Global Strategy: Managing For The 21St Century Essay, Research Paper
Global Strategy: Managing for the 21st Century
The term “globalization” has acquired considerable emotive force. Some view it
as a process that is beneficial as well as inevitable and irreversible. Others regard it
with hostility, even fear, believing that it increases inequality within and between
nations, threatens employment and living standards and thwarts social progress. This
paper is intended to offer an overview of some of the aspects of globalization and aims
to identify ways in which countries can tap the gains of this process, while remaining
realistic about its potential and its risks. Globalization offers extensive opportunities for
truly worldwide development but it is not progressing evenly. Some countries are
becoming integrated into the global economy more quickly than others. Countries that
have been able to integrate are seeing faster growth and reduced poverty.
Outward-oriented policies brought increased activity and greater prosperity to much of
East Asia, transforming it from one of the poorest areas of the world 40 years ago. And
as living standards rose, it became possible to make progress on democracy and
economic issues such as the environment and work standards.
By contrast, in the 1970s and 1980s when many countries in Latin America and
Africa pursued inward-oriented policies, their economies stagnated or declined, poverty
increased and high inflation became the norm (Graham, 1998). In many cases,
especially Africa, adverse external developments made the problems worse. As these
regions changed their policies, their incomes have begun to rise. Encouraging this
trend, not reversing it, is the best course for promoting growth, development and
poverty reduction. The crises in the emerging markets in the 1990s have made it quite
evident that the opportunities of globalization do not come without risks. Those risks
arise from volatile capital movements and the risks of social, economic, and
environmental degradation created by poverty (Graham, 1998). This is not a reason to
reverse direction, but for all concerned to embrace policy changes to build strong
economies and a stronger world financial system that will produce more rapid growth
and ensure that poverty is reduced.
Additionally, the globalization of the marketplace has created a need for
managers who can function effectively in the international business environment
(Walter, 1997). Despite this movement toward globalization, there remains significant
environmental differences between countries and regions. Managers in an international
business must be sensitive to these differences and also must adopt the appropriate
policies and strategies for dealing with them. It is a cliche to say that we live in a
globalized world in which investment flows, communications, and the operations of
multinationals from all parts of the world have changed the character of the
international business environment (Yip, 1995). But the easy concept of globalization
poses as many questions as it answers. Additionally, many managers wonder whether
their business should have a global strategy and if so how global should the business
strategy be. In Total Global Strategy, Yip (1995) defines measures for not only
identifying the raw characteristics necessary for the successful globalization of a
business, but the tools needed in order to adequately measure success of an
implemented strategy. Finally, many other resources related to globalization and
international marketing techniques and their relevance to todays economic and political
structures will be compared to attain a better understanding of how globalization can
affect a business and how that business can have an impact on society.
Globalization Levers and Industry Drivers
First, in keeping with tradition it is of utmost importance to begin with the basics
when planning a business strategy which will ultimately have the potential to go global.
A core strategy must first be developed which includes several key elements such as
the type of product or services, customer base, geographics involved, major resources
available, and the overall investment strategy (Yip, 1995). Without a sound core
strategy on which to build, a worldwide business need not bother with global strategy.
Next, it is important that the core strategy is internationalized so that it can be
determined whether or not the company possess the qualities necessary to be effective
on a global level (Yip, 1995). The first and most important step in internationalizing
the core business strategy is to select the geographic markets in which to compete
(Yip, 1995). In deciding geographic preference one should consider market
attractiveness, potential competition and ways in which to adapt to local conditions
(Yip, 1995). Many factors must be considered such as barriers to trade, tariffs, laws,
language differences and so on (Yip, 1995). Other aspects of the internationalization
strategy to take account of are foreign needs, preferences, culture, and climate (Yip,
1995). Obviously, many considerations must be examined and scrutinized in order to
determine overall quality of the market. Finally, once a successful internationalization
of the core strategy has been implemented and determined to be effective, a
globalization of that strategy must be integrated to take advantage of business
leverage and competitive advantage (Yip, 1995). Consequently, industry levers and
drivers also play an important role in combination with the successful implementation of
a diverse and well planned global strategy to determine the overall success of a
business.
