SAN DIEGO - Former U.S. Commerce Secretary Carlos Gutierrez called orr transportation and supply chain managers to lead the tight to expand global trade, which he said is threatened by growing protectionist tendencies. "Globalization is under threat. It is being questioned," Gutiérrez said in remarks here during the Council of Supply Chain Management Professionals annual conference. Gutierrez, a son of Cuban immigrants who started out selling KeIlogg's cereal in Mexico City and went on to become the CEO ol Kellogg Co., said public support for lowering or eliminating tariffs on imported goods has been diminished by the recession and "special interests," including labor unions.
Thomas Friedman in The Lexus and the Olive Tree identifies six dimensions in which a globalist has to operate and these are: 1. 2. 3. 4. 5. 6. culture politics national security/power technology financial markets environmentalism
He says that "I believe that this new system of globalization - in which walls between countries, markets and disciplines are increasingly being blown away constitutes a fundamentally new state of affairs. And the only way to see it, understand it and explain it is by arbitraging all six dimensions laid out above assigning different weights to different perspectives at different times in different situations, but always understanding that it is the interaction of all of them together that is really the defining feature of international relations today. And therefore being a globalist is the only way to systematically connect the dots, see the system of globalization and thereby order the chaos." There is much talk about the new economy, of new paradigms, of new technology and methodology, but I believe that Friedman has identified a fundamental truth about this time, the first decade of the 21st Century. Globalization has created a new dominant culture, a world-wide system, it creates integration and the development of connected networks, elites around the world are increasingly accepting these core values. Innovation and change are key features of the new system, and the dominant power in this system is the United States, which is why American culture is often seen as the global culture, and English is the language of the global economy. The conflicts of the 21st Century will be increasingly expressed as opposition to this process, which itself is more like a force of nature, than the expression of the will of any country, or group of countries. Institutions which were created in the Cold War period will be forced to reassess their roles and relevance and States which attempt to ignore this process will be forced to come to terms. The European Union, with its large number of unemployed, low growth rates, ageing populations and low defence expenditures will find its' future increasingly problematic as the constructive destruction of globalization rearranges the pieces of the world economy and as new nodes of power emerge in Asia. This new multi-cultural world will increasingly focus on the development of complex adaptive systems, as non-Government institutions and powerful individuals interact with States and regional groupings of States. What we are now seeing is the
emergence of a new type of system, as profound in its effects as the emergence of the Ch'in dynasty in China three thousand years ago, or the rise of the Roman Empire, were in their times and in their regions. If the French and Germans express their hostility to change by becoming increasingly anti-American, and fail to accommodate to change they will fall behind in the race to change and the European Union will be exposed as a failed institution. If China fails to respond to the responsibilities placed on it by its membership of the WTO and does not make structural changes, or reduce corruption, then its failure will be rapid and disastrous, especially given its reliance on food imports from the global economy. If Latin American governements fail to integrate with the global economy then they will follow Argentina on its progress into the wastelands, and the United States will itself have to change as it becomes increasingly reliant on this integrated and inter-dependent world. Increasing farm subsidiaries and putting on steel tariffs is no longer a domestic issue, there is a price to pay. The US will lose many more industries in this constant process of change. The giant chemical plants of the Gulf of Mexico will become uneconomic compared to the giant plants of SABIC in Saudi Arabia and the multi $billion plants planned for Iran and in due course in a democratic Iraq. China, Brazil and India will increasingly form the world manufacturing base and the importance of the North American market will fall in relative terms as Asian resumes its economic growth. The corruption and anarchy of Africa will continue to keep it outside the global system, except for the mineral wealth sold by its "vampire states" to foreign companies; the payments for Angolan oil and Congolese minerals illustrate the depths to which parts of the Continent have fallen. Only South Africa gives any hope, but that country is facing the loss of many of its best people to a massive AIDS epidemic. On present performance countries like Germany will be the losers as the process of globalization forces greater and greater integration of the world economy; Europe will not be able to rely on its regulations and protectist system in order to hold change back, like the Berlin Wall the whole edifice constructed in Brussels could come falling down. Globalization is therefore not merely a new fad or buzzword it represents the emergent dominant culture on this planet, and connects other emergent developments into a single system. The success of nations and businesses will increasingly be dependent on how they respond to this development. The negotiator must therefore understand this emergent zeitgeist, and in the words of Friedman attain a "globalist" prospective; few people should be better equipped to understand how to integrate ideas and concepts.
