GLOBAL CORPORATE STRATEGY

STRATEGY
Process, Content, Context
An International Perspective
 LEARNING
OUTCOMES

• Introduction
• Overview
• Forces Driving Globalization
• Impact of Globalization
• Managing – Global Marketplace
• Summary
• Case Study
 What is Globalisation?
Question: What Is The Truest Definition
Of Globalisation?

Answer: Princess Diana's death.

Question: How come?

Answer: An English princess with an Egyptian boyfriend

crashes in a French tunnel, while in a German car with a
Dutch engine, driven by a Belgian who was drunk on
Scottish whisky, followed closely by Italian Paparazzi on
Japanese motorcycles; treated by an American doctor
using Brazilian medicines.
 Introduction to GILT

Globalisation refers to global economic integration of

many formerly national economies into one global economy
through a broad range of engineering and business
development processes. It is the effective erasure of national
boundaries for economic purposes.
Internationalisation refers to the generalizing of
products and/or services that enables easy localization
according to the cultures and languages of different nations.
Localisation refers to the adaptation of a product,
application or document content to meet the language,
cultural and other requirements of a specific target market (a
locale).
Translation is simply converting the meaning of text in
 Introduction to GILT

Translation is one part

of Localization

Internationalization is a
pre-requisite
of Localization

Internationalization and
Localization are parts
of Globalization

Globalization includes
many business-related
activities outside of the
product itself.
 Introduction to GILT – An Example
The Toyota Corolla is one of the most successful cars of all time. Over 30
million of them have been sold worldwide. But, had its makers not adopted
the basic principles of globalization back in the 60s, the Corolla would
hardly be known outside Japan today. So, to achieve such success, Toyota
had to:

Embrace early on the idea that they wanted to reach markets outside
Japan. They set up a world-wide network of in-country marketing, sales and
customer support organization. (Globalization)

Design and develop a car that could be easily adapted to other

geographical markets with minimum cost and effort (Internationalization)

Adapt cars to specific geographical markets. For example, for the U.S.,
Canada and most of Europe, the steering wheel and pedals were easily
moved to the left side of the car without structural changes.
(Localization)
 INTRODUCTION

• Global strategy as defined in business terms is an

organization's strategic guide to globalisation.
• A global strategy should address the following
questions:
• What must be (versus what is) the extent of
market presence in the world's major markets?
• How to build the necessary global presence?
• What must be (versus what are) the optimal
locations around the world for the various value
chain activities?
• How to turn a global presence into global
competitive advantage?
 INTRODUCTION

• Globalisation simply involves a firm moving from its

home-base into international markets i.e. across
borders (Bartlett and Ghoshal, 1995)

• It is a process of expansion on a worldwide scale – a

spatial or scope definition (Patel and Paritt, 1991).

• It is also a process of increasing international

homogeneity or declining international variety – a
variance definition based on the similarity of product
characteristics (Levitt, 1983).

• Furthermore it is also a process of increasing

international interconnectedness of operations
(Porter, 1986).
 GLOBALISATION
Overview
• Globalisation is the phenomenon by which
industries transform themselves from multi-
national to global competitive structures.
• Global companies operate in the main
markets of the world in an integrated and
co-ordinated way.
• It refers to the shift toward a more
integrated and interdependent world
economy and has two main components:
• The globalization of markets.
• The globalization of production.
 GLOBALISATION
Overview – Challenges & Threats
 Managers now routinely have to decide how best to
expand into a foreign market.
• Should they export to that market from their
home base?
• Should they invest in production facilities in that
market, producing locally to sell locally?
• Should they produce in a third country and export
from that base to other foreign markets and,
perhaps, to their home market?
 Managers also have to decide on:
• How to customize products/services
• HR Practices, Marketing Policies, Backlash
• Adapt to Differences in Culture & Language
• Local Government Regulations, CSR & Ethics
• Deal with threats posed by efficient competitors
 GLOBALISATION
Overview
There are broadly three elements to globalization:
1. International Scope, the spatial dimension:
• Broadest possible international scope.
• Process of international expansion on a world-
wide scale.
2. International Similarity, the variance dimension:
• Homogeneity around the world.
• Process of declining international variety.
3. International Integration, the linkage dimension:
• World is viewed as one tightly linked system.
• Process of increasing international
interconnectedness.
 GLOBALISATION
Forces of Globalisation versus Localisation
Business success in the international context is a case of finding
the right balance between the forces of globalisation versus
localisation.
Globalisation
Forces

