In the future, companies’ competitive advantage will be digital and “mobile”, rather than a physical presence associated with a specific location. As a result, companies will face more international competition due to the transferability of digital assets.

 

Even so, with the Internet of Things, big data, and digital transformation, an important shift is taking place. Industries that were previously focused mainly on the domestic market are now undergoing profound change due to internationalization. For example, agriculture, transportation, and the energy sector have until now concentrated on the national market, but are currently facing increasing international competition. Digital transformation is eliminating former competitive advantages tied to physical presence, replacing them with digital advantages that can be internationalized at any moment. One example is the taxi industry, which has traditionally been very national in scope but now faces international competition through digital platforms like Uber.

 

In the future, companies’ competitive advantages will be digital and mobile, rather than based on physical presence tied to a specific location. As a result, businesses will face more international competition due to the transferability of digital assets. This means companies have three options: do nothing and likely disappear from the market at some point; defend themselves from digital intruders and adapt; or digitize their competitive advantages and internationalize their business.

 

This trend is reflected in the growing body of research focused on understanding how business models can be internationalized. How can companies adapt their business models on a global scale?

 

To answer this question, at the Smart City Innovation Lab of Católica-Lisbon, we defined the incentives and barriers to internationalizing business models, using European energy companies as an example within the context of the inteGRIDy project. This industry is usually confined to national territory, but with new technologies such as solar panels, competitive advantage is becoming increasingly digital, leading to greater internationalization. The three key findings from the study are:

 

Companies consistently underestimate the complexity of foreign markets and what is required to adapt their business models for international expansion.

 

We confirmed that the internationalization process cannot succeed unless the business model is aligned with the market where it is intended to be implemented. As such, we developed a business model framework that companies can use to align their model with the conditions and infrastructure of foreign markets. This framework will soon be available on our website.

 

Finally, we concluded that companies that succeed internationally use different adaptation strategies, notably by adjusting their value proposition and investing in market research that allows them to establish a cost-benefit model.

 

In short, digital transformation is increasingly impacting industries—including those that were once thought to be protected by physical borders. If companies want to be proactive and go global, we suggest they carefully align their business model with the international market—otherwise, competitors will do it instead.

 

 

This article was written by René Bohnsack

Director of the Smart City Innovation Lab at Católica-Lisbon and Assistant Professor of The Lisbon MBA

 

Source: Jornal de Negócios