Francis Fukuyama, in "The End of History and the Last Man" (1992), linked the growth of democracy with economic development at the end of the 20th Century, he wrote: "The most remarkable development of the last quarter of the twentieth century has been the revelation of enormous weaknesses at the core of the world's seemingly strong dictatorships, whether they be of the military authoritarian Right, or the communist totalitarian Left. From Latin America to Eastern Europe, from the Soviet Union to the Middle East and Asia, strong governments have been failing over the last two decades. And while they have not given way in all cases to stable liberal democracies, liberal democracy remains the only coherent political aspiration that spans different regions and cultures around the globe. In addition, liberal principles in economics - the "free market" - have spread, and have succeeded in producing unprecedented levels of material prosperity, both in industrially developed countries and in countries that had been, at the close of World War II, part of the impoverished Third World. A liberal revolution in economic thinking has sometimes preceded, sometimes followed, the move toward political freedom around the globe." Many Globalizations : Cultural Diversity in the Contemporary World Peter L. Berger, Samuel P. Huntington Two Hours That Shook the World Fred Halliday As the dust settled around the devastation of the World Trade Centre and the Pentagon on 11 September 2001, a host of questions emerged surrounding the attacks, the motives behind them and their future implications. Professor Halliday expands on the many social, cultural, religious and political problems that have plagued the Middle East and Central Asia in the last half-century. He dispels the idea that the Muslim and non-Muslim worlds are poised for conflict. Halliday explains the cause and rise of Islamic fundamentalism, and how terror became an instrument of political and military conflict. This book not only examines the causes of what happened, it also provides a reasoned approach as to what the future may hold The Clash of Civilizations Samuel P. Huntington, new edt. 2002 - the author argues that as people increasingly define themselves by ethnicity and religion, the West will find itself more and more at odds with non-western civilizations that reject its ideals of democracy, human rights, liberty, the rule of law, and the separation of the church and state. Picturing a future of accelerated conflict and increasingly "de-Westernized" international relations, this text further argues for
greater understanding of non-western civilizations and offers strategies for maximizing Western influence. Empire Michael Hardt, Antonio Negri, 2001 According to Negri and Hardt, this new Empire [globalization] is the result of the transformation of modern capitalism into a set of power relationships we endlessly replicate that transcend the nation state (so anti-imperialism is out as a progressive politics). Vitally, the authors argue that the multitude, through their many struggles, pushed the world to this point and it is the multitude who can push through to a much better world on the other side of globalisation. No Logo Naomi Klein In No Logo, Klein patiently demonstrates, step by step, how brands have become ubiquitous, not just in media and on the street but increasingly in the schools as well. The global companies claim to support diversity but their version of "corporate multiculturalism" is merely intended to create more buying options for consumers. The International Herald Tribune 2 July 2002 reported an interview with Joseph Stiglitz, a Nobel Prize winner in economics, a former top white house advisor, a former chief economist at the World Bank and, most recently, author of ³Globalization and the Discontents.´ He said: "The real message here is that there is a grain of truth in a lot of the complaints about the way globalisation has evolved. But, globalisation can be a very powerful force for growth in the developing world. What I¶m trying to argue in this book is that we have to change the way globalisation has been managed to ensure its benefits reach developing countries and poor people around the world."
END OF GLOBAL STRATEGY Abstract Recent research suggests that globalization is a myth. Far from taking place in a single global market, most business activity by large firms takes place in regional blocks. There is no uniform spread of American market capitalism nor are global markets becoming homogenized. Government regulations and cultural differences divide the world into the triad blocks of North America, the European Union and Japan. Rival multinational enterprises from the triad compete for regional market share and so enhance economic efficiency. Only in a few sectors, such as consumer electronics, is a global strategy of economic integration viable. For most other manufacturing, such as automobiles, and for all services, strategies of national responsiveness are required, often coupled with integration strategies, as explained in the matrix framework of this article. Successful multinationals now design strategies on a regional basis; unsuccessful ones pursue global strategies. COMMON ³GLOBAL´ MISUNDERSTANDINGS Globalization has been defined in business schools as the production and distribution of products and services of a homogenous type and quality on a worldwide basis.1 Simply put - providing the same output to countries everywhere. And in recent years it has become increasingly common to hear business executives, industry analysts, and even university professors talk about the emergence of globalization and the dominance of international business by giant, multinational enterprises (MNEs) that are selling uniform products from Cairo, Illinois to Cairo, Egypt and from Lima, Ohio to Lima, Peru.2