Localization Forces
 GLOBALISATION
Localization Push Factors
The factor that works against globalisation is the
localisation push; the demand for flexibility to deliver
customer-oriented products/services rapidly and in
close geographical proximity to the customer.
GLOBALISATION - Micro, Meso&
Macro Level
The issues concerning globalisation can be
viewed at the Micro, Meso and Macro
levels.
MICRO Level – The Company
 The extent to which an organisation has a
global strategy, structure, culture, workforce,
management team and resource base.
 Globalization of specific products and value-
adding activities.
 The globalization of one product or activity does
not necessarily entail the globalization of others.
GLOBALISATION - Micro, Meso&
Macro Level
MESO Level – The Market & Industry

 On markets, the growing similarity of

customer demand globally.
 On markets again, the growing ease of
worldwide product flows, e.g. crude oil,
foreign currency markets
 On industries, the emergence of a set of
producers competing on a worldwide basis,
e.g. automobile, consumer electronics..
GLOBALISATION - Micro, Meso&
Macro Level
MACRO Level – The World’s Economies

 The debate on whether the economies of the

world are experiencing a converging trend.
 Consequences of international integration in
terms of growth, employment, productivity,
trade and foreign direct investment.
 Political realities constraining or encouraging
globalization.
 Dynamics of technological, institutional and
organizational convergence.
.
 GLOBALISATION of MARKETS
Overview
 Refers to the merging of historically distinct and
separate national markets into one global marketplace.
• The tastes and preferences of consumers in different
nations are beginning to converge on some global
norm, thereby helping to create a global market,
e.g.McDonald’s hamburgers.
• Significant differences still exist between national
markets, e.g. consumer tastes and preferences,
distribution channels and culturally embedded value
systems.
 Require that marketing strategies, product features and
operating practices be customised to best match
conditions in a country.
 GLOBALISATION of PRODUCTION
Overview
 Refers to the tendency among firms to source goods
and services from locations around the globe to take
advantage of national differences in the cost and
quality of factors of production (such as labour,
energy, land and capital).

• There still exists formal and informal barriers (ex:

barriers to FDIs)
• Poor transportation infrastructure
• Political climate
 FORCES DRIVING GLOBALISATION

Two main factors seem to underlie the trend

toward greater globalisation:

 A decline in barriers to the free flow of

goods, services and capital has occurred
since World War II.

 Technological change (ICT), particularly

the dramatic developments in recent years
in communications, information processing
and transportation technologies.
IMPACT OF GLOBALISATION - Overview

• Reduced US dominance – The rise of non-US

multinationals such as China, Japan and South
Korea
• The rise of mini-multinationals – consulting
firms.
• Changes in Foreign Direct Investments.
• Democratic revolutions - communist world.
• Reduction in dictatorial leadership in 3rd world
countries – Latin America
• Improved ICT and transportation – ‘small
world’.
IIMPACT OF GLOBALISATION
Prosperity or Impoverishment…?

• Ethical and Social issues – Exploitation of

Labour, Encroachment on Human Rights,
etc..
• Widens the gap between the Rich and Poor
• Destroys manufacturing jobs in the wealthy
nations?
• Environmental pollution issues – global
warming, dumping site…?
• Reduced national sovereignty – power shift
towards supranational organizations such as
WTO, EU and UN.
MANAGING IN THE GLOBAL
MARKETPLACE
1. Appreciate Country Differences – cultures,
political systems, economic system, legal
system, levels of economic development
2. Understand the Complexity – Ensure proper
coordination, monitoring and control.
3. Understand implications and make proper
decisions on which foreign market to enter
and how to enter it? (export products, set-up
a subsidiary, joint-venture, licensee,.
4. Ensure compliance with International Trading
and Investment rules and find ways to work
within specific governmental interventions.
 SOLUTION FOR MANAGERS

1. Develop policies for dealing with exchange rate

movement – cross border transactions and
currency risks.
2. Require more complex – matrix organization
structures – Global business managers, country
managers, functional managers, etc..
3. Require robust operational processes and
standards to achieve global leverage and
efficiency - covers decision making, resource
allocation, sharing of intellectual capital,
management escalation, rewards & sanctions, etc..
 SUMMARY

• Globalisation is the phenomenon by which industries

transform themselves from multi-national to global
competitive structures
• The 3 elements to globalization are Scope,
Similarity
and Integration
• Understanding and positioning a firm along the
‘globalization-localization’ continuum remains a
source for sustaining a firm’s competitive
advantage
• The 3 levels of globalization – Micro, Meso and
Macro
• Globalization of Markets and Production