Basic Strategies to Compete in a Globalized Market
Today’s economy provides new alternatives for growth thus opens a window for higher incomes. This is the main reason why business companies are daily searching to consolidate themselves not only in the local but in the international market.
According to Michael Porter, strategy should be defined as the formula a company uses to compete and set goals, along to the necessary politics to achieve such. 70 % of failure cases in an organization’s plan is due to a bad strategy or bad execution of it. This brings strategy as the only way for an organization to generate value.
These are the fundamental points one shouldn’t disregard to establish a good strategy and action plan in a globalized market.
1. Volatility: If you want your company to go international, you must remember the macroeconomic variables such as inflation, currency exchange, or rates of interest, just to mention a few. This will be key to a better performance and to avoid the frequent financial disasters that compel organizations to close operations.
2. Debt level: The financial leverage you’re considering should never jeopardize your company’s operation. It’s important to mention that credits are not bad, but a negligent handling might prejudice the organization.
3.Commercial politics: Governments have approved international treaties that benefit international commerce, and most importantly the operation of foreign companies in their local markets. The fact that the host government can impose taxes an contributions, or establish requirements in the local goods manufacturing, and regulate the prices of imported goods has pushed the aforementioned initiative.
4. Follow a global strategy at low cost. This means that a company aims to become a low cost supplier for the majority of the most important and strategic countries, or every single one of them if possible. All strategic efforts are globally coordinated to obtain a low cost position in front of the competitors.
5. Follow a strategy of differentiation. This means having or creating a company that differentiates its products in the same features in order to build a solid image and a competitive homogeneous theme.
6. Coordination of activities. It is important to identify the course of action for the implementation and coordination of the activities in the different countries. A single business company can create a long term competitive advantage in different ways. For instance if we think of a branch in country “x” that creates an efficient process that produces better performance, the know-how and experience are transferable to other branches. A company can improve its reputation by positioning its products with the same features of differentiation on a global scale.
7.Strategic Alliances: Strategic Alliances are the cooperation agreements between companies. They go further beyond ordinary settlements but don't reach the point of merge. They also don’t mean the start of a new enterprise. An alliance can contain common research, technological exchange, joint production facilities, among others. Through strategic alliances, it’s possible for companies from the same industry but different countries to compete in a larger global scale without loosing their independence.
The common thing to do for small businesess is to tag along the industrial leader prices, either way going up or down with out risking it to take the lead. Today, it’s important for companies to search taking control of the future. Meaning this to become the leading actors of their strategy and opening market with the goal of reaching higher flexibility and transendence in the international markets.
Lugardo Salazar Campos
B.S in Economics and Finances. MBA from the Technology and Higher Studies Institute of Monterrey. Masters Degree in Economics and Finances from the Sonora Technologic Institute. Doctoral Student in Strategic Planning from the Sonora Technologic Institute.