11 To back up their claims, these individuals often point to the fact that foreign sales account for more than 50 percent of the annual revenues of companies such as Dow Chemical, Exxon, Hewlett Packard, IBM, Johnson & Johnson, Mobil, Motorola, Procter & Gamble, and Texaco.3 These are accurate statements - but they fail to explain that most of the sales of ³global´ companies are made on a ³triad-regional´ basis. For example, most MNEs that are headquartered in North America earn the bulk of their revenue within their home country or by selling to members of the triad: NAFTA, the European Union (EU), or Japan and a small group of Asian and Oceania nations.4 In fact, recent research shows that: 1. More than 85 percent of all automobiles produced in North America are built in North American factories owned by General Motors, Ford, Daimler-Chrysler, or European or Japanese MNEs; over 90 percent of the cars produced in the EU are sold there; and more than 93 percent of all cars registered in Japan are manufactured domestically. 2. In the specialty chemicals sector over 90 percent of all paint is made and used regionally by triad based MNEs and the same is true for steel, heavy electrical equipment, energy, and transportation. 3. In the services sector, which now employs approximately 70 percent of the work force in North America, Western Europe, and Japan, these activities are all essentially local or regional.5 As a result, top managers now need to design triad based regional strategies, not global ones The real drivers of ³globalization´ are the network managers of large multinational enterprises. But their business strategies are triad/regional and responsive to local 22
consumers, rather than global and uniform. For example, the automobile and speciality chemicals business are triad-based, not global. There is no global car. Instead, over 90% of all cars produced in Europe are sold in Europe. Regional production and large local sales also occur in North America and Japan. Another misunderstanding about globalization is the belief that MNEs are globally monolithic and excessively powerful in political terms. Research shows this is not so. MNEs are not monolithic; in fact, the largest 500 multinationals are spread across the triad economies of NAFTA, the EU, and Japan/Asia. Recent research shows that of these 500, there are 198 headquartered in NAFTA countries, 156 in the EU, and 125 in Japan/Asia.6 Additionally, these triad-based MNEs compete for global market shares and profits across a wide variety of industrial sectors and trade services. And this process of regional competition erodes the possibility of sustainable long-term profits and the possibility of building strong, sustainable political advantage.7 A third misunderstanding about globalization is the belief that MNEs develop homogeneous products for the world market and through their efficient production techniques are able to dominate local markets everywhere. In truth, multinationals have to adapt their products for the local market. For example, there is no worldwide, global car. Rather, there are regionally-based American, European, and Japanese factories that are supported by local regional suppliers who provide steel, plastic, paint, and other necessary inputs for producing autos for that geographic triad region. Additionally, the car designs that are popular in one area of the world are often rejected by customers in other geographic areas. The Toyota Camry that dominates the American auto market is a poor seller in Japan. The Volkswagen Golf that was the largest selling car in Europe did not make an impact in 3 33 North America. Even pharmaceuticals, which manufacture medicines that are often referred to as ³universal products,´ have to modify their goods to satisfy national and state regulations thus making centralized production and worldwide distribution economically difficult. WORLD TRADE IS HIGHLY REGIONAL World trade provides a good example of just how regional MNEs are. The amount of trade in terms of exports and imports has grown rapidly over the last decade, but it continues to be dominated by the triad. The latest data show that in 1997 these three groups accounted for 57.3 percent of world exports and 56.5 percent of world imports. If these trade data are examined in terms of what might be called the ³core´ triad - the United States, the EU, and Japan - the amount of exporting that each group does to the other is quite small. For example, the United States exports approximately 20 percent of its total to the EU and 10 percent to Japan, while the EU exports 8 percent of its total to the United States and less than 1 percent (.002 to be exact) to Japan. Meanwhile, Japan exports 28 percent of its total to the United States and 16 percent to the EU. An analysis of imports reveals the same general picture. The United States gets 16 percent of its imports from the EU and 11 percent from Japan; the EU receives 8 percent of its imports from the United States and 4 percent from Japan; and Japan gets 24 percent of its imports from the United States and 17 percent from the EU.8
Simply put, the core triad members do not rely on each other for most of their exports or imports. Then on whom do they rely? The answer is: other members of their own triad. For example, as shown in Exhibit 1, over 60 percent of all exports by EU
44 countries is to other members of that triad. The µcore¶ triad members can be expanded by adding Canada and Mexico to the United States, which gives us NAFTA, and then constructing a group of countries for µAsia¶. This group consists of Japan, Australia, New Zealand, China, Taiwan, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, Thailand and also the smaller Asian Pacific economies. This gives us the µbroad¶ triad. This yields Exhibit 1, which confirms that the world¶s trade is controlled by the triad. (Exhibit 1 goes here) According to data for 1997 in Exhibit 1, the triad¶s export total US$ 4,145.8 billion, with 60.6 per cent of the EU exports of US$ 2,092.3 being internal, at US$ 1,268.5 billion. The EU exports only 8.7 per cent to NAFTA (US$ 182.1 billion) and 9.4 per cent to Asia (US$ 197.6 billion). NAFTA exports 15.4% per cent of its total to the EU (US$ 155.3 billion) and 22.4 per cent to Asian (US$ 226.0 billion). The internal NAFTA trade at 49.1percent is surprisingly high, given that Canada is only one twelfth the economic size of the United States and Mexico only about one twentieth its size. Asia exports 21.1 per cent of its total to NAFTA (US$ 220.0 billion) and 14.7 per cent to the EU (US$153.3 billion). But the majority of Asian trade is also intra-regional. In summary, the extent of intra EU exports is 60.6 per cent. For NAFTA internal trade it is 49.1 per cent and for Asia it is 53.1 per cent. The majority of world trade in the European and Asian triads is within their internal markets and for North America nearly half of its trade is also intra-regional. Most of the rest of world trade is between triad members.
