Deciding how to deal with the globalisation of markets poses tough issues and choices for

mangers. There are both external business forces, and internal organisational factors to
consider.  External business forces revolve around the interaction of industry drivers of
globalisation and the different ways a business can be global.  Understanding this interaction is
key to formulating the right global strategy.  Internal organisational factors play a major role in
determining how well a company can implement global strategy.  This paper provides a
systematic approach to developing and implementing a global strategy.
 
 
MOST MANAGERS have to face the increasing globalisation of markets and competition.  That
fact requires each company to decide whether it must become a worldwide competitor to survive.
 
This is not an easy decision. Take the division of a multibillion-dollar company, a company that's
very sophisticated and has been conducting international business for more than fifty years. The
division sells a commodity product, for which it is trying to charge 400% more in Europe than it
does in the United States. The price was roughly the same in the United States and
in Europe when the dollar was at its all-time high. The company built a European plant which
showed greater return on investment with that European price. But the dollar has fallen and, if the
company drops its European price to remain roughly the same as the US price, the return on the
plant becomes negative, and some careers are in serious jeopardy. So it is attempting to maintain a
40% European price premium by introducing minor upgrades to the European product.
 
But its multinational customers will have none of it. They start buying the product in the United
States and transhipping it to Europe. When the company tries to prevent them from transhipping,
they go to a broker, who does the work for them; they still save money.
 
The manufacturer doesn't have a choice. It's working in a global market. And it's going to have to
come up with a global price. But management is fighting a losing battle because it is unwilling to
make the hard strategic and organisational changes necessary to adapt to global market conditions.
 
European and Japanese corporations also face these kinds of organisational roadblocks. Large
European firms, for example, historically have been more multinational than US companies. Their
international success is due, in part, to decentralised management. The companies simply
reproduced their philosophy and culture everywhere, from India to Australia to Canada. They set
up mini-headquarters operations in each country and became truly multinational with executives
of different nationalities running them.
 
Now they are having problem running operations on a worldwide basis because these
multinational executives are fighting the global imperative. In one European company, for
example, the manager running a Latin American division has built an impenetrable wall around
himself and his empire. He's done very well, and everyone has allowed him to do as he pleases.
But the company's global strategy requires a new way of looking at Latin America. The
organisation needs to break down his walls of independence. So far, that's proved next to
impossible.
 
Japanese companies face a different set of problems. On the whole, they have followed a basic,
undifferentiated marketing strategy: make small Hondas, and sell them throughout the world.
Then make better Hondas, ending up with the $30,000 Honda Acura. It's incremental, and it has
worked.
 
Now, however, the Japanese must create various manufacturing centres around the globe and
they're facing many difficulties. They have a coordinated marketing strategy and have built up
infrastructures to coordinate marketing, which requires one particular set of skills. But now
they've begun to establish three or four major manufacturing operations around the world, and
they need a different set of skills to integrate these manufacturing operations. In addition, many
Japanese companies are trying to add some elements of a multinational strategy back into their
global one.
 
American multinationals have tended to take a different path. The huge domestic market,
combined with cultural isolation, has fostered an "Us-them" mentality within organisations. This
split has made it difficult to fully adapt to the needs of international business. Until recently,
overseas posts have been spurned. A marketing manager for new products in a United
States consumer products company told us that running the sizeable United Kingdom business
would be a step down for him. As a result of others' similar views, many American firms face two
conflicting challenges today. They need to complete their internationalisation by increasing their
adaptation to local needs, while at the same time they need to make their strategies more global.
 
But some companies are better off not trying to compete globally because of the difficulties of
their internal situation. The CEO of one Midwest manufacturer decided that his company had to
go global to survive. He gave marching orders. And the organisation marched. Unfortunately, they
started marching over a global cliff. For example, they set up a small operation in Brazil since
they had targeted South America as part of their global strategy. But the executives they appointed
to run the operation had never been outside the United States before, and the company started
losing money. Company analysis found that going global was just too unnatural to its cultural
system and that a viable strategic alternative was to stay in the United States and play a niche
strategy.
 
