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Learning to compete: transforming firms in the face of radical environment change

Over the last decade, Latin American economies and companies have witnessed substantial changes

By Rogelio Oliva and Fernando Suarez . 01 September 2002

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Firms that have adapted to these changes may have useful lessons to offer to companies in other countries as they face economic transformation and expanding competition.


Throughout the 1990s, Latin America received a lot of attention from the international business and financial communities. After being largely overlooked during the 1980s, when most Latin American countries were still tied to different forms of state-driven economies, the 1990s was a decade of change and growth that presented local firms, long used to limited internal competition and protection from foreign exposure, with substantial challenges. This process of change – recently slowed but not halted by the global slowdown – has also taken place in other regions of the world.


But though much has been written on the macroeconomic aspects of these reforms, little effort has gone into understanding the impact at the level of the individual firm.


In Latin America, coping with the new environment was not easy. Changes were swift and felt simultaneously in different dimensions of a firm’s environment: labour market; competitors; financial markets; and government regulation. Many firms were unable to adapt. Others, however, took advantage of the openings offered by deregulation and liberalisation to become world-class players, fighting for a prime place in global markets.


The transformation process that successful firms undergo when faced with radical economic reform is complex. Managing in uncertain and fast-changing conditions is a challenge. Even so, our research in the region illustrates the main action plans carried out by managers and provides a rationale for the sequencing and timing of different plans.


The similar patterns the research found in different industries and countries lead us to believe that our findings may be regular enough to inform firms in other industries and geographical settings.


The structural reforms that took place in Latin America are representative of many emerging economies that are struggling to move towards market-driven growth. Indeed, the framework could prove valuable for any firm that enjoyed a protected environment over an extended period and is now facing increased competition due to reforms or industry deregulation.


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