55 Given the dominance of the triad in world trade (and direct investment data show the same picture) what strategies are appropriate for individual multinationals? THE INTERNATIONAL MANAGEMENT STRATEGY MATRIX What types of strategies do MNEs use in their international efforts? The answer will vary from firm to firm, but in virtually every case these companies have developed a regional triad-based strategy. They first do well in their home markets and then expand out in their home triad markets. In the process, they carefully analyze costs, revenues, factor conditions, growth potential, political risk, cultural factors, and environmental issues. One of the major strategic tools they use in this effort is an integration/responsiveness framework that helps them address the benefits of economic integration with those of national responsiveness.9 Figure 1 provides an illustration of this international management strategy matrix. (Figure 1 goes here) The vertical axis in Figure 1 represents the benefits of economic integration which yield economies of scale. Some of the characteristics of MNEs that employ high economic integration include centralized, closely integrated and internally coordinated operations, product line managers with high degrees of authority, and a strong headquarters office. The horizontal axis represents the ability of the MNE as an organization to develop skills in ³national responsiveness´. This means adapting its products and services to local cultures and tastes as well as investing to understand local political regulations and
public policies. Some of the characteristics of MNEs with high national responsiveness include strong local
66 autonomy with decentralization of operations and the ability of country managers to rapidly respond to local market conditions.10 The matrix in Figure 1 yields four generic economic integration/national responsiveness strategies. Quadrant 1 is a pure global strategy and is widely used by firms such as Ericsson and IKEA which focus heavily on going international to achieve the benefits of global integration using a successful home base product or service. We can call this a ³pure´ global strategy. Quadrant 4 is a pure national responsiveness strategy and is used by firms such as Unilever and the Kingfisher Group that carefully adapt their approaches to local market conditions.11 Quadrant 3 offers a balance of integration and national responsiveness strategies and is employed by firms such as the Peninsular and Orient Steam Navigation Company and Procter & Gamble, which have found that strong attention to both economies of scale and local customs, tastes, and culture are critical to success. Quadrant 2 is an unsatisfactory set of strategies that offer few or no benefits of either integration or national responsiveness and is avoided by successful MNEs. This matrix links the first part of this paper (with its discussion of the end of globalization) to the second (in which strategies of MNEs will be discussed, in a set of real world cases). In a sense, Quadrant 1 captures much of the discussion of ³globalization´ and ³global strategy´. The MNEs are driven by economic drivers and can succeed in an idealized world of free trade, political interdependence and cultural homogeneity. It is the quadrant of ³convergence´ of economic, political and cultural aspects of globalization, as discussed by Giddens, Grey, and Friedman.12 It is the economics-based quadrant of MNE activity, criticized by environmentalists, nongovernmental organizations (NGOs) and
77 advocates of a new ³civil society´. In other words, most of this literature on globalization is captured quite adequately in Quadrant 1. However, the matrix in Figure 1 has a right hand side column where MNEs can develop capabilities in national responsiveness, i.e. in being both politically aware and also culturally sensitive. The MNEs which can take advantage of the liability of foreignness by internationalizing such organizational capabilities will be able to outcompete both other MNEs stuck with a Quadrant 1 mindset and also domestic triad rivals who have local knowledge and connections. A major contribution of this paper is the recognition that the widespread globalization literature has not discussed the right hand side of Figure 1. Yet, this is where much of the action lies for many MNEs, whose managers today need to wrestle with either Quadrant 4 strategies of pure national responsiveness or with Quadrant 3 type issues of integration and localization.13 When MNEs target their regional triad markets using the appropriate economic integration/national responsiveness, they tend to be successful. We will discuss ten such cases below. Besides the U.S.-based Procter & Gamble, Canadian Nortel, and Japanese Matsushita we shall discuss the strategies of seven E.U.-based MNEs, as some of them may be unfamiliar to North American managers. Before proceeding we
shall next discuss three cases of these problems with a Quadrant 1 pure global strategy; two are U.S.-based and one is European. ³GLOBAL´ FAILURES
88 Over the past decade a number of MNEs that should have known better have tried to succeed with a globalization strategy. Some of the best-known include Coca-Cola, the Walt Disney Company, and Saatchi & Saatchi. In all three cases, these MNEs have developed a global strategy based on Quadrant 1 of Figure 1, i.e. one where the benefits of global integration are sought and the need to adapt products to local markets is largely ignored. Coca-Cola: Global Is Out, Local Is In After decades of continued success, Coca-Cola found itself facing a series of problems as it entered the millennium. During the 1970s and 1980s the firm had expanded its global reach into almost 200 countries. At the same time the company began to centralize control and to encourage consolidation among all bottling partners. In the 1990s, however, the world began to change. Many national and local leaders began seeking sovereignty over their political, economic, and cultural futures. As a result, the very forces that were making the world more connected and homogeneous were also triggering a powerful desire for local autonomy and the preservation of unique cultural identity. Simply put, the world was demanding more nimbleness, responsiveness, and sensitivity from MNEs, while Coca-Cola was centralizing decision making, standardizing operating practices, and insulating itself from this changing environment. Coke was going global, when it should have been going local.14 Today Coca-Cola is beginning to turn things around. In particular, the firm has begun implementing three principles that are designed to make it more locally responsive. First, Coke is instituting a strategy of ³think local, act local´ by putting increased decision making in the hands of local managers. Second, the company is focusing itself as a pure marketing company that pushes its brands on a regional and local basis. Third, the firm is
99 working to become a model citizen by reaching out to the local communities and getting involved in civic and charitable activities. In the past Coke succeeded because it understood and appealed to global commonalties. In the future it hopes to succeed by better understanding and appealing to local differences. Disney: Learning to Say Oui Not Yes Between 1988-1990 three $150 million amusement parks opened in France. By 1991 two of them were bankrupt and one was doing poorly. This track record did not concern the Walt Disney Company, which planned to open Europe¶s first Disneyland in 1992 on a site 20 miles east of Paris. There were over 100 million people within six hours driving distance of the park and company officials were certain that Euro Disney would be a major success. They were quite wrong.15 From opening day there were problems with the operation, as the company tried to implement a global strategy rather than a local one that accommodated the needs of Europeans. One of the problems was that workers were required to speak English at
