The Evolution of International Business
Successful domestic organizations follow four distinct and progressively complex stages of evolutionary growth before reaching, if ever, the final stage of the Transnational Corporation. This blog is set to define the five types of evolutionary corporate growth – Domestic, Export/International, Multinational, Global, and Transnational – its characteristics, and to understand the opportunities that exist to link them to the next stage.
|1. Domestic||Primarily defined according to where it sells its products.||– Operates only within its own country
– Uses domestic suppliers
– Only follows domestic market trends, resources, environment
– Competitive strategies, plans/tactics remain inside a domestic marketplace
|Will find itself losing market share to foreign competitors. Need to scan the global environment for trends.
With the advent of the internet, the world marketplace has erased or blurred the distinction between domestic and international.
|Export corporations have a product/service/technology that they send overseas and is managed by distributors, and they have zero to few personnel expatriated as staff.
International corporations have an int’l division which travels frequently overseas to work. This includes manufacturers (or maquiladoras, for example)
|– Its product is sold in other countries, but operates from it sense of domestic competition
– Studies data of off-shore market trends
– Re-organizes its resources, technologies, systems, networks, etc. in response to emerging opportunities
– Understands the importance of cross-cultural needs
|Needs to be flexible in order to adapt to destabilizing changes, such as entering or withdrawing from foreign markets.
For example, one organization suffered its property seized and proclaimed by the foreign government, and had to cease operations. Hence, higher monetary reward may require higher fiscal risk.
|3. Multinational||A centralized HQ, as well as localized national or regional operations that handle the following decisions: marketing, sales, manufacturing, customer service, and competitive tactics. Localized structure reduces need for cross-cultural awareness.
Since this structure is hierarchical, information is power, there is a chain of command, and people resources act as boss/subordinate.
|-Each hub acts independently and communicates back to HQ only
– Collects/Uses info on multi-domestic trends, environmental conditions and strategic resources
– Adapts market model to cultural contexts; systems/processes to int’l competitive conditions
-Develops multi-national alliances/ventures
– Adapts to destabilizing change by flexibly reallocating resources across national markets
|National or regional boundaries can serve as barriers.
Needs to shift away from such a hierarchical model to a flexible, entrepreneurial, matrix structure.
|4. Global||A balance of structure and flexibility, global and local needs, and on-time product delivery with low costs. The differentiation is strategy integration with operations. Flexible, entrepreneurial, matrix structure.
Since this structure is more networked and organic, the people resources are more interactive.
|-While the centralized global strategic plan remains, there is a localized customer focus and competitiveness that reacts to local conditions.
-Decisions are made to deliver products in the best markets, at the lowest cost, with the appropriate management resources, regardless of where they (e.g. funds, people, raw materials, tech) reside.
-Creates global strategic partnerships; inter- and intra-organizational linkages.
– Managers must transcend cross-cultural situations effectively
|A strong global corporate culture is only possible if the mission, values and vision is exercised visibly by the most senior levels of management and is understood, felt, and incorporated right down to the janitor.
Managing this level of complexity is successful if the cultural norms are aligned with the stated mission and values.
Walking the talk is imperative. Humility must be repeatedly displayed. There is no room for egos when diversity is present.
|5. Transnational||Resources/Responsibilities are allocated freely across boundaries while maintaining a strong connection to a solid HQ identity.
Information is a resource; not a power.
|-All levels require cross-cultural management skills for maximum flexibility
– So well integrated that all resources flow freely between its interdependent units. Every part of the org must collaborate, share info, solve problems, and collectively implement strategy.
– Allocation of worldwide product responsibilities to different national subsidiaries according to their strengths.
– People are rotated around the world.
|Conflicting, parochial interests and overlapping responsibilities may pose as problems.
Must retain its ability to facilitate organizational learning by fostering an inclusive environment of ideas, best practices, and knowledge around the organization.
Aristotle was noted as the first to claim the world is round. Thomas Friedman was noted as the first to claim the world is (metaphorically) flat.
Rossina Gil, MSOD, MAIS, is a Leadership and Organization Development Practitioner, author, cultural analyst, coach, speaker, and facilitator. CorporateLookingGlass.com.
©Rossina Gil, 2013
Posted on May 19, 2013, in Uncategorized and tagged Business, Evolutionary corporate growth, global management, international business, Management, Multinational corporation, Organization Development Practitioner, Princeton New Jersey, Rossina Gil, Thomas Friedman, Transnational Corporation. Bookmark the permalink. Leave a comment.