For years companies are trying to create the right balance between a fat and agile organization. During the 1970’s, companies multiplied their own infrastructure whenever they expanded into the international markets, yet left the strategy decision making to the headquarters’ management only. This organizational structure made the company a fat one and not that agile. Today a company’s structure is built on local management teams that are subordinate to a regional management, which in turns is managed by the headquarters. This structure simplifies the decision making process and lessen the bureaucracy, all the while providing the headquarters at the mother country with full control.
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 the headquarters of companies or parent companies will no longer have total control over their own branches or subsidiaries, and will become 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 on top of their game, i.e. to be innovative, price attractive and service oriented. All this is because that in order to cope, a company has to have a quick way of thinking and an excellent executing process.
B. The latter direction is the process of a widening gap between large companies and small ones. This is created because big companies are swallowing middle size ones to avoid competitive forces. As part of this process big companies will buy or merge with middle size companies that fit their own long term strategic needs. As a result, the big companies will become bigger and the number of middle size will shrink down. In addition, the number of small size companies will rise, because more people are looking to become independent. In this global market expansion it will be hard to maintain a middle size company for long.
Ten years ago top managers said that if you are not number one or two or even three in your own country then you must change direction of business strategy, because it is simply not working. Today, if you’re not one, two or three in the Global market, then you should strategically do something different. Big companies have already started initiating this new way of thinking process, by using and implementing a subsidiary structure that allows them to control more than one market segment at a time, from foods to plastics, or minerals and cosmetics.
This market trend will create 5 to 10 big empire companies that will control most of the global market. Therefore, strategic and operational flexibility will not be as important as today.