Survival through internationality
In the long run, companies cannot do without some form of internationalization; they must operate internationally and partly globally in order to remain viable. They need to learn about potential competitors in other markets and, above all, serving customers. A balanced market portfolio is not only good for growth but also reduces unilateral market risks. As is known, markets are subject to cyclical developments, as whole states or regions of the world are in crisis or experience a boom. Those who are represented exclusively in a country or region must almost unavoidably ride out these market movements, whereas an internationally broadly based company can compensate for the crisis in one country by a good economic situation in another country. For example, a company that has strong economic interests in Eastern Europe, the southern EU countries, and China will have experienced some mountain and valley rides over the past decade: Eastern Europe’s boom and South East Asia’s recession, the European debt crisis, which first affected Central and Eastern Europe, then the South; then came the upswing in China, and hopefully there will also be a recovery in southern Europe soon. All these fluctuations, however, never occurred at the same time. As East Asia weakened, countries such as the Czech Republic and Romania experienced double-digit growth rates. When Europe staggered into the long aftermath of the financial crisis, the rise of China continued. Companies in every country in the world confirm that export-strong companies are more viable than others. This is repeatedly confirmed, especially during economic crises. Companies need growth markets in addition to the saturated markets.
Rooted and globaly active
Growth through geographic market expansion is an unwritten law of successful, focused companies. At the same time, however, they never forget the local roots and are loyal to their origins. Family-owned enterprises are also not jumping from one international boom region to another. Quick removal and relocation does not belong to the understanding of internationalization of successful family businesses. Perhaps, if you will, the globalization drive of some companies is often too great; the growth impetus due to export activities is sometimes too strong instead of consistently using the core market properly. Nevertheless, international markets are necessary for a successful company starting from a certain point. Without its presence in global growth markets, the local survival capacity of many companies that are internationally competitive is decreasing. But local know-how, local management, local production, R&D, logistics, etc. are needed for international local markets. According to Hubert Lienhard, Chairman of Voith, an international automotive supplier, F.U. (Including braking systems) from Swabia, it is futile that Europe produces for the world: neither is it competitively priced, nor can we produce the desired quality for India, China, Brazil, etc. If a “friction-free braking system” from Voith costs more than a TATA truck in India, Germany’s approach to the world is hopeless. We do not get so simple a technique for India in Europe; this is a competence that can only exist in the country. So you need products for both worlds: innovative, technologically sophisticated for the stagnating western economic world without growth and other products for the high-speed countries such as China, India, Brazil etc. Survival means being at home in both worlds.
The Unger Steel Group from Oberwart in the Austrian Burgenland sees this as well. “We are a globally operating, international family company with strong, regional rootedness.” And the vision is: “We are the leading steel construction company in existing and new markets. Here, our business portfolio is locally engaged.” This is the publicly communicated intention of a successful global family business. Similarly to Voith—a combination of global and local.
This blog post is the second excerpt from an article published in ManagementLetter 02/2017. You find the first one here.