meetings, even if most people in attendance were French. Another was that liquor was not sold in the park, although many visitors were accustomed to having a drink with lunch or dinner. A third was that many of the exhibits and rides did not have a local theme, they were the same as those in Disneyland USA and thus did not appeal to Europeans. A fourth was that labor policies were at odds with worker expectations, resulting in 3,000 employees leaving over pay and working conditions with a month of opening day. By 1994, after heavy losses, Euro Disney was in such poor shape that some observers believed that it would be shut down. Forced to reevaluate its approach, however,
1010 the company began making a series of changes, abandoning its global approach, and substituting one that appealed to local tastes. The name of the park was officially changed to ³Disneyland Paris´ and the company started to stress the regional origins of the fairy tale characters. In addition, the firm began creating European-specific attractions such as history movie shows and a science fiction tour based on Jules Verne¶s stories; the rules and regulations governing employee behavior were radically altered; and the services provided in the park, including the serving of alcoholic beverages, were changed to reflect local tastes. Today Disneyland Paris is profitable and local anti-Disney hostility is all but gone. The firm has come to realize that what works well in the U.S. cannot be directly transported overseas, as seen by its new regionally-focused strategy. Saatchi & Saatchi: When In Rome Saatchi & Saatchi, the successful British advertising firm, experienced spectacular growth in the 1980s partly due to a series of acquisitions in Britain and other European countries. The high quality of its advertisements, including those for the Thatcher government, and the vision of the Saatchi brothers enhanced their name in the U.K. The firm then decided to build a global business in order to achieve economies of scale.16 The U.S. market at this time accounted for 55 percent of all worldwide advertising revenue, far higher than the 24 percent that was generated in mainland Europe and the 5 percent accounted for by the UK. So the company decided to enter the North American market, which it did by purchasing the U.S.-based Bates advertising agency. At the same the company decided to build a global service supermarket for multinational enterprise clients by expanding its core advertising business to include a communications and public relations
1111 division and a consulting division. The objective of these efforts was to become a full service provider across the triad, using a common brand name. Unfortunately, the Saatchi organization lacked the requisite skills for integrating its approach into the local markets. Management failed to realize that advertising, communications, and consulting have to be geared toward local clients and a global, boiler-plate approach will not succeed. As a result, the firm¶s expansion into the U.S. market and its globalization efforts proved to be major failures. REGIONALIZATION AND STRATEGIC SUCCESSES
Successful MNEs do not always use the pure globalization, one-size-fits-all strategy of Quadrant 1. Rather they seek an optimal balance of economic integration and national responsiveness. In some cases MNEs employ high economic integration and low national responsiveness (Quadrant 1); in other instances they use high national responsiveness and low economic integration (Quadrant 4); and in still others they have a high focus on both areas(Quadrant 3). The most famous example of such a Quadrant 3 strategy is ABB, widely discussed in the literature.17 This section reports on examples of ten MNEs that are using one or other of these three strategies. (See Figure 2, which also shows the three MNE discussed in the previous section.) (Figure 2 goes here)
1212 Philips and Matsushita: Global Gladiators In terms of triad-based competition, the 1980s saw the emergence of Japanese winners in the consumer electronics industry. One of the most successful Japanese MNEs is Matsushita. Initially successful with color televisions (Panasonic TVs), its best known product was the video cassette recorder (VCR), a field which it denominates by using the VHS system instead of Sony¶s betamax format and others produced by European and American rivals. In order to dominate world business in VCRs, Matsushita made the VHS format the industry standard. It achieved this, not just by its own massive production and worldwide sales, but by licensing the VHS format to other MNEs such as Hitachi, Sharp, Mitsubishi and even its great European-based rival, Philips. Other companies like GE, RCA and Zenith (who sold VCRs under their own brand name) were tied into the VHS format because of the production and process technology retained by Matsushita in its strong Japanese home base. Massive global economies of scale enabled the firm to cut VCR prices by a half over its first five years. It operates a global strategy in Quadrant 1 of Figure 2. In contrast to Matsushita, Philips was in desperate trouble by the 1980s. Built up in the inter-war period of protectionism and strong government regulations it had developed a very decentralized organizational structure. Individual national country managers held the power in Philips and they were slow to respond to the Japanese threat in the post-war period. As a result Philips lacked economies of scale and its radios, TVs and VCRs were all too expensive, compared with similar Japanese products. Philips had over 600 manufacturing
plants across the world, all developing products for local markets. The challenge facing Philips was how to restructure its entire business away from Quadrant 4 of Figure 2 (a locally responsive national organization), towards becoming a more integrated and leaner
1313 manufacturer capable of reaping the necessary economies of scale through a standard production in the triad markets. This required a move to Quadrant 3 or even to Quadrant 1, to compete with its Japanese rival. In essence, the Japanese had changed the rules of the game in the consumer electronics business. Matsushita, as a centralized, high quality, low price and innovative company was beating the decentralized and nationally responsive European firm. One response by European firms was to lobby their governments for protection in the form of anti-dumping actions and tougher customs inspection of Japanese products. But such triadbased ³shelter´ only buys some breathing room before MNEs like Philips need to restructure and fit their organizational capability to the required industry strategy. Finally, the response of Matsushita to more protection has been to switch overseas sales from the export mode to one of foreign direct investment. This means that the Japanese firm can evade European trade barriers such as anti-dumping actions, since it actually manufactures in European countries, such as the United Kingdom, where it has a major plant in Cardiff, Wales. But this also means that Matsushita needs to make its foreign subsidiaries as useful as possible by encouraging local initiatives, (moving from Quadrant 1 to Quadrant 3), even where these conflict with its international, centralized Japanesebased management culture. The same government regulations which made Philips too decentralized are now being reapplied half a century later to make Matsushita less global and more local.
