Startups vs multinational corporations – Which is the safe choice?
Every individual dream of success in their professional career path. Some excel as an employee in a Multinational Company, whereas some leap to own a business startup company.
Every company is different—regardless of size—and there are a few key characteristics that ring true about startup and corporate culture.
What is a Startup Company?
Startups refer to young companies founded to build up an exclusive product or service. It is rooted in innovation, addressing the deficiencies of existing products or creating entirely new categories of goods and services, thereby unsettling fixed ways of thinking and doing business for complete industries.
A startup environment is typically a fast-paced culture where creativity and communication are valued. Startups are generally smaller than large corporations, especially in the early stages of growth thus enabling employees to build strong relationships and freely exchange thoughts and ideas.
Startup culture is often less formal than that of a corporate environment and usually puts less emphasis on hierarchy within teams.
What is a Multinational Company?
A multinational corporation or MNC refers to a company that functions in its home country and other countries across the globe. It upholds a central office located in one country, which organizes all its other offices through its managerial branches.
The environment of an MNC is characterized by a more structured, formal approach to company culture. Because many thousands of workers are employed in such organizations, it’s not uncommon for employees to be unfamiliar with colleagues outside of their immediate teams or departments.
Corporations tend to have concrete procedures, protocols, and guidelines that govern daily operations. This rigidity, though, can sometimes have the effect of slowing down innovative processes.
We have aligned some information in this article to know the difference between a business start-up and a multinational corporation.
1. Responsibility and Accountability
At a startup, one is more responsible and accountable for the actions as the action has a significant impact compared to that of an MNC. If one does a great job, everyone from the CEO to the colleagues would praise him for the achievement and celebrate the value he creates for the company. If you do something terrible, it will not go well with your colleagues as it will have a significant impact on the company.
However, at an MNC, even if someone creates some value, the work goes unnoticed mostly, especially when one is at an entry-level position. He would have a fractional impact on the company’s performance as he is just expected to complete his assigned tasks.
2. Working Atmosphere
Working at a startup brings out one’s creativity as it has a lively and fun-filled atmosphere. Startups generally have a favourable working environment. There is an informal way with no strict rules and regulations. Many times, employees work remotely as there is no office set up.
MNCs follow a professional and strict working environment. It curbs the creativity of the employees, where one only works according to a set process of the organization. The work culture is fixed and formal. Rules are set to assign roles and responsibilities of different job positions. The companies also have career development, such as paying incentives to employees and promotions in the company after a fixed time.
3. Stability and Security
Multinational corporations are already well established and can offer more secure and stable jobs. Everything flows in a structured process.
In startup companies, there is not much-guaranteed stability as these companies are trying to develop and cannot provide that kind of security. Unfortunately, many startups, especially those in the technology industry, do not survive for long as new technological advancements and inventions wipe out their businesses. Thus, even if someone loves what he does, his job might not be stable. Career growth is unpredictable – if the company turns out to be in a success mode, then there is no limit to growth. But if it fails, then the employee can be in danger both professionally and financially.
4. Work-Life Balance
In the case of a multinational company, there are fixed working hours. Thus one can plan his free time beyond his working hours and have a well-ordered and maintained life. Also, even if one takes a leave for a few days, it would not impact the company significantly.
At a startup, every step of the owner or employee will have a significant impact on the performance of the company – be it his performance or the working hours that he puts in. Thus as a new set-up, start-ups demand more time and dedication, and one might have a negligible social life apart from work. Working hours in a start-up is demanding – the more one puts in, the better off he would see his start-up in less time. He would surely enjoy his working hours as he would grow every minute spent, facing new challenges every day which in turn would help him grow in his learning curve. Thus, though demanding, one would surely see the benefits if he carefully maintains the work-life balance.
5. Learning Curve
At a startup, one works directly with the innovators and the creators of the business and is involved in the whole process – right from the start – which is making plans to the end which is providing the product or service to the client. Thus there is a great scope to learn and excel from and through the entire process. It would help if one is hardworking, adaptable and open to new challenges daily. He might climb up the ladder very quickly. Performance is the primary factor for succeeding in a startup.
However, in an MNC, the task one does is merely a part of a more significant process of the company of which one might not even be fully aware. The core work that one does will have just a few variations over years, and the learning curve might flatten out quickly.
6. Scope
Multinational corporations have stringent authorities and regulations that every employee has to abide by. Here the scope is wide as the companies are already running successfully. Freshers usually undergo a training period and probation before getting absorbed. Reaching high managerial positions like that of a team leader can take a long time.
However, in a startup, though it involves a huge amount of risk, the level of growth is significant. One can grow along with the startup, learn new ideas and use them for career success.
