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International companies, such as Toyota, Apple and Microsoft, have managed to establish their operations globally. In addition, their products can be found virtually in any country. However, this implies that these companies can achieve only the minimal geographical expansion. These firms must use various techniques in order to avoid different pitfalls. For instance, Nokia was the leading mobile phone and related gadgets manufacturer in the early 2000’s. However, innovative techniques employed by its major competitor, Apple, have led to the introduction of the iPad, a gadget that has literally driven Nokia out of business. This presents a debate as to the best way through which international firms can remain successful. Whereas these firms cannot expand geographically, different avenues for growth are still open. This essay shall analyze whether international firms need to grow in order to remain successful. It will conclude that growth is a vital component if a company is to achieve success and continuously face off its competitors. Therefore, company CEOs must seek innovative ways through which they will advance their organization’s objectives.
Reasons for and Against
There are various reasons why international companies should keep expanding. First, growth and expansion is a direct result of innovation. International firms mainly base their continued success on their ability to innovate. When a company chooses to stop expanding the workforce, especially those in the product innovation departments, are highly de-motivated. International companies regularly come up with new products which lead to the new growth opportunities. Therefore, growth opportunities are not mainly based on regional expansion. Rather, the company bases its success on ‘catchy’ products that sell as fast as a song topping on a billboard chart. Blackberry, in the face of the emergence of Android phones and gadgets, has lost its business to companies such as Apple. In order to face off their competitors continuously, international firms must maintain a highly creative workforce. Apple’s success has been largely attributed to Steve Jobs. By working closely with an inner circle of highly-seasoned and experienced employees, he came up with the mobile phone revolution in the form of the iPad and iPhone. Although most international firms follow particular principles in charting innovation guidelines, there is no particular recipe. Every firm must come up with its own agenda and techniques (Samson, 2010, 16)
Although growth is an important ingredient for success, various factors must be evaluated if innovation and subsequent expansion are to be maintained. First, different companies are faced by different circumstances in their line of operation. In choosing a line of expansion that will not be detrimental to the firm, the management needs to consider the firm’s competitiveness, technological advancements and product lifecycles. Whereas Apple and Microsoft products must keep changing rapidly over time, Toyota is under the pressure to introduce a new product altogether. Secondly, different firms are faced with diverse difficulties as they endeavor to explore various opportunities. Growth opportunities may exist in product development, cost reduction, process refinement and the renewal of the laid-down business model. However, different approaches should be applied. Finally, leadership styles influence the firm’s decision as to whether it should pursue a continuous growth scheme or explore other means. Strong leadership styles ensure that the management identifies and explores new strategies that ensure that the firm does not remain on a plateau but keeps growing.
Secondly, when an international firm pursues growth and expansion, more profits are raked in. This is normally a three-pronged strategy: firstly, when the firm keeps expanding, it ensures that it is not forced out of business since it conquers new markets. Secondly, once a firm creates new and innovative products, it differentiates its products form those of its competitors, allowing it to charge premium prices for its products. Finally, expansion ensures that a firm acquires new customers, hence increasing its market share. Therefore, competitors are kept at bay. For instance, both Apple and Microsoft must keep innovating and releasing new products. Otherwise, their sales will decline, leading to lower profitability. If these firms were to pursue a non-expansion scheme, their products would become outdated. The fast pace at which technological advancements are made in the mobile phone and computer markets demands that new and highly innovative products are released frequently, thus replacing older versions. Car companies such as Toyota must pursue strategies that continuously improve their production processes and improve new product features as well as improving other features. Otherwise, the firm would not only loose its customer base but also earn lesser profits. Distinctive products, such as the iPad, allow Apple to charge its customers a premium price. Although high costs were accrued during production, the firm is in a position to recover its expenses.
Thirdly, when an international firm keeps pursuing a growth strategy, new areas are conquered. Therefore, new job opportunities are created and new markets are introduced. International companies have sufficient resources to invest in new markets and products. Therefore, if a firm is to retain its most talented employees, resources need to be allocated for growth and innovation. In addition, a firm that prefers pursuing a growth strategy attracts the young and highly talented employees easily, thus winning the ‘war for talent.’ Companies such as Microsoft, Dell and Toyota have low staff turnover since they centre on staff satisfaction and inspire commitment. Toyota pursues a ‘people capability’ strategy that ensures that employees in innovation departments and other top organs are satisfied. This leads to high work output, hence, these firms not only reduce costs since fewer resources are wasted, but also earn higher profits since their employees are in a position to come up with new products.
However, growth might expose the firm to various risks. When a firms sticks to the production of items or delivery of services without introducing new products/services for a long period of time, fewer risks occur in the production, customization and marketing stages. In addition, fewer costs are accrued since departments charged with innovation are allocated for fewer resources. However, this is a counter-productive strategy due to the fact that when a firm chooses not to pursue a growth strategy, new products are not released into the market. Hence, sales decline as the product falls out of favor with the consumers due to the availability of newer, cheaper and highly advanced products.
In addition, when an international firm chooses to pursue growth, more resources are dedicated to research, innovation and infiltration of new markets. These costs may not be recoverable, more so when the products fail during design or in manufacturing. Moreover, employees who are not involved in the manufacture of new products may feel left out, which may lead to disgruntlement in the workplace. If these two case scenarios were to occur, a firm would be faced by two losses. First, there is an obvious financial loss accrued from this venture. Secondly, the disgruntled employees would make lower individual effort, leading to a lower productivity. Toyota faces several hurdles in light of the various difficulties it encountered in 2010. An over-zealous growth plan, which was enacted when the firm was smarting from the effects of the global recession, has been disastrous.
Case Study: Toyota vs. Apple
Recent troubles encountered by Toyota provide an acute reflection of the limits of a firm’s growth on the global scale. On the other hand, Apple’s current growth rate seems unstoppable. However, there are vital lessons and comparisons that can be drawn from these two companies. In 1973, the world plunged into an oil crisis that fueled the demand for smaller, lighter and fuel-efficient vehicles such as Honda, Toyota and Nissan. During the next decade, Toyota managed to double its production through the introduction of various brands such as Tundra, Scion and Lexus. The later marked a shift towards the customer’s appeal for luxurious cars. The Toyota Scion was based on the customer’s demands for customization and an appeal for a fast, small and luxurious vehicle. This created traction and fueled sales among the younger generation. However, the young generation market segment is highly dynamic and their preferences change drastically over a short duration. Toyota chose to stick with the brand despite these changes, choosing to customize it rather than introduce a new brand altogether. This has been the core of its growth problems.
Apple has managed to create user-friendly and interactive software based on its operating system, OS X. In 2001, Apple released iTunes. In 2003, they released Safari. Both of these softwares have garnered popularity among their users. Unlike Toyota who chose to depart from their core-brand by producing the Scion, Apple has gone ahead to produce the iPad, a very popular device that relies on Apple’s software. However, the iPad may present a similar situation to Toyota’s. High level of sales may blind the company into ignoring the much-needed changes in the gadget’s data-consumption, which is not sustainable in the long-term. Therefore, key changes need to be instituted in time. Else, the company will share a similar fate to Toyota’s (Report, 2010, 2).
In conclusion, international firms need to invest in a long-term growth strategy in order to succeed. International companies need to rigorously invest in sustainable and innovative products just like middle-sized and small companies. However, caution should be taken in order to ensure that the laid-down strategy is not overzealous. Several factors, such as the firm’s competitiveness and market share, should be taken into account before the management rolls out its expansion plans.