Key success factors of transnational corporations

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S.O. Savytska SHEE Vadym Hetman Kyiv National Economic University

This article presents the latest findings on factors critical to the success of transnational corporations. The study was based on the experience of top global companies. It shows that critical success factors include: innovations, corporate values, partnerships and people.

Current trends in the world economy show the continued power growth of transnational corporations. These corporations operate in more than one country or nation at a time and have become the productive core of the globalizing world economy [2]. There are many different ways to value a company. For the Fortune Global 500 list, the ranking of the worlds largest companies is based on revenues (Table 1). In 2010, US-based retailer Wal-Mart came in at the top of the ranking with $408 billion in revenues. In second place was oil & gas company Royal Dutch Shell (The Netherlands) with revenues of $285.1 billion. Third was Exxon Mobil (US), with $284.6 billion in revenues. Table 1 Worlds largest companies Top 10 Rank 1 2 3 4 5 6 7 8 9 10 Company Wal-Mart Royal Dutch Shell Exxon Mobil BP Toyota Motor Japan Post Holdings Sinopec State Grid AXA PetroChina Country United States Netherlands United States United Kingdom Japan Japan China China France China Revenues ($ millions) 408,214 285,129 284,650 246,138 204,106 202,196 187,518 184,496 175,257 165,496

Key success factors of transnational corporations

Source data: Fortune Global 500 list, from the July 26, 2010 issue.

To become global operating leaders each of these corporations used common approaches as well as their own key success factors (KSFs). These KSFs are actually what the firm must be competent at doing or concentrate on achieving in order to be competitively and financially successful. In order to determine their own KSFs, a firm must understand how customers differentiate between competitors offering the same or similar products or services, and how the firm will distinguish itself from these competitors. Consumers purchasing commodity-type products are usually not greatly aware of brand difference, and will buy strictly on the basis of price. Sam Walton, the founder of Wal-Mart Stores Inc., discovered this niche in discount retailing, and his innovative vision made the company the leader in this market. Wal-Mart is successful due to a number of factors, with the most important being their dedication to their customers as well as offering the lowest possible price for their products. Though WalMart offers low prices and accepts a lower profit margin per unit sold, its tremendous volume more than makes up for the lower profit margin. The company has four parts to their corporate strategy: v dominance in the retail market; v expansion in the USA and international markets; v creation of positive brand and company recognition; v branching out into new sectors of retail. http://www.rusnauka.com/2_KAND_2011/Economics/78552.doc.htm 4/25/2012 7:41:48 PM

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v branching out into new sectors of retail. Though there are some concerns about its strategy, among which encroaching into far too many other retail sectors than it should, Wal-Mart continued expanding globally, driven by a program of relentless international expansion. Royal Dutch Shell is the largest energy company and the second largest company in the world measured by revenues according to Fortune Global 500. One of the companys key success factors has been its ability to create a well-defined approach to innovation. Furthermore, Shell has always associated its success with its high-quality workforce. The corporation therefore invests in the improvement of the professional capacity of its staff and attempts to implement flexible working practices as far as possible. According to Fortune 500, Exxon Mobil stands at third position in 2010. Mergers are crucial components for the companys growth. The merger between Exxon and Mobil increased market share by 23%. Moreover, ExxonMobil has always focused on its core business research, development of e-business activities, technologies and innovations. In addition, the company has good motivation programs for its employees. British Petroleum (BP) is one of the largest players in the oil sector and the fourth largest in terms of revenues. Several factors were responsible for the transformation of BP into one of the worlds leading companies. Innovation is a basic factor in all of its production methods and technologies, as well as in the way in which BP interacts with its customers. In the extremely competitive global market, maintaining customer satisfaction is also one of the most important factors for success. BP strives to build strong relationships with all its customers, stakeholders and employees, urgently clearing up any misunderstandings or mishaps. Toyota is a dominant leader in automobile manufacturing today. The principles employed at every level of the company led to a standard of quality known all over the world. These 14 principles can certainly help not only automakers achieve success. They are known as The Toyota Way. Some of them are: base your management decisions on long term philosophies; grow leaders who thoroughly understand the work; develop exceptional people who follow your company's philosophy; and make decisions slowly, implement decisions rapidly. Every Toyota employee involved in the manufacturing process has the power to stop production if they see an issue developing. This aspect alone ensures the quality of their production. Thus, in most cases, business success is associated with the human factor (as the companies main asset), sound-brand management, innovations, international expansion through mergers, and meeting the customer's satisfaction over time. Besides these, a successful global leader translates his objectives into achievable targets and remains open to partnerships. On the other hand, corporate values and local market knowledge are the key success factors in a global economy. A successful global leader must understand the diversity of cultures and be able to use them.

References 1. Adenfelt M. Knowledge development and sharing in multinational corporations: The case of a centre of excellence and a transnational team / M. Adenfelt, K. Lagerstrom // International Business Review. 2006. Vol. 15. Iss: 4. P. 381-400. 2. Biggest transnational companies, The Economist, Economic and Financial Indicators (July 29, 2010) at www.economist.com 3. Dahan N. The role of multinational corporations in transnational institution building: A policy network perspective / N. Dahan, J. Doh, T. Guay // Human Relations. 2006. Vol. 59. 1. . 17-28. 4. Fortune 500 2010: Annual ranking of the worlds biggest companies from Fortune Magazine at http://money.cnn.com/ magazines/fortune/global500/2010/ 5. Kuan Y.W. Critical success factors for implementing knowledge management in small and medium enterprises / Y.W. Kuan // Industrial Management & Data Systems. 2005. Vol. 105. Iss: 3. P. 261-279. O. Levy, S. Beechler, S. Taylor, N. Boyacigiller // Journal of International Business Studies. 2007. Vol. 38. P. 231-258. 7. World Investment Report, 2009: Transnational Corporations, Agricultural production and development. UNCTAD at http://www.unctad.org/en/docs/wir2009overview_en.pdf

6. Levy O. What we talk about when we talk about global mindset: Managerial cognition in multinational corporations /

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Key words: Globalization, transnational corporations, Fortune 500, KSFs, TNC strategy, competitiveness.

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