There are several direct and indirect factors affecting the process by which the
core strategy, internationalization of that strategy, and the final globalization of the
strategy are successfully or unsuccessfully integrated into the business process. The
direct factors I am speaking about, also termed levers, can be directly controlled by the
business to either negatively or positively impact a given situation or circumstance.
The indirect factors, or drivers, are not as easily controlled and consist of market
trends, overall economic growth, and the nature of marketing in a given business (Yip,
1995). Conversely, the levers are accessible and controllable by the business and
consist of market participation, product, location, marketing technique, and competitive
moves (Yip, 1995). There are four specific industry globalization drivers which exist as
defined by Yip (1995) which include market drivers, cost drivers, government drivers,
and competitive drivers. Unfortunately, drivers are primarily uncontrollable by the
worldwide business community as individuals and thus can provide the downfall for an
otherwise potentially sound organization/business. To get a better grasp of the
relevance each lever and driver has on business profitability we will examine in depth
the key lever and driver in the specific named groups to show what notable affect each
can have on a business. It is interesting to look at the different factors which effect
overall success of a business when it initially seems to be a clear cut and well defined
parameter in choosing where and what product you will sell in order to succeed. My
personal experiences, although limited to domestic applications, have also been driven
by the same industry standards (drivers/levers). For any given market there exists
parameters by which a company must operate in order to be efficient and productive.
Without giving thought to specific industry drivers a company would surely fail. A good
example of this can be seen in the airline industry where struggling airlines working on
a thin profit margin are forced to continually lower prices in order to stay competitive.
They do so because the industry has determined that the market will only tolerate a
survival of the fittest concept. This means that if smaller, more fragile airlines cannot
match the predatory pricing strategies of the industry leaders then the success of their
companies will be in jeopardy. Therefore, it can be seen over the years that airlines
such as Eastern, Pan Am, and recently ValuJet have succumb to industry pressure and
failed miserably while attempting to allude industry drivers in order to turn a higher
profit.
Thus, we you can see that a globalization strategy is multidimensional. As well,
it can be determined that many factors are present when determining effectiveness and
success. Perhaps, the most controllable lever which has been evaluated is
international marketing . The world has indeed become a smaller place. International
marketing has intensified and is evident in nearly all aspects of daily life. The shoes
we wear may come from Brazil, stockings from China, trousers from Taiwan, belts from
Korea, shirts from France, ties from Italy, and watches from Switzerland (Walters,
1997). Competitive forces are no longer restricted by local regions or national
boundaries. According to Walters (1997), to be successful in today’s economy,
companies must be simultaneously responsive to local and global market conditions,
within the context of being supportive of the company’s own overall strategies. “The
global corporation accepts for better or for worse that technology drives consumers
relentlessly toward the same common goals-alleviation of life’s burdens and the
expansion of discretionary time and spending power” (Levitt 1999). This is especially
true in a world of increasingly complex competitive structures. Companies must resolve
the strategic issues of product/market scope, long-term objectives, and functional
policies (Levitt, 1999). International marketing skills are an important ingredient for
every company, whether or not it is currently involved in exporting activities (Buzzell
1997). International marketing skills are important ingredients for every company,
therefore it is vital to identify which skills are needed. After searching the literature,
there seemed to be no studies regarding identification of the specific skills needed to
be effective in international marketing. However, three studies (Busche, 1990; Scott,
1999; and Graham, 1998) were completed to determine the general perceptions of
business people regarding their need for international trade training. Each of these
studies concluded that international marketing was the number one priority area for
international business training.
