For years, companies have been trying to create the right balance between a fat and agile organization. During the 1970s, companies multiplied their own infrastructure whenever they expanded into international markets, but left strategic decision-making solely in the hands of headquarters management. This organizational structure made the company fat and not as agile. Today the structure of a company is built on local management teams that are subordinate to a regional management, which in turn is directed by the parent company. This structure simplifies the decision-making process and reduces bureaucracy, while providing full control to the headquarters in the mother country.
Today it is important for a company to be agile, because it gives it the ability to compete in the global market. In the near future, company headquarters or parent companies will no longer have full control over their own branches or subsidiaries, and will be much smaller and more independent. However, this structure has yet to develop into its final stage where the opposite situation will happen…
The global market is acting in two parallel directions:
A. A very competitive direction that forces companies to be at the top of their game, that is, to be innovative, attractively priced and service-oriented. This is all because, to get ahead, a business must have a quick mindset and a great execution process.
B. The last direction is the process of a widening gap between large and small companies. This is created because the big companies are gobbling up the medium ones to avoid competitive forces. As part of this process, large companies will buy or merge with midsize companies that fit their own long-term strategic needs. As a result, large companies will get bigger and the number of medium-sized companies will shrink. In addition, the number of small-sized companies will increase, because more people seek to become independent. In this expanding global market, it will be difficult to sustain a medium-sized company for long.
Ten years ago, top managers said that if you’re not number one, two, or even number three in your own country, you need to change the direction of business strategy, because it just isn’t working. Today, if you are not one, two or three in the global market, then strategically you should do something different. Large companies have already started to start this process of new thinking, using and implementing a subsidiary structure that allows them to control more than one market segment at a time, from food to plastics, or minerals and cosmetics.
This market trend will create 5 to 10 large imperial companies that will control most of the global market. Therefore, strategic and operational flexibility will not be as important as today.