The article is devoted to artificial intelligence in creating strategy for international companies. Companies play a crucial role in global business. They are regarded to be leaders in artificial intelligence development from practical employment. Those companies focus on advanced technology production with the support of AI. AI has to be engaged in strategy creation as its role has been marginalized.
SwissCognitive Guest Blogger: Aleksandra Buszko, Project Manager – “Artificial Intelligence in creating future of global strategy – International company leadership approach”
Today’s world offers as well as many possibilities of development as threats. We face problems with pandemic, military conflicts like war in Ukraine, change of climate, pollution, and unsolved economic problems as well. Those issues affect companies’ strategies, especially taking into consideration international approach. Companies aim to achieve competitive advantage by trying to employ different tools including artificial intelligence (AI) (Rusia, et.all. 2021).
AI can work as human, based upon neural network. It may even improve some performance due to the possibility of constant learning (Kumari, Bhat, 2021). Intelligence itself is defined as the ability to learn and create suitable proposals to solve complex problems. There are lot of definitions of AI. Originally AI was linked with computers and other IT technologies. It was categorized as any software which could use programs and provide solutions analyzing usually big data collections. All those solutions were finally evaluated by humans and were regarded as the basis for decision-making process. It should have been stated that this approach anyway required human intelligence.
Quite often AI is used as synonymous to Machine Learning (ML). ML figures computational models that provide predictions of possible problems solutions. ML is usually divided into three main categories: supervised learning, unsupervised learning, and reinforcement learning. So, there are many definitions around, but most of them can be classified into the following four categories: systems that think like humans, systems that act like humans, systems that think rationally, systems that act rationally (Raynor, 1999). I argue that this definition underline very important and challenging feature of AI. It means system can act rationally. Humans pretend to act rationally as well. Theoretically humans choose the best option. In empirical approach the situation varies, significantly. Humans decisions are habitually affected by emotions and headed in the favor of selected groups; the others are ignored. The same story applies to companies. In market-oriented economies companies must follow characteristic guidance. They habitually try protecting their own benefits first then shareholders and stakeholders. If the situation from company perspective is satisfactory, companies can support even competitors. Whenever such cases are becoming more popular, still competitiveness among companies are very vital.
Moreover, the problems both in local and international scale are not solved. Furthermore, they started to be more dangerous and create barriers. The “rich part” of the world has been developing fast, leaving behind the “poor one”. Underdeveloped countries do not employ advanced technologies they do not create big domestic companies operating worldwide, as well. International companies operate in different markets, including underdeveloped countries as well. International companies focusing to employ strategy that help to assure good business result both in well and less developed countries (Thomé, Medeiros 2016). Strategy should foresee basic vision and long-term objective of any company. Especially international companies should be long-time oriented. Spot transactions can be accepted but the success does not rely on temporarily deals (Griffin, Pustay 1991). That is why local partners and relations with them for international companies play crucial role. Strategy of international companies should include the way of cooperation with the local companies. Usually, such feature makes some important problems, for example due to the fact of the gap of development, culture differences and profits shares. The emotions as well as lack of trust can hammer any business attitude and make strategy less effective. This applies not only to international companies but local ones as well. That is why there is an obvious need to present some ideas to create better working strategy of international companies. Taking this into consideration AI can be one of such thoughts.
Typical approach to create strategy of international companies
International companies are convinced in strategic planning. Their strategy is supposed to be focused on long term goals. Short term ones must fulfill future targets. The key question is: Does this long-term strategy really pay off not only for international company but for all co-partners?
Another important issue is related for the motivation of those entities operating globally. Such motion provides usually more profits and less risk (Harrigan, 1984). International companies operate very skillfully, and they habitually come from more developed economies. They offer wide range of products and services employing advanced technologies including AI.
There are international companies originating from less or moderate developed countries, some of them even from emerging markets, but their offer is not so wide one, and they are focusing on raw materials and semi-ready products predominately (Dunning, 1992). Those companies are not enough capable to engage AI and other advanced technologies. Such approach requires not only proper institutional order but progressive R&D spendings. Albeit some less developed countries spend reasonable (as the % of their GDP) money on R&D but the effectiveness of such investment are still very poor ones. International companies are generally coined multinational corporates and they predominately choose three basic types of strategy: transnational, global and multidomestic (Cullen, Parboteeah, 2010). Transnational strategy is simply a business action across borders.
According to Levitt (1983), the idea of global strategy is to produce a single standardized product or service and deliver them to different markets. In this way company achieve benefits due to the scale of production. Standardized product helps to assure accuracy and skillful manufacturing (Mahoney, Pandian, 1992). Multidomestic strategy is understood as the business motion plan of subsidiaries of a multinational firm to compete in domestic market by offering different products or services (Diaconu, 2012). Head office controls subsidiaries, providing them marketing and R&D assistance. It interferes whenever the whole company benefits are in danger. Such situation may happen whenever one entity can grow too fast, exploiting the others’ assets.
Taking this situation into consideration some technology advanced companies may employ AI in order not to elaborate the best (from optimum point of view) strategy but controlling subsidiaries fair competitiveness and development as well. The situation varies whenever the benefits of competitors or even co-partners are taken into an account. The priority of the business profits goes to the international company.
