Home Insider Foreign Competition Forces Local Companies to Adopt New Business Models

Foreign Competition Forces Local Companies to Adopt New Business Models

Companies around the world recognize Myanmar as a viable market after having just emerged from decades of economic and political isolation as the fastest growing Asian country in 2016. With the expected increase of foreign investments over the coming decade, local Myanmar companies will feel immense pressure to change their organisational structure and business model in order to compete with foreign companies. A reluctance to change and stick with traditional ways of business will likely hinder a local company’s progress in this new era of competition. This new era was ushered in by high expectations of rapid growth across many business sectors in the country. The Asian Development Bank (ADB) forecasts Myanmar’s real GDP to have increased 7.2 percent in the fiscal year 2015-2016, and projects a 8.4 percent growth for 2016-2017. However, while the approval of foreign direct invest (FDI) totaled $ 4.9 billion from April to December, down by 26 percent from the same period a year earlier, it still has a huge impact on the telecommunications, oil and gas, and manufacturing sectors. It should be noted that no FDI went into agriculture.

To prepare for this increased competition, local companies will need to address their organizational structure. This includes both personnel and production systems, either functional or divisional, such as: management controls, levels of hierarchy, decentralization, complexity of tasks, degree of functional specialization, and extent of departmentalization, which will vary according to the organization’s size. The traditional way of doing business in Myanmar usually has a high level of hierarchy with a centralized authority, which is inflexible for decision-making. This is what makes the companies lose their innovation and they will eventually lose in the competition with more flexible, vertically integrated foreign companies. In a competitive setting, it will be better for the companies to have a flat organisational structure, rather than a long one as they have to respond quickly to the external demands.

Another element that local businesses will need to alter is their strategy. As strategy and structure are always needed to be in alignment, some adjustment to the current strategy has to be made. Local businesseswill need to conduct competitor analysis to determine how best to adjust their strategy. Management may pursue several strategies to get the desired outcome or result. However, there will be resistance to every change. Senior management needs to carefully communicate with their staff to actively encourage their participation in the change.

Competitive advantage will not easily be gained just from changing the structure or training the staff alone. In fact, local companies already possess some advantages. For example, they have better knowledge about the market making them resourceful when it comes to local needs and customers, which can be the greatest asset they possess. They have to assess these assets with the characteristics of the industry they are operating. By assessing where their own competitive assets are most effective, insights into the breadth of business opportunities available can be gained. Local companies can keep foreign companies at bay if they can align their assets with industry characteristics effectively. According to experts, the key to success for local companies is to focus on the advantages they enjoy in the home market. As mentioned above local companies have the advantage of understanding the market needs better than foreign companies. They need to focus on the fact and make good use of the resources they have. In the face of aggressive foreign competitors, they frequently need to upgrade their products and services to the particular and often unique needs of their customers. Local companies need to resist the temptation to try to reach all customers or imitate foreign companies as the resources they possess will not be the same. They’ll do better by focusing on consumers who appreciate the local touch and ignore those who favor global brand. This can be called as defending their existing market. Furthermore, in some cases, local companies, which can successfully establish their brand successfully against foreign ones, can go beyond defending their markets. With the right transferable assets, these extenders can use their success at home as a platform for expansion elsewhere. A selective policy of international expansion, carefully tied to the company’s key assets, can reap added revenue and scale economies, not to mention valuable learning experiences. According to experts, Extenders can leverage their assets most effectively by seeking analogous markets—those similar to their home base in terms of consumer preferences, geographic proximity, distribution channels, or government regulations. Expatriate communities, to take a simple case, are likely to be receptive to products developed at home.

Examples of local companies gaining advantage against foreign ones can be seen in many emerging markets such as BRIC and Mexico. In Brazil, Grupo Positivo has a larger share of the PC market than either Dell or Hewlett-Packard, and Totvs is the enterprise resource planning (ERP) software leader in the small- and midsize-company market, ahead of the world’s largest business software provider, SAP. In Russia, Wimm-Bill-Dann Foods is the biggest producer of dairy products, ahead of Danone and Coca-Cola. In India, Bharti Airtel has taken on Hutchison Telecom, which sold its Indian operations to Vodafone in 2007, and emerged as the leader in the cellular telephone market. In China, daily use of the search engine Baidu exceeds that of Google China by fourfold; QQ, from instant-message leader Tencent, is ahead of MSN Messenger; and online travel service Ctrip has held off Travelsky, Expedia’s eLong.com, and Travelocity’s Zuji.com. In Mexico, Grupo Elektra, which has created one of the country’s biggest retail networks, has taken the battle to Wal-Mart.