Globalization

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.