„Foreign” companies are changing our local economic and social structures. But our “local” companies also change these structures in other countries.
Yes, there are still some shops, which were already there in my childhood. The bakery, the village shop that has everything, the paper shop with great paper products, stationery and gift items. Gone are shoemakers, cloth shops, and hardware dealers. They have not managed to survive but have been replaced by large chains and DIY centres. But even those who are still left are often fighting for survival. The reasons are manifold, and globalization certainly has its part in this. At the same time, local companies have become more international. Formerly small craftsmen have grown to international sizes in the course of a few decades. Just as “foreign” companies change the local economic and social structures, our “local” companies also change these structures in other countries.
One may or may not like to read this: long-term successful companies have a strong international orientation. Successful family businesses are not only active locally, but also beyond national boundaries. The reason for this is the strong specialization of these companies. Already in the 90s Hermann Simon coined the concept of “hidden champions,” which among other things displays a strong focus. The DNA of successful family businesses confirms this realization: the best family businesses are focused, not broad. They are niche players, and from this position, the international activity of these extraordinary companies is almost imperative. The more focused a company is, the wider the geographic market boundaries in order to reach critical dimensions as well to exploit the growth potential.
Specialist are attractive
Let us make a short, fictitious journey and think of a specialized surgeon, a globally renown one for his subject. And let’s assume that all the surgeons of your more or less local environment are unable to solve your health problem, or at least do not give that impression or gain your confidence. Let us assume that the global specialist in the field lives and works in Djibouti. Probably few know where Djibouti is (until recently it was also a mystery to me). If financially possible, you will most likely travel to the African state east of Ethiopia and south of Eritrea to solve your health problem.
The same is true for specialized, highly competent niche players. Anyone who has the reputation of the specialist is attractive, is appealing, and customers will spare no effort to know their concern or problem. Being an expert is therefore a very good prerequisite for being internationally successful. Anyone who offers products, services, skills, solutions that no one else around the world can offer in a comparable way—quality, professionalism, time or money—is attractive to customers from all over the world. There are plenty of examples from Germany and abroad: Patek Philippe, Confiserie Sprüngli, Victorinox, Läderach, Loacker, Leitner, Fercam, Brembo, Ermenegildo Zegna, Menarini, Würth, Uvex, Faber Castell, Haribo, Spar, Swarovski, Rosenbauer, and many, many more.
International, De-Local and Global
Let’s have a look at the tourism sector to illustrate the concept of international, de-local, global. Tourism in general is almost international by definition. One could call this inbound-internationalization. This internationalization concept attempts to promote a location in other countries through targeted advertising and thereby occupy the beds of the local hotel industry internationally. Vainer Marchisini, President of the WAM Group, has analysed the efforts of companies to become active in other countries. There are three stages:
Internationalization: This means that your own products are sold in other markets in other countries, and/or raw materials or components are bought from there.
Delocalization: A company operates locations in other countries. Offices, factories, or subsidiaries are controlled and coordinated by the headquarters.
Globalization: This leads to the fact that the company’s products lose their clearly defined origin because no one can clearly tell where the individual components of a particular product come from. The world is the home of globalized companies, and all activities are networked worldwide.
The WAM Group’s screw pumps and tubular screw conveyors are highly delocalized, if not globalized. WAM Group is a highly specialized family-owned company and has dozens of patents that underline an incredible innovative power. Many of the best family businesses have become world market leaders through specialization. According to Hermann Simon, 55% of all world market leaders are based in Switzerland, Austria, and Germany. Overall, it can be assumed that between 1500 and 2000 world market leaders are located in this region, and are mostly family businesses.
This blog post is the first excerpt from an article published in ManagementLetter 02/2017.