The role of AI in strategy formation of international company
Source: own elaboration
Each strategy must consist of several important and characteristic elements. They are like follows mission, vision, goal, organization, motivation, and control. Each element may be supported by AI. I argue that all elements of strategy are very imperative, and they should have been discussed all together. One missing element can spoil the whole strategy. Even though international companies have enormous amount of assets, they cannot make so many false steps. It was discovered by many researchers that various companies have successfully implemented AI technologies to meet customers’ needs (Tsai, H-Y, 2021). So, the usage of AI in creating successful strategy has been mainly devoted to marketing strategy. Based upon such approach all elements of strategy may be dependent on marketing goals. AI has been especially progressively deployed in operational marketing.
Many managers found out its positive effects in risk analysis, selection of matching costumer targets or pricing to maximize yield of business operation (Claudé, Combe, 2018). AI proved to be very effective in public relation and distribution. It can evaluate and suggest the best way of communication with the clients and find out the superlative channels of distribution. AI already occupies sound role in internet area. Practically AI can automatically run all business operation throughout web applications (Åberg, Kazemargi, Bankewitz, 2017). But on the other hand, taking above into consideration it should have been stated that AI is selectively used in strategy creation. The major focus is devoted to marketing and financial issues from individual company perspective. More important elements of the strategy are ignored.
AI employment in future global international companies’ strategies
AI is quite well-known tool in international companies. They recognized the benefits of this device very skillfully. International firms spend lot of money for R&D exploring all possibilities to achieve market advantage. They employed IT as well as already in the 70ties. This step made them leaders not only in communications but gathering and analyzing big data. AI has been used to investigate data to make the best final decision. I argue that all decisions were in the favor of international companies. The benefits for others were lowered. AI is widely used in robotics and other engineering processes. This helps to arrange humans daily work more comfortable. But still many challenges are related to strategy of international companies operating globally are missing. Since it has been already mentioned that AI is employed in strategy, the key question is related to algorithms.
International companies set up algorithms in the way searching for mainly financial benefits. The other benefits are ignored. We can indicate many examples of violating natural environment, pollution even devastating social systems, especially in less-developed countries. Such activity finally is not only danger for international companies but the whole societies in the world. Big exploitation of natural resources is the short-oriented goal. The idea of sustainability does not change this attitude so much. I would even say that some of international companies are fed by imbalanced strategy. It means that they exploit others too much focusing on their benefits only. Since less developed countries lose their position in competitive advantage, AI of international companies supposed to take into consideration two important facts:
- Long term cooperation with entities originating from less developed parts of the globe
- Provide options for sustainable growth
The less developed countries cannot independently minimalize the gap. This gap is quite big one and it has been unfortunately largening constantly. AI that is in international companies’ usage should assure possibilities for this gap reduction. First important issue is related to the long-term cooperation. Some crucial areas from less developed countries must be improved. This is education, technology improvement and institutional order upgrading. Those areas are very well known and there are lot of rumors to recover them. But many attempts have failed. Humans proved to be ineffective in this respect. AI is the hope for new change.
It is expected that AI can be partially implemented in companies originated from less developed countries. This implementation allows not only fair profit sharing but smooth cooperation as well. Furthermore, companies from less developed economies get access to useful AI technologies. In this way they can start to upgrade their level of knowledge. If this is not done, they will remain as “cost oriented partners”. It means that practically they will provide for international companies not enough skilled labor force and raw materials supply. Obviously, their profit margin will be very low one. Additionally, to that AI provides the capability to make decisions without any kind of errors.
Sustainability is not a new idea; it was first time discussed in the Brundtland Report of 1987. It shows a tension between the wish of better humans life and protecting natural environment (Tonn, 2007). Since less developed countries did not develop industry so much, theoretically their natural environment should have been not wrongly affected. It is false assumption. Companies from those economies try to survive by any force. They independently or with cooperation of international companies exploit their natural environment greedily. Valuable rainforests are cut down on a large scale. The global climate equilibrium is upset. The global warming has become a fact due to large cattle farming. Exploitation of raw materials caused irreversible damage. Even though headquarters of international companies are based in well developed countries and environment is officially better protected, but globalization and comprehensive processes affect them as well. Finally, they face similar effects like those entities in less developed economies.
The role of Artificial Intelligence in global strategy creation of international companies
Source: own elaboration
Therefore, the strategy of international companies are supposed to be changed significantly. The goals should refer to sustain development and pay attention to the need of partners originated from less developed countries. AI will be used as the useful tool for assuring flexibility of companies’ performance. I would expect that international companies in their global strategy will marginalize profit orientation and impose more adequate indicators for companies’ performance evaluation. I would vote for indicators protecting natural environment like volume of waste/ the less the better – zero waste is the target/, pollution, renewable energy etc. Those indicators can very easy transferred into financial effects.
This evaluation will be not short time oriented but devoted to long term targets. Those targets will include partners from less developed economies as well. I do believe that in this way the economic gap will be narrowed significantly.
This idea may arise many other questions and doubts. It is the first step to arrange more detailed research and find out the right tailored strategy for any international company. It is quite difficult to compile one universal strategy. International companies are complicated entities, and they search for unique strategy options. Right now, the financial indicators are dominant in company evaluation, and they spoil fair company performance. Albeit there is a need for change those indicators are valid. AI may change this fixed and binding approach and it will be used for the benefits for all entities worldwide. I argue that whenever AI is developed and employed quicker the better change will be observed.
About the Author:
Aleksandra Buszko is a highly professional Project Manager in innovation area (insure-tech), with broad experience in helping businesses implement solutions by determining the requirements of a project or program cost-effectively and communicating them clearly to stakeholders, facilitators, and partners.