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1. Globalization Competing in a Transnational World
Lecture 4
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6. �It was once sacrosanct to talk about our cars being �Made in Germany.� We have to change that to �Made by Mercedes,� never mind where they are assembled.�Juergen Schremmp, CEO, DaimlerChrysler Corporation
7. Globalization: An Ongoing Evolution� A number of factors contribute to the evolution of globalization and transnationalism:
8. Two Macro-Trends Become Critical� Two major trends have combine as the essential drivers of globalization:
9. Understanding Globalization� Issues to Address
What is an appropriate definition for globalization?
What are the factors driving globalization?
What is the impact of globalization on strategy?
10. GLOBALIZATION: ESTABLISHING THE CONTEXT
11. Globalization�Common Misconceptions The following characteristics do not necessarily make a company global:
Plants, customers, employees and other assets in foreign countries
Revenue sources from abroad
Even if the majority of trades and revenues comes from sources outside the border, it does not mean that a company is a global leader.
12. The Five Drivers of Global Growth� The democratization of politically and economically repressed countries and societies, increasing the mobility of employees.
The proliferation and availability of information technology, neutralizing the traditional sources of competitive advantage.
The interconnectivity of economies and the emergence of borderless companies and markets, changing the basic equation of market and economic equilibrium.
Increased consumer knowledge and choices, forcing companies to employ innovative practices and operations.
Mega-mergers and alliances, creating new forms of organizations that have deep competencies, extensive financial resources and the ability to redefine the rules of competing.
13. Defining Globalization� Some Vague Thoughts
14. Defining Globalization, cont�d� Traditional Thinking:
Differences and interactions between markets
Relationship between international subsidiaries the parent organization
Importance of product branding
Role of national identity or affiliation
Modern Thinking:
Services
Intellectual property rights
Knowledge transfer
Multiculturalism and diversity
Uniformity of enterprise identity
15. Defining Globalization� �The process of viewing and managing resources, products, customers, competencies and markets on a geographically indiscriminate and culturally inclusive basis, in a manner which best leverages and integrates the organization�s capabilities, optimizes its world-wide identity and de-emphasizes geographical uniqueness and national identity or origin .�
Mische
16. Levitt�s Global Model� Globalization is driven by:
Convergence of consumer sentiment
Massive and rapid proliferation of technologies and unprecedented access to knowledge
Global brand perceptions
Economies of scale afforded by standardization which reduces cost and increases return on investments
17. Equidistant Thinking of Kenichi Ohmae� This philosophy requires:
That organizations view their customers, resources and markets from a holistic and equidistant perspective
High level of personal objectivity, awareness, sensitivity and unbiased behavior
Ability to scan the global environment, correctly interpret and prioritize issues and make the decisions which best optimize and leverage the entire resources of the organization on a global basis
18. Global vs. Transnational Organizations� Global Companies
Retain a distinct country of origin identity
Stress geographical location, particular market or customer base Transnational Companies
Organizational forms and strategies have no particular country connotation or nationalistic centering
Leaders� thinking and organizational focus are centered on worldwide brand name and image
Emphasis placed on uniform org. identity and entity recognition
19. Six Key Attributes of Globalization� Competing on a geographically indiscriminate basis
Utilizing cultural inclusiveness for strategic advantage
Providing for the standardization of product and process using �cross-platform� designs
Adaptability of product and process to a wide variety of uses based on common platform designs, highly configurable designs, and standardized assessment measurements
Adopting a consistent view of the market in its totality with the ability to �move� and reallocate resources and assets in a manner that optimizes strategic value
Acknowledging the realization that an organization can exist in multiple states of �globalization� and standardization
21. Evolution and Phases of Globalization� Informal trading:
Trading and bartering
Driven by geographical characteristics
Determined by naturals resources
Driven by individual consumer needs
Formal agreement
Created by international political agreements
Formal trade agreements and contracts
Subject to legal interruptions and the discontinuities attributed to economic cycles, political events, political and societal structures, etc.