1414 IKEA: Low Cost²And Designed To Stay That Way In less than 50 years IKEA has grown from a small, privately-held, Swedish furniture retailer into a $7 billion multinational corporation with 140 stores in 30 countries. Focusing heavily on an economic integration strategy, the company introduced knockdown kits that customers can buy at the store and assemble at home. IKEA also brought innovation to the logistics of furniture production by establishing groups of key suppliers to produce components at low cost, while maintaining tight control over product design and
quality in order to maintain the IKEA brand name and the distinctive identity of its products. After establishing itself in Sweden as a high quality, low cost producer of modern, functional, durable, and competitively priced furniture, the company began to ³internationalize´ and become a strong regional player in Europe and, in more recent years, across the triad. During the 1970s it moved into Switzerland, Germany, Australia, and Canada. In the 1980s it expanded into Europe at large, as well as into the United States. In the past few years it has begun establishing operations in Shanghai. This is a Quadrant 1 strategy of building upon a strong home-based Swedish concept of clean, efficient, well designed, functional, durable and modern furniture. The product is not adapted as international expansion takes place. Today IKEA continues to focus on the high economic integration, low national responsiveness strategy of Quadrant 1. It has been successful by introducing highly differentiated products into a traditional industry and has now established a universally recognized brand name for high quality, inexpensive, and attractive furniture. By combining the generic strategies of differentiation, low cost, and niching,18 the firm has been able to maintain its success as a Quadrant 1 player (again see Figure 2).
1515 Kingfisher: Where Retail Is Detail In contrast to the Quadrant 1 ³internationalization´ strategy of IKEA, other retailers are more nationally responsive. One example is Kingfisher. The Kingfisher Group, a British retail enterprise with annual sales of over $10 billion, was founded in 1989. Today the firm has over 2,500 stores, principally in Great Britain and France, although in recent years the group has made acquisitions in Asia. The firm¶s major holdings include British Woolworth Stores, Comet (electrical products), Superdrug, B&Q (home improvement stores), Darty (electrical retailer), and Castorama (do-it-yourself retailer), as well as an electrical retail chain in Singapore. A recent study of the profitability of foreign assets found that the Kingfisher Group had an annual return on foreign profits in excess of 30 percent, well above the average of 4.78 percent for the world¶s top 500 MNEs.19 The company has been increasing its foreign holdings in recent years by acquisitions of leading continental European retailers and now has 40 percent of its assets in overseas markets. The approach that is used in managing these geographically dispersed operations can be best described as: ³retail is detail´ and ³local knowledge is vital.´ The firm relies heavily on a Quadrant 4 strategy by keeping in place the European managers and workers in its
acquired businesses, as they are best suited to deal with local customers. In order to keep costs to a minimum in an industry where price is a key factor, the firm is continually looking for ways to generate logistical savings and scale economies. Should this trend continue, the Kingfisher Group will move into Quadrant 3. However, for the moment it is doing very well with its regionally-focused strategy in Quadrant 4.
1616 In contrast, Wal-Mart, the world¶s largest retailer is using its strong U.S. base to expand abroad, more like IKEA than Kingfisher. Wal-Mart is pursing a Quadrant 1 strategy and this has led it into some difficulty in Europe, especially in Germany and Britain where there are few large suburban shopping malls, and insufficient space for Wal-Mart in the traditional ³high-street´ shops. Nokia And Ericsson: Small Phones But Big Markets Nokia, headquartered in one of the smallest countries in Europe, Finland, is the world¶s largest producer of mobile phones. It is the leader in Europe and second only to Motorola in the United States. In the 1970s Nokia transformed itself from a forest products firm into a high technology producer of electronic products, especially cellular phones; and by the end of the millennium the company was operating in 130 countries with annual sales of almost $20 billion.20 Because there are only 3 million people in Finland, Nokia has actively pursued a Quadrant 1 internationalization strategy and today 95 percent of all revenues are generated outside of its borders. A large degree of this success can be attributed to its research and development (R&D) efforts which have resulted in mobile phones that employ ³global roaming,´ thus allowing the unit to be used across different telecom systems worldwide. Nokia has also been very successful in forming strategic alliances with U.S. distributors such as Radio Shack and American telecom companies such as AT&T, thus providing it with access to large markets where it can successfully employ its economic integration strategy. In addition, Nokia has worked closely with governments to develop an industry standard (a Quadrant 1 strategy) and has entered into a joint venture with its major rival,