Most international companies have grappled with the types of problems we have been describing,
and have tried to find a solution. This paper provides a framework for thinking through this
complex and important issue. In particular the framework addresses the dual challenge of
formulating and implementing a global strategy. Readers may find the framework a convenient
way to analyse globalisation issues.
 
 
THE DUAL CHALLENGE
Managers who want to make their businesses global face two major challenges.  First, they need
to figure out what a global strategy is. Then, when they know what to do, they have to get their
organisations to make it happen.
 
 
DIFFERENT WAYS OF BEING GLOBAL
Developing a global strategy is complicated by the fact that there are at least five major
dimensions of globalisation. These are:
 
  Playing big in major markets.
 
  Standardising the core product.
 
  Concentrating value-adding activities in a few countries.
 
  Adopting a uniform market positioning and marketing mix.
 
  Integrating competitive strategy across countries.
 
Each of these can offer significant benefits:
 
 
PLAYING BIG IN MAJOR MARKETS
Playing big in major markets - countries that account for a sizeable share of worldwide volume or
where changes in technology or consumer tastes are most likely to start - brings
these benefits:
 
  Larger volume over which to amortise development efforts and investments in fixed assets.
 
  Ability to manage countries as one portfolio, including being able to exploit differences in
position along the product life cycle.
 
  Learning from each country.
 
  Being at the cutting edge of the product category by participating in the one or two major
countries that lead development.
 
 
STANDARDISING THE CORE PRODUCT
The local managers of multinational subsidiaries face strong pressures to adapt their offerings to
local requirements. This gets the company laudably close to the customer. But the end result can
be such great differences among products offered in various countries that the overall business
garners few benefits of scale.
 
The core product can be standardised while customising more superficial aspects of the offering.
McDonald's has done well with this approach - Europeans and Japanese may think they are eating
the same hamburgers as Americans, but the ingredients have been adapted for their tastes. A
French McDonald's even serves alcohol. But the core formula remains the same.
 
 
CONCENTRATING VALUE-ADDING ACTIVITIES IN A FEW COUNTRIES
Instead of repeating every activity in each country, a pure global strategy provides for
concentration of activities in just a few countries. For example. fundamental research is conducted
in just one country, commercial development in two or three countries, manufacturing in a few
countries, and core marketing programs developed at regional centres, while selling and customer
service take place in every country in the network. The benefits include gaining economies of
scale and leveraging the special skills or strengths of particular countries. For example, the lower
wage rates and higher skills in countries such asMalaysia or Hong Kong have encouraged many
electronics firms to centralise worldwide assembly operations in these countries.
 
 
ADOPTING A UNIFORM MARKET POSITIONING AND MARKETING MIX
The more uniform the market positioning and marketing mix, the more the company can save in
the cost of developing marketing strategies and programs. As one company told us, "Good ideas
are scarce. By taking a uniform approach we can exploit those ideas in the maximum number of
countries." Another benefit is internal focus. A company may struggle with numerous brand
names and positioning around the world, while its rivals single-mindedly promote just one or two
brands. There also are marketing benefits to a common brand name as international travel and
cross-border media continue to grow. In consolidating its various names around the world, Exxon
rapidly achieved global focus and recognition.  Coca-Cola, Levis, and McDonald's are other
companies that have successfully used a single brand strategy. Mercedes, BMW, and Volvo not
only use the same brand name throughout the world, but also have consistent images and
positioning in different countries.
 
Example of Global Strategy:  Black & Decker

Black & Decker, manufacturer of hand tools, provides an example of a company that is
 pursuing a global strategy. In the past decade, Black & Decker was threatened by external
and internal pressures. Externally, it faced a powerful Japanese competitor, Makita. Makita's
strategy to produce and market standardised products worldwide made it a low-cost
producer, and enabled it to increase steadily its share in the world market. Internally,
international fiefdoms and nationalist chauvinism at Black & Decker had stifled co-
ordination in product development and new product introductions, resulting in lost
opportunities.