Survival Strategies for Start-ups in Emerging Markets
With the emergence of new markets around the world, multinational corporations are always trying to find new growth opportunities. The arrival of the MNCs is a boon to local consumers, who benefit from the wider choices available. But for local companies, the influx often appears to be a death sentence. Accustomed to dominant positions in protected markets, they suddenly face the threat from foreign rivals wielding a daunting array of advantages: substantial financial resources, advanced technology, superior products, powerful brands, and seasoned marketing and management skills. Thus often, the very survival of local companies in emerging markets is at stake.
Strategists at multinational corporations can draw on a rich body of work to advise them on how to enter emerging markets, but managers of local companies in these markets have little guidance. They have to think and design and strategize to answer questions – How can they overcome—and even take advantage of—their differences with competitors from advanced industrial countries? Generally, it is seen that they can respond in one of only three ways: by calling on the government to reinstate trade barriers or provide some other form of support, by becoming a subordinate partner to a multinational, or by simply selling out and leaving the industry. But one must look for other options for companies facing stiff foreign competition.
In markets from Latin America to Eastern Europe to Asia, the strategies and tactics that successful companies have adopted in their battles with powerful multinational competitors have been studied. Examples are plenty where local players have succeeded to hold the fort against MNCs – Vist in Russia and Shanghai Jahwa in China, for example, have managed to successfully defend their home turfs against such multinationals as Compaq and Unilever. Others, including Jollibee Foods in the Philippines and Cemex in Mexico, have built on strength at home and launched international expansion strategies of their own. Thus by studying these examples, managers of other companies from emerging markets can gain insight into their strategic options.
Industries vary a great deal in the pressures they put on companies to sell internationally. At one end of the spectrum are companies in such industries as aircraft engines, memory chips, and telecommunications switches, which have enormous fixed costs for product development, capital equipment, sales and marketing, and distribution. Covering these costs is possible only through sales in multiple markets across the globe. A single set of rules governs competition worldwide, and consumers are satisfied with the standardized products.
At the other end of the spectrum are industries that target achieving success in meeting the particular demands of local consumers. In beer and retail banking, for example, companies compete based on well-established customer relationships that they have built over the years. Consumer preferences vary enormously because of differing tastes and also incompatible technical standards at times. Multinational corporations generally do not choose to compete simply by selling standardized products at a lower cost. Again, high transportation costs in some sectors may discourage a global presence. In all of these industries, companies can still prosper by selling only in their local markets.
The major group of industries lie somewhere in the middle of the spectrum. International sales bring some advantages of scale, but adapting to local preferences is also important. By studying and understanding where their industry falls on the spectrum, managers from emerging markets can begin to get a picture of the strengths and weaknesses of their multinational competitors. But they need to place their industry carefully. Industries that seem similar may be far apart on the spectrum. Once they understand their industry, managers need to evaluate their company’s competitive assets.
They may have a local distribution network that would take years for a multinational corporation to replicate. They may have long-standing relationships with government officials that are simply unavailable to foreign companies. Or they may have distinctive products that appeal to and match local tastes, which global companies may be unable to produce cost-effectively. Any such asset could form the basis for a successful defence of the home market.
Compared to MNCs, business start-ups face several challenges. They are elaborated below:
(i) Financial challenges: Finance is an integral part of the startup process. Any startup would face financial issues and have problems for several reasons and in different stages For instance while bootstrapping the founder negotiates with family members and friends to convince them to invest in the startup. The initial money is invested in the business, and since the idea is in its early stages, the founder might need more money to expand it. Afterwards, in the seed stage, the founder should look for angel investors and convince them with reasonable valuation plans. Next, in the creation stage, the founder should prepare a plan along with supporting documents to take advantage of venture capital.
(ii) Human resources: Startups normally start with one founder and/or some cofounders. As time goes by, the founder needs more experts to develop the prototype, etc. Then, he has to negotiate with people, make a team and finally hire employees. This process is extremely critical to succeed and if the founder lacks enough knowledge of the field, the startup would fail due to human resource management issues
(iii) Support mechanisms: Several support mechanisms play a significant role in the life cycle of startups. These support mechanisms include angel investors, hatcheries, incubators, science and technology parks, accelerators, small business development centres, venture capitals, etc. Lack of access to such support mechanisms increases the risk of failure of the startup.
(iv) Environmental elements: The effect of environmental elements is also at times fatal. Many startups fail due to a lack of attention to environmental elements, such as existing trends, limitations in the markets, legal issues, etc. While a supportive environment facilitates the success of startups, a maleficent one could fail. It is said that often the environment for a startup is even more difficult and critical than for an established firm.
To conclude, whether one works in an MNC or a startup, there will be certain advantages as well as disadvantages. The choice should thus be solely based on individual preferences and priorities. Hope this article gives you some transparency.
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