What makes company global

An MNC is a company that operates in two or more countries, leveraging the global environment to approach varying markets in attaining revenue generation. These international operations are pursued as a result of the strategic potential provided by technological developments, making new markets a more convenient and profitable pursuit both in sourcing production and pursuing growth.

International operations are therefore a direct result of either achieving higher levels of revenue or a lower cost structure within the operations or value-chain. MNC operations often attain economies of scale, through mass producing in external markets at substantially cheaper costs, or economies of scope, through horizontal expansion into new geographic markets.

If successful, these both result in positive effects on the income statement either larger revenues or stronger margins , but contain the innate risk in developing these new opportunities. As gross domestic product GDP growth migrates from mature economies, such as the US and EU member states, to developing economies, such as China and India, it becomes highly relevant to capture growth in higher growth markets.

High growth in the external environment is a strong opportunity for most incumbents in the market. However, despite the general opportunities a global market provides, there are significant challenges MNCs face in penetrating these markets. These challenges can loosely be defined through four factors:. Undoubtedly, the globalization of a business is not a project that every business should do.

It's not a project that every business can do. You might be wondering if this strategy is right for you. The best step you can take is to do your due diligence, before you dive in, and ask for help from the experts, who can explain the pros and cons of globalizing your business. It makes sense to assume that a global company is a company that does business all over the world.

Actually, they probably can be numbered on the fingers of both hands. The global company definition, therefore, should be a little more lenient to accommodate this fact, which would enable more companies to call themselves global companies.

Really, a global company is any company that operates in at least a country other than the country where it originated. Realistically, expanding to even just one additional country is a lot of work and is therefore a great achievement. It takes more than that to earn the name a global company. To be a global company, you need to introduce not only your products, but also your company to people who live in another country.

You need to conduct significant research to figure out which country is your best choice for expansion and how to introduce yourself. Probably, you'll have to send some of your employees to that country to speak with people face-to-face and to experience that country on a first-hand basis, before you decide whether the country is right for your company.

Once you expand to another country and establish yourself successfully, it's only natural that you will want to try an additional country, and another, and yet another. That is how global companies have started, and now they have a massive list of countries in which they do business.

Businesses only begun to be referred to as global fairly recently. Consider Coca-Cola, which, in , was struggling to get by. By World War II, Coca-Cola was 50 years old and had proudly maintained its price at 5 cents, so as to enable many people to afford the beverage.

The company would sell its drink to U. Coca-Cola now sells its beverages in more than countries. Some companies are already following these three imperatives, pursuing all of them simultaneously. Leaders in these enterprises have trained themselves and their teams to be very deliberate about where to customize, how to build competencies, and what to arbitrage.

With this type of operating model, there is no longer a need to choose between a centralized and a decentralized structure, between current and future customers, or between a strategy grounded in industrialized economies and one grounded in emerging economies.

Only with the full operating model can a company gain the benefits of decentralization, centralization, and outsourcing without making compromises. The key to this imperative is to deliver products and services in a locally competitive way. That means they must satisfy the needs and wants of diverse customers, in terms of features, affordability, and cultural affinities.

Because needs and wants vary greatly among people at different income levels, this objective is complex and expensive to reach in any centralized way. That is why companies must leverage the diversity of a decentralized structure.

Is there a simple and coherent way to deliver customization to customers in countries spread over five continents? The answer is yes, through the hub system: Companies customize only in a maximum of 20 gateway countries. With this limited investment, they can serve customers everywhere, on every level of the income pyramid, from the wealthiest to the poorest. These 20 countries have enough scale in themselves to offer the necessary economies and growth potential.

The logistical and institutional infrastructure is well developed in most of these gateway countries, integrated into international regulation and trade. Each gateway country can independently perform most necessary business activities; when linked together, they make up a formidable network. Many companies will settle on fewer than 20 hubs; each industry requires a different selection of gateway countries to meet differing tastes and needs.

Reducing complexity in this way also dramatically reduces a wide range of overhead costs for large global companies, while enabling them to travel the last mile to customers. For example, by trimming back supervisory layers to only those needed by the gateways, companies can cut overhead costs significantly. Its primary business is high-end medical imaging products.

In the late s, GE Healthcare started investing in ultrasound machines, designing separate devices for use in obstetrics and cardiology.

Over time, the business became a market leader, with a portfolio of premium products employing cutting-edge technologies, sold primarily to big hospitals in rich Western countries. Very few devices made by GE Healthcare were sold in China and India in the s, although the medical need was enormous and the region represented a huge potential market.

In these large but poor countries, the general population relied and still relies on poorly funded, low-tech hospitals and clinics in small towns and villages. None of these organizations could afford sophisticated, expensive imaging machines.

There was a significant need for customization: Someone needed to create low-priced machines with basic features that were easy to use. The devices also needed to be portable, so that medical workers could bring the machine to the patient, rather than the patient to the machine. GE Healthcare started a major effort in in China to tackle this problem. Sales took off in China and then in a few other emerging-market gateway countries.

Soon, customization worked in the other direction. Applications were found for these devices in several rich countries as well, at accident sites and in clinics and emergency rooms. This initiative means aligning your entire global company with a common core purpose, a body of proprietary world-class knowledge, and the competencies that distinguish your company from all others.

The core purpose must be understood equally in all functions and geographies of the corporation. Every individual should know the strategic principles of the business — which are the same around the world, but adapted differently in each locale.

Although that principle remains constant, the implementation varies considerably; Walmart in India is a joint venture wholesale operation, and Walmart in Mexico operates restaurants and banks as well as superstores.

The core competencies at the heart of this platform include proprietary technology and intellectual property.

These are the unique pieces of knowledge and know-how that distinguish any company — not the applications or technologies, but the standards and platforms of knowledge that the company creates and makes its own.

They may include manufacturing processes, supply chain and logistics systems, customer insight—gathering processes, or distribution and access systems. They are made available to all operations, everywhere in the world, and are used to customize offerings and arbitrage procurement and costs. The restaurant chain had embodied the centralization model for many years.

Every aspect of the system had been standardized around the world: brand identity, product offerings, packaging systems, franchise arrangements, and the design of the stores. But standardization began to reach its limits around There was a distinct shift in consumer taste toward healthier, more nutritious foods. In the U. Customers started switching to other chains. The brand logo, color schemes, and store layouts are the same around the world.

Procurement and distribution systems are centrally managed to ensure that deliveries take place on time to more than 32, individual restaurants. Structured training from a common playbook is given every day to store associates in all locations.

The final imperative involves gaining effectiveness and reducing cost by finding less expensive materials, manufacturing processes, logistics systems, funds sourcing, or infrastructure.

Most companies have addressed this tactically, by offshoring back-office work or moving manufacturing to locations with lower-cost labor.