In response, Black & Decker decisively moved toward globalisation. It embarked on a major
program to coordinate new product development worldwide to develop core standardised
products that can be marketed worldwide with minimal modification. The streamlining in
R&D also offers scale economies and less duplication of effort, and new products can be
introduced more quickly. It consolidated worldwide advertising by using two principal
agencies, gaining a more consistent image worldwide. Black & Decker also strengthened the
functional organisation by giving functional managers a larger role in coordinating with the
country management. Finally, Black & Decker purchased General Electric's small appliance
business to achieve world-scale economies in manufacturing, distribution, and marketing.

The globalisation strategy initially met with scepticism and resistance from country
management due to entrenched factionalism among country managers. The CEO took a
visible leadership role and made some management changes to start the company moving
toward globalisation. Today, in his words, "Globalisation is spreading and now has a life of
its own."
 
 
INTEGRATING COMPETITIVE MOVES ACROSS COUNTRIES
Instead of making competitive decisions in a country without regard to what is happening in other
countries, a global competitor can take an integrated approach. Tyrolia, the Austrian ski-binding
manufacturer, attacked Solomon's stronghold position in its biggest market, the United States.
Rather than fighting Tyrolia only in the US, Salomon retaliated in the countries where Tyrolia
generated a large share of its sales and profits-Germany and Austria. Taking a global perspective,
Solomon viewed the whole world-not just one country-as its competitive battleground.
 
Another benefit of integrating competitive strategy is the ability of a company to cross-subsidise.
This involves utilising cash generated in a profitable, high-market-share country to invest
aggressively in a strategically important but low-market-share country. The purpose is, of course.
to optimise results worldwide.
 
 
INDUSTRY DRIVERS OF GLOBALISATION
How can a company decide whether it should globalise a particular business? What sort of global
strategy should it pursue? Managers should look first to the business's industry. An industry's
potential for globalisation is driven by market, economic, environmental and competitive factors
(Chart 1 omitted from this version)  Market forces determine the customers' receptivity to a global
product; economic factors determine whether pursuing a global strategy can provide a cost
advantage; environmental factors show whether the necessary supporting infrastructure is there;
and competitive factors provide a spur to action.
 
The automotive industry provides a good example of all four forces.  People in the industry now
talk of "world cars." A number of market factors are pushing the industry toward globalisation,
including a mature market, similar demand trends across countries (such as quality/ reliability and
fuel efficiency), shortening product life cycles (e.g., twelve years for the Renault 5, eight for the
Renault 18, and five each for the Renault 11 and Renault 9), and worldwide image-building.
Similarly, economic factors are pushing the automotive industry toward globalisation. For
example, economies of scale, particularly on engines and transmissions, are very important, and
few country markets provide enough volume to get full benefits of these economies of scale.
Similarly, many car manufacturers have now moved to worldwide sourcing. In the environmental
area, converging regulations (safety, emissions) and rapid technological evolution (new materials,
electronics, robotics), all requiring heavy investment in R&D and plant and equipment, also are
moving the industry inexorably toward globalisation. Finally, competitive factors are contributing
to globalisation. Witness the increasing number of cooperative ventures among manufacturers-
Toyota-GM, Toyo Kogyo-Ford, Chrysler-Mitsubishi. These ventures are putting pressure on all
automotive manufacturers to go global.
 
In summary, managers wrestling with globalisation issues should first analyse the four sets of
industry forces to determine whether they compete in an industry that is global or globalising.
Next, they need to assess how global their companies are, and how global their competitors are
along the five dimensions defined previously.  A very difficult part remains: assessing whether the
organisation has the capacity to go global.
 
 
ORGANISATIONAL FACTORS IN GLOBALISATION
Organisational factors can support or undercut a business's attempt to globalise., Therefore, taking
a close look at how the organisation will affect the relative difficulty of globalisation is essential.
Four factors affect the ability of an organisation to develop and implement global strategy:
organisation structure, management processes, people and culture (Chart 2 omitted from this
version). Each of these aspects of organisation operates powerfully in different ways. A common
mistake, in implementing any strategy, is to ignore one or more of them, particularly the less
tangible ones such as culture.
 
