher level in their strategic decision-making procedure, the costs of operating business could cause irrecoverable consequences.
Warren (2008) observed the presence of a in strategy development in this domain. A good illustration is the expenses associated with packing, shipping, and transportation of goods to and from foreign locations. Export taxation policy and environmental impact that restrict these types of goods from entering a country and even regulations governing shipping vehicles could adversely affect the cost of doing business. Based on Porter ought Shared Value Concept, international corporations must incorporate the costs related to emerging environmental controls into the product costs. Even within the local sphere, environmental regulations have caused the costs to escalate.
By all measures, this concept continues to be viable, as it has met considerable success. As a concept followed by leading conglomerates, it is no surprise that it continues to succeed in securing a significant and positive practitioner audience. This concept has reached its audience through various mediums like web accounts, magazines, and newspapers including the Huffington Post, The Guardian, The Economist, Forbes and the New York Times. It is a topic considered in various CEO roundtables like at Davos and has reached the emerging generation of business managers via business schools where it is part of various MBA and executive courses. With leading global corporations like Coca-Cola and Nestle adopting CSV, the concept has already proven its potential to push ahead a wider understanding of corporate responsibility among giant corporations.
Successful Strategies Used by leading global Enterprises
While choosing the appropriate strategy, companies factor a number of primary key factors: environmental controls, emerging technologies and time to market. Mostly, international companies seeking expansion into foreign markets tend to employ international strategic alliances, mergers, and diversification.
The recent global economic turmoil caused sharp declines in sales and increased various levels of prices (Oakey, 2008). Global firms had to meet the changing consumer needs including high-quality standards. Therefore, they had to identify their strategy, based on flexibility and innovation to remain viable and set competitive prices for their products. While seeking to meet these goals, international companies use alliances and mergers as strategies to improve their expertise, widen their offer, enlarge their market share and increase sales. Others decided to direct their efforts towards innovative products, environmentally friendly practices, and better services as their primary strategies. In fact, market conditions favored these firms to relocate to costly attractive continents like Africa and Asia. For instance, Fiat Group opted for a reorganization, which was followed by a series of strategic alliances (Tallman, 2007). In early 2010, the firm split into two independent companies (Fiat Industrial and Fiat Auto, each concentrating on its strategic business division. This paved the way for a better business management and flexibility. By forming an alliance with Chrysler, the company improved its sales’ network. The financial results indeed supported the strategies adopted. According to Oakey (2008), global strategic alliances have become a common approach used by Multinational corporations of all sizes as an entry tactic on new markets as well as jointly using technology and sharing expertise. For instance, Japan-based Sony Corporation launched various strategic alliances with smaller players holding complementary competencies and hence penetrated the new markets
Besides strategic alliances, global partnerships are being applied by multinationals. These firms choose strategic networks especially when distance among companies is small. Here, a good example is the clustered firms from Silicon Valley. One firm is the center of the network. One advantage associated with this method is that participants are better informed and innovative. For instance, Hewlett Packard’s acquisition of Compaq led to a 25% increase in the PC market share and similar results with its IBM competitor. In the 90s, U.S.-based Gillette bought the leading producer of razors from China, invested in a new factory in Russia and purchased a renowned razor manufacturer in India. Therefore, it considerably revamped its sales. However, the firm continued to make efforts towards innovating products and thus by integrating the two strategies, the corporation secured profit above average.
Conclusion
International companies will have to permanently to identify proper resources, adapt to changing market conditions and be flexible to secure a competitive edge in the future. Therefore, they must devise an optimum strategy and re-direct it based on the social, political and economic contexts at the time being. A successful strategy is grounded in the way it makes a difference, the benefit it generates and on the market attractiveness. This helps the company secure a profitable and competitive position. International companies are using a wide range of strategies to remain viable (Tallman, 2007). This paper has discussed various types of strategies and offers insights into the most successful strategies used by these corporations. In choosing the appropriate strategy, companies factor a number of primary key factors: environmental controls, emerging technologies and time to market. Mostly, international companies seeking expansion into foreign markets tend to employ international strategic alliances, mergers, and diversification. In decades to come, it is predicted that companies will be more complexly integrated because they will depend on more intense communication and their behavior will be rather proactive than reactive. In addition, they are likely to face intense rivalry from online enterprises, which are expanding their market presence and share.
Reference List
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