Just operating in different countries is not enough for large corporations. Nor is the establishment of manufacturing plants in several countries (as Exxon and General Motors have done) sufficient to be competitive in the world market. The shift is towards the global or transactional corporation, which views the whole world as one market. This means, however, that a corporation also has to adapt to national and even local needs. American Express for example, has an overall advertising strategy– Membership has its privileges – but it adjusts its message for individual countries and even specific cities. In Japan, the basic message translates to “Peace of mind” only for members.
Domestic markets have become too small. Developing a drug may cost several hundred million dollars and may take more than 10 years. To recover the cost requires selling the drug in a world market. Moreover, global companies have to keep abreast of the technological developments around the world. Ford Motor Company decided in the latter half of the 1980s to become a global corporation. Previous attempts to make the world car (named the Escort) were not very successful. However, the use of modern communication technology, such as teleconferencing and reorganization establishes now a much closer link with its European operations. While Ford is aiming at becoming a global corporation it has no plants in Japan. To compensate for this void, Ford bought a 25 per cent share in Mazda that was later increased to 33.4 per cent.
While many firms are aiming at becoming global, only a few have really done so. It requires developing products with the whole world in mind, especially the markets in North American, Asia, and Western Europe. Similarly strategic decisions must take into account the whole world but tactics must be adapted to the national and local environments. In staffing, opportunities must be opened for non-nationals to move into the upper management ranks. Finally, strategic alliances may need to be formed with companies in countries the global corporation cannot enter.
At one time, countries in a region were competing against each other (and they still do). But now, countries have formed regional alliances that have regions competing with each other. Some examples, are the European Union (EU) the North American Free Trade Agreement, the Association of Southeast Asian Nations (ASEAN) and consisting of countries in Central and South America as well as the Carribean region.
1992 was the year for the completion of the first stage of European economic ties. The EC 1992 program caused dramatic shifts in economic power. Some saw the new programme as the New Europe while others especially outsiders, saw it as a Fortress, which could provide serious challenges to other countries, including the United States. In order to compete effectively, the United States and Asian businesses prepared for the New Europe by forming NAFTA and ASEAN.
The European Commission worked on some 300 legislative actions for removing trade barriers and for creating an internal market. The effects of the new measures were to increase the market opportunities, escalate competition within the EC and boost competition from companies outside the EC. The abolition of transnational trade restrictions and the relaxation of border controls had a considerable impact on US companies doing business in Europe. Moreover, strong European companies have become formidable in the US market as illustrated by Siemens the German global company.
The objective of Europe 1992 was to create a single market through the removal of trade barriers, and a free movement of goods, people, service and capital. The changes go beyond economic interests and encompass many social changes as well. Educational degrees, for example, are also being affected. The Council of ministers submitted a directive that recognizes diplomas of higher education across national boundaries. This makes it easier for professionals to work in different countries. It is clear, then, that the EC is more than an economic community: It is a state of mind with political power.
The original European Community 1992 (that later became European Union, or EU) consisted of 12 member nations: Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom. The union expanded in 1995 to include Austria, Finland and Sweden. In 2004, ten additional countries were admitted to the EU – eight were from the former Communist countries. The new member countries were: Cyprus Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.