Several years ago, before the eruption of the sub-prime crisis, global strategy and globalisation became common buzzwords to managers. Some disputed that these strategies were beneficial for them, while a few aspired to augment their firms’ international coverage and scope, trying to become global.
However, several managers thought that global strategies have exposed the companies to huge risks and volatility. For instance, property companies in Singapore have seen their share costs fall as their property holding in other countries are devalued.
Even during this deteriorating situation, not all companies are weakening. Some still performed quite well. For instance, Asia Pacific Breweries had an increased profit by 28% in the end quarter of 30 June 2008, and by 10% for the first nine months of its current financial year. Meanwhile, the Singapore Airlines has increased its revenues by 14.1% in the quarter end of 30 June 2008, and by 10% because of headwinds of the industry, they gained a healthy amount of S$343 million.
In the banking sector of the US, Wells Fargo Bank has managed to beat biggest rivals, such as Citibank, for the acquisition of Wachovia Bank.
So what is the difference between several companies that can do well although there is a crisis happening in the world, which have the possibility to fall? There are four factors that determine the vulnerability of a company to market turbulence: market position, capital structure, country/market mix, and Industry.
In a domino effect, possible failures in a company increase the probability of failure of a specific firm. For example, an uneven portfolio partnered with an unpredictable industry can create a firm susceptible to a domino effect.
Firms should avoid risky cocktails. These risky cocktails involve combined circumstances that significantly increase the company’s risk level. For instance, high levels of debts and feeble market positions might be a lethal mix that could jeopardise the survival of a company.
Successful worldwide firms involve a long term vision and remain the course even in short-term blips. The temporary setbacks might be inevitable, but the rewards go to those companies who stay committed to their vision.
Regardless of the existing crisis globalisation remains and global strategies stays relevant. Several firms that suffered during the previous turbulence failed to pay attention to some imperative lessons for possible globalisers. On the other hand, Singapore firms going after appropriate strategies might come out stronger from the crisis and become better positioned than they were before.