Dominant for the last 100 years
Interconnectivity
Based on interconnectivity and synergies of purpose
Driven by economic and strategic needs rather than governmental/political incentives
Rapidly evolving
22. Effective global strategies create synergies of purpose through the integration of:
Synergy of purpose is best attained by:
Focusing on long-term business and social benefits
Integrating social responsibility with business strategies, policies and governance.
Implementing financial, cultural, educational and social commitments in the communities affected by their business.
Working to develop effective levels of social affiliation between the organization and the local communities
Synergies of Purpose� Central Theme of Globalization
23. �and the Five Challenges of Global Enterprises� Developing sensitivity to changes in political, social and economic balance of power, and the ability to distinguish between ascending and descending economies.
Leverage technology investments to more effectively reach existing and emerging constituencies to communicate, transfer knowledge, share information and leverage resources at any time and any place � extend the enterprise.
Driven by developments such as WTO, EMU, etc.; companies must now compete against, and with, global alternatives in mind.
Globalization and more liberal trade agreements open an arena for new competitors; Any company that has a global competitor working in a local or domestic market must consider itself a global company.
An effective use of business alliances and partnership will be critical to an organization�s ability to compete on a global scale and to become a global leader.
24. Mergers & Alliances� Keys to Global Strategies DRIVERS OF GLOBAL M&As
Need to create synergies of purpose
Need to capture new markets
Costs pressures and demand for greater economies of scale
Need to acquire new intellectual capital and knowledge
Availability of common equity shares of target companies on publicly traded stock exchanges
Availability of public information on organizational performance
Relatively open governance style of US boards of directors STRATEGIC BENEFITS
Expanded core competencies
Sharing of structural costs
Risk mitigation
Access to new markets
Access to new knowledge
Creation of new markets and opportunities
Circumventing certain barriers to entry
Creation of synergies of purpose and EOS
Neutralizing competitor�s strategic and operational advantages
Accelerating change and setting new competitive rules
25. GLOBAL STRATEGIES FOR HIGH PERFORMANCE
26. Three Key Attributes of Global High Performers
Global Management Perspective
Global Leadership
Uniform Global Brand Identity
27. Comparing International, Global and Transnational Organizations�
28. Global Management Perspective In contrast to domestic or international organizations, global high-performance leaders:
Manage resources as a worldwide single unit
Consider their capacities as a single worldwide resource
View their markets as a complete, single entity
Emphasize entity level branding
Create operational leverage
Integrate their organizations along common process, organizational, behavioral and measurement lines
29. Global Leadership�
30. Global Leadership� Globalization drives new types of:
Personal characteristics and behaviors
Strategies
Organizational management practices
Global high-performance leaders possess:
Unique technical and skills
Different professional experiences
Various life experiences
Diverse backgrounds, personalities and cultures
Different knowledge
31. Uniform Global Brand Identity� High-performance organizations form and implement strategies that rationalize their images, messages, operations, and brands on both a worldwide and enterprise-wide basis.
High-performers see the world essentially as one market, adjusted, as necessary, for individual nuances and emerging opportunities.
Global high performers understand and emphasize the importance of enterprise-wide identity on a global basis without regard to any nationalistic identity and country� the strength of the brand is found at the enterprise level.
32. Impact of Globalization on Leaders and Brand Management�
33. Strategic Implications of Globalization� Defining completely new rules of competing:
Negates traditional management and strategy formulation practices.
Creating increasingly competitive and intensive environments.
Creating significant investment and marketing opportunities.
Driving new forms of business and global scales through mega-mergers and acquisitions on an unprecedented scale:
Increases global alliances and partnerships
Destroying the physical and geographic boundaries of companies, industries and markets.
Demanding new types of leaders and leadership styles.
Defining new ethics and morals for competing and leading.