A study completed by Busche (1990) found that nearly 77 percent of the
respondents supported a need for international training. Marketing was the area
identified by nearly 64 percent as a potential problem area. Respondents showed a
special interest in international marketing with a highly perceived need for training in
six topics: (1) research on foreign markets; (2) working through agents and distributors;
(3) export marketing know-how; (4) how to find international opportunities; (5)
developing an international business plan; and (6) cultural aspects of sales to foreign
consumers (Busche, 1990). These topics were mixtures of both skill sets and areas for
knowledge acquisition, yet clearly identified the general area of international marketing
as a priority. Another study concurred with the identification of international marketing
as a topic deserving training priority. Scott (1999) found that 84 percent of the
southern California business respondents polled expressed a need for training at the
California community colleges. The course selected by 67 percent as being useful to
employees was International Marketing. Unfortunately, the conclusion of this study did
not reveal any insight about which skills were needed to be effective in international
marketing although a need still remains to identify those necessary skills needed to be
effective in this area.
Since the vast majority of international marketing studies involve context-specific
knowledge, markets and cultures are widely different across countries (Myers, 1999).
As Graham (1998) said, this may be why not much has been learned about
international marketing in the last twenty-five years. The conclusion of the study was
that research should pursue an exploratory approach to building knowledge in
international marketing. Research identifying the skills needed to be effective in
international marketing may, in fact, create the progressive portfolio of skills needed to
cut across context-specific knowledge and themes effectively (Graham, 1998). A
progressive portfolio of international marketing skills would allow employees to
accumulate skills that help them “adapt to technological and market changes, to
improve their prospects or to explore their potential” (Wills, 1998). Conclusions from
the three studies previously cited clearly point toward the necessity to identify which
skills are needed to be effective in international marketing. However, these studies
also indicate that there is much difference of opinion regarding which international
marketing skills are most important. Using the knowledge available, academic
international marketing experts could provide a sound assessment of the relative
importance of international marketing skills.
The structure of the field of international marketing has remained basically the
same over the past several decades. However, the emphasis given within the literature
clearly reveals that international marketing activities have been given diversified
breadth and depth of coverage over the years, with distinct clusters of international
marketing skills being emphasized sporadically throughout the time period from Borden
(1964) up to Smith (1998). The marketing mix elements of product, price, place, and
promotion, as understood by Neil Borden (1964), were emphasized as the basis for
marketing activities for several decades, yet a study completed by Berry (1990) which
ranked the importance of marketing mix activities, offered a distinct difference of
opinion. The Berry (1990) study identified customer sensitivity as the most important
marketing mix activity. This reflects a major shift in emphasis regarding the importance
of various types of skills-from certain skills being needed primarily by employees within
the marketing function, to certain skills now being needed by all employees whose work
affects customers, which “involves almost everyone in the business” (Hiam, 1997).
Dissimilar emphasis on the importance of various types of international
marketing skills continues in recent literature and studies. The switch in emphasis to
personal skills is reflected by other recent literature as well. “A company’s ability to
conduct business in global markets depends primarily on how closely the skills of its
personnel match the opportunities present in the market” (Dahringer, 1994).
International marketing is viewed as a system of interacting and interrelated activities
which requires multifunctional skills, according to Albaum (1994). Skills needed to be
effective in international marketing may encompass more than just the technical skills
needed on the job. According to Michael S. Schell, president of Windham
International, a New York-based global relocation-management company,
Expatriate assignments rarely fail because the person cannot accommodate to the
technical demands of the job. The expatriate selections are made by line
managers based on technical competence. They fail because of family and
personal issues and lack of cultural skills that haven’t been part of the process.
(Solomon 1994).
Given the distinct opinions regarding skills needed for effective international
marketing, there is a need, therefore, for international marketing experts, both
accomplished international marketers and academic researchers to determine the
importance of each of the skills identified as being needed for effective international
marketing. The need exists not only to identify the skills necessary for effective
international marketing and determine the importance of each of these skills, but also to
realistically identify the degree to which employees have these skills. A need exists to
identify the extent to which employees perceive that they have the identified skills.
These skills encompass more than just the technical aspects of international marketing.
A means of identifying the gap between the skills these employees have and the skills
they need, and an understanding of this gap is required before appropriate training
programs can be developed (Solomon, 1994).