ORGANIZATION STRUCTURE
 
Centralisation of global authority.
One of the most effective ways to develop and implement a global strategy is to centralise
authority, so all units of the business around the world report to a common sector head.
Surprisingly few companies do this. Instead, they are tied for historical reasons to a strong
country-based organisation where the main line of authority runs by country rather than by
business. In a company pursuing a global strategy, the business focus should dominate the country
focus. It's difficult, but necessary.
 
Domestic/international split.
A common structural barrier to global strategy is an organisational split between domestic and
international divisions. The international division oversees a group of highly autonomous country
subsidiaries, each of which manages several distinct businesses. A global strategy for any one of
these businesses can then be coordinated only at the CEO level. This split is very common among
US firms, partly for historical reasons and partly because of the enormous size of the US market.
Ironically, some European multinationals with small domestic markets have separated out not
their home market but the US market. As a result they find it difficult to get their US subsidiaries
to cooperate in the development and implementation of global strategy. In one European company
we know, the heads of worldwide business sectors go hat in hand to New York to solicit support
for their worldwide strategies.
 
 
MANAGEMENT PROCESSES
While organisation structure has a very direct effect on management behaviour, it is management
processes that power the system. The appropriate processes can even substitute to some extent for
the appropriate structure.
 
Cross-country co-ordination.
Providing cross-country co-ordination is a common way to make up for the lack of a direct
reporting structure. Some consumer packaged goods companies are beginning to appoint
European brand managers to coordinate strategy across countries.
 
Global planning.
Too often strategic plans are developed separately for each country and are not aggregated
globally for each business across all countries. This makes it difficult to understand the business's
competitive position worldwide and to develop an integrated strategy against competitors who
plan on a global basis.
 
Global budgeting.
Similarly, country budgets need to be consolidated into a global total for each product line to aid
the allocation of resources across product lines. Surprisingly few companies do this.
 
Global performance review and compensation.
Rewards, especially bonuses, need to be set in a way that reinforces the company's global
objectives. An electronics manufacturer, for example, decided to start penetrating the international
market by introducing a new product through its strongest division. The division head's bonus was
based on current year's worldwide sales, with no distinction between domestic and international
sales. Because increasing his domestic sales was easier and had a much quicker payoff-than trying
to open new international markets. the division head didn't worry much about his international
sales. Predictably, the firm's market penetration strategy failed.
 
International groups and forums.
Holding international forums allows exchange of information and building of relationships across
countries. This in turn makes it easier for country nationals to gain an understanding of whether
the differences they perceive between their home country and others are real or imagined. It also
facilitates the development of common products and the co-ordination of marketing approaches. 
For example, a French manufacturer of security devices uses councils of country managers, with
different countries taking the lead on different products. While this approach is time consuming,
the company has found that this reliance on line managers makes it easier for various countries to
accept the input of other countries, and thus for global approaches to be pursued by all.
 
PEOPLE
Being truly global also involves using people in a different way from that of a multinational firm.
 
Use foreign nationals.
High-potential foreign nationals need to gain experience not only in their home country, but also
at headquarters and in other countries. This practice has three benefits: broadening the pool of
talent available for executive positions; demonstrating the commitment of top management to
internationalisation; and giving talented individuals an irreplaceable development
opportunity. US companies have been slow to do this, particularly at the most senior ranks.
 
Promoting foreigners, and using staff from various countries, has often paid off. In the 1970's, an
ailing NCR vaulted William S. Anderson, the British head of their Asian business, to the top
job. Anderson is widely credited with turning around NCR. A French packaged goods
manufacturer undertook seven years ago to move its European staff from country to country.
Today, of fifteen staff members working at headquarters, seven are French, three are English,
three are German and two are Italian. The company credits this practice-among others - for its
remarkable turnaround.
 
Require multicountry careers.
Making work experience in different countries necessary for progression, rather than a hindrance,
is another step that helps a company become truly global. One electronics manufacturer decided to
make a major push into Japan, but an executive offered a transfer there was loath to take it. He
was unsure a job would remain for him when he came back. As he put it, "The road to the
executive suite lies throughChicago, not Osaka."
 
