Final Reflection Assignment Business Strategies of Global European Firms
Developing Bridges across the Globe: Business Strategies of Global European Firms The changing business environment, the changes in communication technology, and political changes all encourage and facilitate the emergence of global business, transnational companies and the emergence of common markets around the globe. With the emergence of a global economy, the export of business culture and business interests has been dramatically growing. Most reputable companies like McDonalds, Starbucks, Miguel Torres Family Winery and Duvel Moortgat SA are no longer run in a ‘national’ way like they have been in the past.
In fact, while touring Duvel’s manufacturing plant in Puurs, Belgium, I learned during a conversation I had with Christian Cols, Business Development Manager, that the Belgian brewer’s growth has far outpaced competitors in Western Europe’s sluggish beer markets. Sales have doubled in the past five years. It is now Belgium’s second biggest brewer in revenue terms, after global leader Anheuser-Busch InBev SA.
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In the 1920s, Duvel developed its signature beer, initially named Victory Ale in commemoration of World War I.
With an attractive brand and distinctive taste, Duvel can get away with charging higher prices. Today the silky ale accounts for roughly 55% of the company’s revenues. In 2010, Duvel increased net profits to €18. 9 million ($27. 5 million) from €14. 9 million. Its share price has climbed to around €74, from €16 in 2003. Revenue, €137. 3 million last year, is expected to grow to €172. 1 million in 2012, according to analysts. While Anheuser reported that their total volumes fell 2. 5% in Western Europe and 0. % in Central and Eastern Europe for 2011, Duvel, expanded sales in Belgium by 24%, in the Netherlands by 17% and in France by 10%. In order to expand into new markets, gain global clients, challenge today’s global financial crisis and become sustainable, ‘globalization’ has become the key factor in business strategies for European companies I have mentioned hereinabove. Merriam-Webster. com defines globalization as the process of integration across societies and economies. Globalization is currently in the top 20% of lookups on Merriam-Webster. om. This phenomenon encompasses the flow of products, services, labor, finance, information, and ideas moving across national borders. The frequency and intensity of the flows relate to the upward or downward direction of globalization as a trend. This trend has been vastly spreading amongst the European Union (EU). The EU, comprising 27 countries with a combined population of almost 500 million people, generates about one third of the world’s economic output and is home to key domestic and international organizations and companies.
As the world becomes more integrated, the countries and organizations within the EU are impacted and in return impact the ‘global’ business environment. With today’s global financial constraints, globalization for organizations has become the key element for sustainability and competitiveness. Although this may seem like a new trend, as a young boy I remember an increase of globalization ever since the early 1970s, especially in regards to cars, fashion, entertainment and music.
After interviewing executives from six different organizations based in Europe including @22Barcelona, Duvel, Torres Winery, HRD Antwerp, and Delhaize, I learned that one of the key factors in their globalization efforts, from the perspective of regional economic integration, they break down a global strategy into a more regional integration strategy with three types of global strategies (global sales, global production, and pure global integration).
In general, R&D capability determines a global production strategy, whereas firm size and managerial capability determine both a global sales strategy and a pure global integration strategy. From the perspective of business strategy, globalization is the process of internationalization of production and competition. In their view, the key factors driving the globalization of industries are shifts in technology, buyer needs, government policies and country infrastructures.
Such shifts create major differences in competitive position among firms from different nations and might make the advantages of a global strategy more significant. Organizations must respond strategically to such changes; global strategies, addressing competitive advantage in global markets, combine advantages at the home base with advantages resulting from presence in many nations, such as the exploitation of economies of scale and brand reputation.
Establishing strategic alliances, global supply chains, global value networks and associated forms of collaboration is definitely a part of such strategy. Companies entering such alliances are gaining benefits such as economies of scale, marketing activities, production or assembly, creating access to local markets, and to hedge risks. And lastly, long-term agreements between organizations in the form of joint ventures, licenses, long-term supply agreements is another strategy and great opportunities for companies pursuing globalization.