Target Location and Commercial Function in Multinationals

Posted on Dec 1, 2024 in Economy

Target Location

This section motivates individuals with high-level needs and is divided into three parts:

  1. Initial meeting between superiors and subordinates to establish goals for the upcoming period.
  2. Regular meetings to review progress.
  3. Final meeting to assess results at the end of the period.

Objectives should be quantifiable whenever possible. Subordinates are responsible for achieving established goals. If unsuccessful, they must take steps to improve in the next period.

Key Advantages:

  1. Motivates individuals through participation.
  2. Provides clear targets and responsibilities.
  3. Grants greater autonomy.
  4. Enhances regular communication between subordinates and superiors.
  5. Fosters understanding and effort.
  6. Provides valuable information for compensation and promotion decisions.

Many multinational companies utilize this method for managing their subsidiaries.

The Commercial Function

This function encompasses purchasing and sales. Companies operate between two markets:

  1. Goods and services required for production.
  2. Sales of finished products.

1 The Role of Purchasing

The supply department must acquire raw materials in sufficient quantities and suitable conditions to maintain production flow. Procurement should be cost-effective, necessitating a well-organized purchasing section.

This section requires up-to-date market information on raw materials to secure optimal pricing. Its mission is solely procurement, not determining needs. It acts as an intermediary between the market and factory requirements, necessitating close collaboration with research and manufacturing departments.

The purchasing section must also stay informed about new materials and methods. Its primary goal is identifying the most profitable suppliers offering the highest quality products. Orders are legal documents and require clear stipulations from relevant parties.

2.2 Sales Forecasting

Production estimates must be based on sales forecasts aligned with market opportunities. These forecasts, along with manufacturing plans, must harmonize with financial projections.

Sales forecasts should consider three external factors:

  1. Long-term variation trends (e.g., population growth or decline).
  2. Short-term variation trends (e.g., fashion and customs).
  3. Economic cycles: Economic life comprises four cyclical stages:
  • Depression: Low economic activity, low prices, and minimal profits.
  • Recovery: Increased activity, job creation, and rising sales.
  • Prosperity: A state of economic euphoria.
  • Crisis: Market saturation, financial difficulties, declining profits, and potential losses.

2.3 Market Research

The market represents the interplay of supply and demand, encompassing consumers and sellers. Market research has specific objectives and examines several key points:

  • Market Structure and Cyclical Market: The structural market represents underlying long-term needs, while the cyclical market reflects current conditions influenced by occasional events. Companies develop long-term programs to adapt to the structural market.
  • Fundamentals: Market analysis focuses on three elements:
    • Clients: Identifying current and potential customers.
    • Products: Ensuring product quality meets customer needs.
    • Competition: Maintaining comparative knowledge of competing products.
  • Influencing Variables: Different locations have distinct market characteristics, as sales depend on various variables (e.g., population). Companies leverage this information to enhance product quality and presentation, using indices such as:
    • Per capita income ratios for urban and rural areas.
    • Sales volume of the studied product and competing products.
  • Data Collection: This involves internal data (e.g., sales records) and external data (e.g., official statistics on consumption and price indices). Internal data informs statistical studies and sales analyses.
  • Survey Methods: Surveys can be conducted in person, by mail, or by phone. Questionnaires can be open-ended or closed-ended.
  • Depth Psychology Methods: Effective market research goes beyond statistical analysis and delves into consumer psychology. Some companies employ depth psychology methods.

2.4 Advertising and Propaganda

The goal of advertising and propaganda is to promote the product. This requires product differentiation. Propaganda necessitates an action plan considering:

  • Target audience.
  • Desired outcomes.
  • Methods of influence.
  • Timing.
  • Appropriate media channels (e.g., TV, radio, newspapers, cinema).

The financial aspect involves determining the necessary advertising budget to achieve the desired results.

Inspection: Control Services

Control services are the final step, encompassing inspections and laboratory testing of both materials and finished products to ensure adherence to required specifications.