Globalization
In the last decade, increasing competitive pressures have forced businesses to consider global strategies - to treat the world as an undifferentiated worldwide marketplace. Such strategies are now loosely referred to as globalization - a term that refers to the establishment of worldwide operations and the development of standardized products and marketing. Many, like Porter, have argued that globalization is a competitive imperative for firms in global industries: “In a global industry a firm must in some way integrate its activities on a worldwide basis to capture the linkages among countries. This includes, but requires more than, transferring intangible assets among countries.” The rationale behind globalization is to compete by establishing worldwide economies of scale, offshore manufacturing, and international cash flows. The term globalization, therefore, is as applicable to organizational structure as it is to strategy. (Organizational structure is discussed further in Chapter 8.)
The pressures to globalize include (I) increasing competitive clout resulting from regional trading blocs; (2. declining tariffs, which encourage trading across borders and open up new markets; and (3. the information technology explosion, which makes the coordination of far-flung operations easier and also increases the commonality of consumer tastes?4 Use of Websites has allowed entrepreneurs, as well as established companies, to go global almost instantaneously through e-commerce - - either B2B or B2C.35 Examples are Yahoo!, Lands' End, and the ill-fated E-Toys, which met its demise in 2001. In addition, the success of Japanese companies with global strategies has set the competitive standard in many industries - most visibly in the automobile industry. Other companies, such as Caterpillar, ICI, and Sony, have fared well with global strategies.
One of the quickest and cheapest ways to develop a global strategy is through strategic alliances. Many firms are trying to go global faster by forming alliances with rivals, suppliers, and customers. In fact, the rapidly developing information technologies are spawning cross-national business alliances from short-term virtual corporations to long-term strategic partnerships2 (Strategic alliances are discussed further in Chapter 7.)
Globalization is inherently more vulnerable to environmental risk, however, than a regionalization strategy Global organizations are difficult to manage because doing so requires the coordination of broadly divergent national cultures. It also means, say Morrison, Ricks, and Roth, that firms must lose some of their original identity - they must “denationalize operations and replace home-country loyalties with a system of common corporate values and loyalties.”37 In other
words, the globalization strategy necessarily treats all countries similarly, regardless of theft differences in cultures and systems. Problems often result, such as a lack of local flexibility and responsiveness and a neglect of the need for differentiated products. In some recent research into how U.S. companies compete, Morrison et al. discovered that many companies are finding that “globalization is no panacea, and, in fact, global imperatives are being eclipsed by an upsurge hi regional pressures” These researchers claim that many companies now feel that regionalization is a more manageable and less risky approach, one that allows them to capitalize local competencies as long as the parent organization and each subsidiary retain a flexible approach to each other.
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