1717 Ericsson, for this purpose. The two firms are working to establish GSM (Groupe Spéciale Mobile) as the standard for mobile phones across Europe, in addition to its becoming one of
the key standards globally. L.M. Ericsson is one of the world¶s largest producers of digital mobile phones. Like Nokia, its small phones have a worldwide market. Only 6 percent of its $24 billion annual revenue is earned in its home country of Sweden.21 Its biggest revenue markets are Europe (40 percent), Asia (27 percent), and North America (16 percent). Like Nokia, the firm places major emphasis on R&D and innovation and, among other things, has developed telephone switches that compete effectively with Canada¶s Nortel Networks and France¶s Alcatel. Ericsson has also formed alliances with firms such as Compaq, Intel, Hewlett Packard, and Texas Instruments. These firms serve as key suppliers of components and products that Ericsson uses for voice and data transmission. This outsourcing approach also helps the company, like its competitor Nokia, maintain a successful Quadrant 1 strategy. Both Nokia and Ericsson are working for the development of standardized global telecom services which will make Quadrant 1 viable in the long term. At present, different national regulations affecting telecommunications raises the possibility of a Quadrant 3 strategy being necessary. Nortel Networks: A Transnational Firm Northern Telecom, now called Nortel Networks, had transformed itself from a Canadian-based multinational enterprise in 1977 to a North American-based MNE by 1987 to a quadrant 3 transnational corporation by 1997. Between 1985 and 1998, its revenue
1818 increased from US$4.2 billion to US$18.7 billion and total employees from 46,500 to 80,000. In 1985, over 90 per cent of its sales were within North America. Today, Nortel has 92 per cent of its sales outside Canada, and 40 per cent of all sales outside of North America. It spends over 15 percent of its sales on R&D. Moreover, one in four of Nortel¶s employees focuses on R&D, working in 42 R&D facilities in 17 countries, along with numerous joint ventures and strategic alliances. Overall, the number of knowledge workers has increased from 42 per cent in 1985 to 66 per cent in 1995, rising to 75 per cent by 1998. While Nortel competes globally in the telecommunications sector, it is not operating as if borders do not exist. Despite the apparent globalization of the telecom sector, there remains a very high degree of government regulation and a set of regionally-separated national markets. Even with the WTO¶s International Technology Agreement of 1995, there is no single world market for telecommunications. Nortel must be flexible enough to respond to differences in national regulations and consumer tastes, so it has adopted a policy of national responsiveness. With this strategy, a firm like Nortel can be ³close to the customer´ and responsive to the local regulator.22
The key managerial challenge for Nortel today is how to organize effective ³networks´ with allies and strategic partners across the segmented regional markets characteristic of the telecommunications sector. Nortel¶s objective is to be the global resource for digital network solutions and services. It aims to deliver a total network solution of technical assistance, training, customer service and documentation in partnership with its clients. By building and integrating both wireline and wireless digital networks on a global basis and operating as a transnational corporation (TNC), Nortel has moved towards
1919 achieving this objective. In 1998, Nortel purchased Bay Networks, a Silicon Valley internet firm for Cdn$11.2 billion. It did this to refocus itself as an internet-based provider of digital networking solutions. It also did this nearly two years before the world¶s biggest ever merger, of internet leader AOL and entertainment/magazine leader Time Warner, in January 2000. Unilever: Local Tastes And Worldwide Profits Unilever is the second largest consumer goods company in the world. This BritishDutch firm currently markets over 1,500 brands (although it is moving to reduce this number to 400)23 of food and home and personal care products in 158 countries and has annual revenues of more than $44 billion. Much of this success can be attributed to its high national responsiveness and low economic integration strategy (Quadrant 4 of Figure 2). Unilever¶s strategy is to remain close to customers in the local markets while giving regional managers authority to make operating decisions in these geographic areas. The company¶s national responsiveness strategy has been particularly effective in many regions because it has operated there for decades and understands the local culture. For example, it has been in the Philippines, Chile, Argentina, and Brazil since the late 1920s and in India and Indonesia since the early 1930s. It was in China soon after WW I and when that government opened itself up to outside businesses in the 1980s, Unilever was quick to sign joint venture agreements to reenter the market. As a result, sales in China are now in the range of $500 million. In particular, Unilever¶s success in emerging markets is a result of its regional perspective. Selling to consumers from diverse cultures with different local tastes requires a
2020 locally-driven strategy that addresses the unique characteristics of the buyers. Unilever has done a very good job of ensuring that its managers understand the specific needs of their diverse customers. The firm does this with its Quadrant 4 strategy.