Travel frequently.
Senior managers must spend a large amount of time in foreign countries. The CEO of a large
grocery products company we have worked with spends half his time outside the United States - a
visible demonstration of the importance and commitment of the company to its international
operations.
 
State global intentions.
The senior management of a company that wants to go global needs to constantly restate that
intention and to act accordingly. Otherwise, the rank and file won't believe that the globalisation
strategy is real. One test among many is the prominence given to international operations in
formal communications such as the chairman's letter in the annual report and statements to stock
analysts.
 
 
CULTURE
Culture is the most visible aspect of organisation, but, as shown below, it can play a formidable
role in helping or hindering a global strategy.
 
Global (vs national) identity
Does the company have a strong national identity? 'This can hinder the willingness and ability to
design global products and programs. It can also create a "them and us" split among employees.
One firm was making a strong global push, and yet many of its corporate executives wore national
flag pins! European companies are generally well in advance of both American and Japanese
firms in adopting a global identity.
 
Worldwide (vs. domestic) commitment to employment.
Many American companies view their domestic employees as more important than their overseas
employees and are much more committed to preserving domestic employment than to developing
employment regardless of location. This often leads them to decide to keep expensive
manufacturing operations in the United States, rather than relocate them to lower-cost countries.
This puts them at a competitive cost disadvantage and threatens their overall competitive position.
 
Interdependence (vs. autonomy) of businesses.
A high level of autonomy for local business can also be a barrier to globalisation.
 
In sum, the four internal factors of organisation structure, management processes, people and
culture play a key role in a company's move toward globalisation.
 
For example, a company with a strong structural split between domestic and international
activities, management processes that are country -rather than business-driven, people who work
primarily in their home countries, and a parochial culture is likely to have difficulty implementing
integrated competitive strategies. If the analysis of external drivers has shown that such strategies
are necessary for market, competitive, environmental, or economic reasons, top management
needs to either adapt the internal environment to the strategic moves the company needs to make-
or decide that the profound organisational changes needed are too risky. In the latter case, the
company should avoid globalisation and compete based on its existing organisational strengths.
 
 
CONCLUSION
There are many was to pursue a global strategy. Industry forces play a major role in determining
whether going global makes sense. An analysis of a company's competitive position against the
five dimensions of globalisation - major market participation, product standardisation, activity
specialisation, uniform market positioning and integrated competitive strategy-helps define the
appropriate approach for a globalisation strategy. Finally, and very importantly, the ability of the
organisation to implement the different elements of global strategy needs to be considered.
 
Matching the external and internal imperatives is critical. For example, we have worked with a
company whose culture included the following characteristics:
 
       A high degree of responsiveness o customers' requests for product tailoring.
 
       A strong emphasis on letting every business and every country be highly autonomous.
 
       A desire for 100% control over foreign operations.
 
       A commitment to preserving domestic employment.
 
The difficulty the company found in pursuing a globalisation strategy is illustrated in the
strategy/culture fit matrix in Exhibit 3.[omitted here] The matrix helped management articulate
the pros and cons of the three major options they could pursue: a pure global strategy with an
organisational revolution; a series of incremental changes in both strategy and organisation,
leading to a mixed strategy of globalisation/national responsiveness; and an explicit rejection of
globalisation, accompanied with a conscious decision to build on the company's existing
organisational and cultural characteristics to develop a pure national responsiveness strategy. This
enabled them to make fundamental and realistic choices rather than assuming the unavoidable
dominance of strategy over organisation and of globalisation over national responsiveness.
 
Competing globally is tough. It requires a clear vision of the firm as a global competitor, a long-
term time horizon, a concerted effort to match strategy and organisation changes, a cosmopolitan
view and a substantial commitment from the top. But the result can be the opportunity to gain
significant competitive advantage through cost, focus, and concentration, and improved response
to customers' needs and preferences.
 
Source: Columbia Journal Of World Business Volume 23 Number 4 Winter 1988
Note: For technical reasons, the appendix, charts and references have been omitted from this version.