Globalization

Globalization & Companies

When we talk about the market and the changes it has gone we can agree that the market we knew in the past has revolutionized thanks to one factor which we call today globalization. Although many scholars can disagree on when did it start and say that it was a method used even back in ancient times, we can agree that it became better known during these years. Since does times the biggest changes that have occurred are in politics, culture, and the economy. The way how globalization influences these three general factors caused a revolution for companies that were used to working in mass production. This companies were so adapted to methods that had a high level of bureaucracy and lacked little innovation or flexibility. When the nations decided to open up there markets in the 1980s to remove trade barriers such as import quotas, import tariffs, and import bans which are basically taxes one had to pay in order to export products in the country. This was the starting point in the era of globalization, but you can tell me the opposite or worse tell me I’m wrong and say innovation led to a more global world with communications and the media. I wouldn’t disagree with you because you’re right too. The conclusion we can agree on is that globalization was happening and was taken a part in history as a mayor contributor to changing the markets that we know now. Companies saw this as the start of a new era in the industry. The start of new opportunities that will change the way they think and operate. Another mayor contribution to this cause would be the advances in technology like I mentioned, which had an impact in prices. All this changes just came together and made possible the new era in which companies are faced with opportunities and challenges. The focus of this essay will be on the way companies benefit and I will provide examples of very well know international companies and how they managed to take the lead in the world of today. Globalization has given exceeding benefits to companies that have led to the establishment of a new competitive market.

Competitive advantage has changed the method in which companies operate either in efficiency or effectiveness. The mindsets companies have today are very flexible. I say this because they worry about the state of health their company is on. Today we have a lot of companies coming to the market these new firms which we call entrepreneurs packed with the spirits to take on the market. Markets in which not only you compete with your neighbors, but foreign companies that give such little advantages to the newcomers. In order to succeed they have to adapt in the way their consumers think, and try to satisfy his needs. This concept leads to what companies focus now a day and allow it to stay ahead of the rest. This can also be described as that advantage or added value we as a company has that the others don’t. Competitive advantage is like having that trump card in your hand. This competitive advantage not only exceeds for any kind of industry, but you can look at it from the point of view as competitiveness between nations. In other to understand this concept of competitiveness we are going to look into Michael Porters generic strategies. There are different strategies but Porter’s strategy focuses on two things, which are effectiveness and efficiency. What is effectiveness today? Today we can describe effectiveness into one simple word quality. The level of effectiveness is determined by the performance one incorporates into any activity, which give it value and that value can be measured by the amount of quality it is worth. The concept of quality is what we as a consumer look for when we decide between products when we purchase. This brings the other point which is efficiency. How we describe efficiency is by time, in which it takes us to do activities. Time is a concept that has become of relative importance. There is a phrase that everyone can relate to and that is “Time is money”, we can say that is true today time has become the leading solution to saving companies millions. There is another concept that relates to this and that is “just in time”, the time expand it takes for the product to go to the consumer from the factory, that process we call just in time.

Michael Porter’s generic strategies help us understand these concepts and add a third concept which is segmentation. The strategies are separated into three parts: differentiation, cost, and segmentation. It states that the only way to compete in the market is by having a competitive edge that will determine the structure of the company. When I say structure I mean the way the company will operate in order to establish its goals and visions throughout objectives. Before I get in these three strategies let me remind you that in each industry we have big companies and smaller companies. Most high profitable companies tend to push for a cost strategy which is also named a cost leadership strategy. Most of the higher profitable companies acquire this strategy because the industries they find themselves in are demanding that positions are determined by market shares. Market share is the percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity. This means that having control of market shares give the company control of the market. This is also an indicator of competitiveness which tells how a company is doing against its competitors. Getting back to the subject, cost differentiation is one of the tools used to compete over control of market shares. Most companies focus in reducing cost of production by either outsourcing services or by finding cheaper materials. They also innovate their processes by purchasing newer technology. The other way most companies look at their industry is by product differentiation. This term means only one thing adding value to your product. How do you achieve this is by the quality it’s worth in the market. We can relate this by being efficient the amount of time we put in work in order to compensate for a good value. This strategy is chosen mostly by smaller companies because they can’t compete in cost reduction that will only lead them to bankruptcy. The only way is to produce a better product or service that will attract the consumer. This option is also chosen by bigger companies but they had to start from the bottom in other to become big. Take the example of Apple a company that started out in a garage owned by Steve Jobs. The success he had was because he wanted to differentiate his product from other competitors and add value to his machines in order to satisfy the need of the consumer. The consumer is the one who runs the market and that’s what most companies aim for when they create value for their product. The third strategy focuses on segmentation, which involve the market scope. The market scope divides the consumer into categories according to preferences and belief. The economy tells us that the consumer has been evolving during the years due to the changes. We have a stereotype in buyers according to living standards and other factors that determine their preferences. In the world report of competitiveness of 2011 by the IMD Business School, Stephane Garelli says, “In the upcoming years we are going to have two emerging classes and they are middle and less poor motivated by money consumption”. This states the fact that the preferences of the consumer are going to change always in the near future. The changes are produced by the economy and political affairs that interrupt the way the consumer thinks. The segmentation strategy is focusing which type of consumer we should focus as a company. There are mayor marketing strategies that capture the attention of buyers that companies tend to launch. These three factors are what companies aim for that allows competitiveness within the industry to bloom. He also goes to say that each strategy is independent of each other and a company should only follow one to maintain a level competitiveness.

These three strategies would be the main core strategies any company should follow, but what most business men ask themselves is the possibility of combining strategies to make a hybrid. There is always a possibility of combining, but one combination has promoted controversy. Combining the cost leadership and product differentiation can make a company loose track. This has being stated by Porter as he says that allowing the possible combination of strategies can lead a company to lose focus on core objectives. There are companies that have created a possible combination of two strategies, but have not succeed in the industry for too long others just have decided to go back to one main strategy. Other combinations are possible as long as you combine them with segmentation strategy. When you combine a strategy with segmentation you can focus on the type of segment you’re going to launch your product with either a cost leadership strategy or a product differentiation strategy. This depends according to the preferences of that segmented market. This has being well demonstrated with Apple Company when they launched their apple IPods to a specific type of consumers and added value and quality to their product. The same goes for a cost leadership strategy with a segmentation strategy. A good example of that would be Wal-Mart which squeezed suppliers in order to ensure low prices of its goods and their main segment is the poor and middle class. These are great examples that counter Porters generic strategies, but as he said this leads to a loose of focus on what the company is going. Another thing these generic strategies fail to mention is innovation and technology advances. These developments in technology are factors that have a great impact in the economy and are looked over when it comes

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