Strategies for Globalizing Latin American Business

Abstract

Economic and commercial changes taking place at the The reduction of trade barriers, the liberalization of economies, and the subsequent change in the structure of industries national and international levels have important implications for the Latin American enterprise. Economic have all affected the level of competition in Latin America. This in turn has substantially heightened pressure on both liberalization, real exchange rates, reduction of trade barriers, and vanishing protectionism allow for the penetration of interlocal companies and on multinationals located in the region that are interested in developing new strategies for competing national competitors in domestic markets with equal conditions, intensifying business rivalry. This is no doubt a basic in local, regional, and international markets. In recent years, we have observed different ways of competing in each of these reason for the greater interest that we have noted on the part of Latin American businesses in redefining their competitive markets, and although the individual company strategies vary widely, we may group them into four general categories for strategy, as we see in the cases selected for this special issue. The fundamental objective of formulating and implementanalysis: national defense; alliances between local competitors; creation of real competitive advantage at the local level; and ing a business strategy is to ensure higher return on investment in the long term. This competitive advantage should be unique going international, regional, or global. and depend upon a range of key elements whose objective is to make imitation difficult for the competition. Both high and National Defense Strategy low performing companies can be found in all industries, independent of how attractive these industries may be. This This strategy is used by Latin American companies to defend clearly demonstrates that the success of a business will depend their local market through the active promotion of protectionon the concrete actions it takes to compete, not on the average ist policies. They lobby for governmental and congressional profitability level of its industry. support in keep tariffs high and to impose nontariff barriers on The history of economic development in Latin America international trade, thus restricting the entrance of imported has been marked by policies of import substitution during goods and services into the country or at least making their much of the twentieth century, as a means of spurring industriprices prohibitive for local consumers. alization throughout the region. This translated into greater The arguments commonly used to support this strategy levels of protectionism, including high tariffs, nontariff barriare based upon the unfair advantage of large multinational ers, and licensing, which in the majority of cases promoted companies. These arguments include fears about the impossithe development of local businesses with low levels of internability of competing against multinational giants and about the tional competitiveness. Indeed, in the past, doing business threat that they will come in and buy up or destroy local successfully was relatively simple when compared with other businesses and the employment they generate. Such arguparts of the world or to the same region today. Almost anything ments are appealing to many political factions. They are useful was good business since both the competition and consumer for labor unions and may be convincing to the public at large options were totally limited. The case Turri S.A. (Paladino that has never had the opportunity to exercise choice in daily and Almaraz,1994) included in this special issue, describes consumption. Throughout the years, this strategy has been past and present economic development strategies in Latin common practice in the Latin American business environment America by using Argentina as an example and clearly traces under the import substitution model. Today, it is used by the implications of these policies for management at the combusinesspeople and managers who have not been able to pany level. anticipate the impact that free market forces and trade liberalization would have on their industrial sector. As a result they have no other recourse but to resist the change by fighting Address correspondence to E.R. Brenes, INCAE, P.O. Box 960, Alajeula, Costa Rica. to keep international competition from penetrating the local