P&G: Regional Focus And Global Coordination Procter and Gamble (P&G) with annual sales of almost $40 billion has operations in virtually every country of the world. In carrying out its operations, the firm employs a strategy that combines high national responsiveness with high economic integration. In contrast to Unilever, P&G is using a Quadrant 3 strategy. In its latest organizational restructuring, called Project 2005, the company has grouped its 200+ brand products into seven major business units. Each of these units is now coordinated globally from different locations. For example, some are run from Japan, Venezuela, and Austria, while others are managed from headquarters in Cincinnati, Ohio. These seven product divisions are called ³global´ business units, but in practice they operate in a highly decentralized manner with strategies being developed and implemented locally and/or regionally. In particular, product delivery and marketing are local, as befits a customer-based products business, while the ³back office´ of payroll, financing, human resource management and other general services and processes is coordinated on a more global basis, in order to achieve internal economies of scale. In addition, P&G uses the best practices of each subsidiary as benchmarks for the others. Simply put, the firm has created an organization structure and an operating strategy that meet the twin goals of economic efficiency and localization. And in recent years, to ensure that it does not drift toward a Quadrant 1 pure globalization strategy that fails to
2121 address local needs, the company has refashioned its board of directors. Today this group is more international than ever, with membership from South America, Canada, Europe, and Asia, in addition to the United States. As a result, the members bring regional/triad viewpoints to the board, with the objective of ensuring that P&G continues to operate with a Quadrant 3 strategy. P&O: From Cruises To Containers The Peninsular and Orient Steam Navigation Company (P&O) was the sea transportation backbone of the old British Empire. In the nineteenth century the firm won British government contracts to deliver mail to the Spanish peninsula and, via Africa and the Indian subcontinent, to Australia and the Far East. Today P&O is a $10 billion transportation and service business that is one of the UK¶s most international firms. P&O
uses its familiar brand name as a base for its British Commonwealth cruise ships, cross channel ferries, container ships, and pan European trucking. Meanwhile, in North America, the firm operates the Princess (Sun Princess, Dawn Princess, Grand Princess, and Ocean Princess) cruise ships out of Florida and along the North American west coast to Alaska. This North American operation is run separately from the company¶s European cruise lines; and using a nationally responsive Quadrant 4 strategy, P&O has been able to appeal to the ³baby boomers´ in the North American market. In fact, its strategy has been so successful that these cruise ships often sail with 100 percent occupancy. In Europe, the British and European-based P&O cruise lines are also operated on a regional basis, appealing to the particular needs of these markets.
2222 P&O is also one of the world¶s largest container carrier operators. The business has routes across all the world¶s oceans and its container ships are linked up with P&O European Trucks, the largest integrated distribution and transport system in Europe. These need economies of scale as in Quadrant 1. Meanwhile P&O Ferries, the largest operation between Britain and the continent, continues to do well despite competition from the Eurotunnel. Overall the company faces an interesting strategic challenge of managing a series of businesses that range from leisure and entertainment to shipping. The firm¶s long range strategy falls into Quadrant 3 of Figure 2. P&O is a transnational company that manages a marketing, sales and service culture (cruise lines) and an engineering and technical culture (shipping). It has done this in number of ways including the development of extensive senior management training programs at Templeton College, Oxford University, which are designed to increase managerial efficiency and help executives address the specific needs of their varied international markets.24 LESSONS LEARNED The case examples provided here show clearly that a pure globalization strategy of Quadrant 1 that is typified by high economic integration and low national responsiveness will not always work in the 21st century. In fact, firms that attempt this approach tend to be from strong triad-based home markets in consumer electronics or retailing, or hope to
develop a global standard (as in mobile phones). Some MNEs in Quadrant 1 have significantly lower returns on their foreign assets than do MNEs that balance a concern for economic integration with that of national responsiveness.25 For example, recently Japanese
2323 MNEs have used the globalization approach (Quadrant 1 of Figure 2) with disastrous results. The relatively more successful European MNEs tend to opt for strategies in Quadrants 1 and 4, although recent research shows that some of them are now beginning to move into Quadrant 3. Successful American MNEs also tend to adopt a Quadrant 3, transnational approach. Which are sure of the lessons to be learned from analysis of these ten MNEs? yPhilips has been in trouble as its country managers were too powerful and the firm was too decentralized, in Quadrant 4. The push for a single EU market to provide a ³home-base´ to offset the advantages of U.S. and Japanese rivals is a logical response. yIn contrast, Matsushita has successfully penetrated the U.S. and European triad markets in Quadrant 1 but is now attempting to get more value out of its subsidiaries and be a little nationally responsive. yIKEA has followed a Quadrant 1 home-based internationalization strategy whereas Kingfisher has not followed a standardized approach but rather left its French and German acquisitions alone to deal with triad retail customers, a Quadrant 4 approach. yNokia and Ericsson. The two mobile phone producers are successful as domestic champions and have been able to internationalize into larger triad markets, despite strong national telecom regulations, as they are attempting to develop a Quadrant 1 ³global standard´ for mobile phones. yNortel has already developed into a Quadrant 3 ³transnational´ MNE with strong decentralization within a network combined with integration
2424 skills in terms of communication and common strategy. P&O has also developed a Quadrant 3 strategy of decentralized cruise ships combined with centralized global logistics. yUnilever has been moving to consolidate its many national and regional brands into a manageable number and it is operating on a regional basis. yIn contrast, Procter and Gamble is attempting to set up seven worldwide product groups, the top management of which is spread around the triad. Both companies are nationally responsive; Unilever in Quadrant 4 and Procter and Gamble in Quadrant 3. What quadrant is best? This will depend on the specific situation, but it is possible to offer some practical strategies for managers who want to increase their company¶s international revenues and profits. Five of the most useful lessons learned are these: 1. Do not assume an integrated global market. There is more to strategy
than Quadrant 1. Instead, be prepared to design strategies that take into account regional trade and investment agreements such as NAFTA or the single market of the EU. Also learn to deal with different cultures and become ³nationally responsive´ when necessary. 2. Design organization structures for Quadrants 3 and 4 which recognize triad-based internal know-how capability and develop network organizational competencies, rather than always rely on international divisions or global product divisions, in Quadrant 1. 3. Develop new thinking and knowledge about regional business networks and triad-based clusters and assess the similar attributes of triad
2525 competitors, rather than always developing pure global strategies. The foreign market is not always the same as your home market.. Make alliances and foster cross-cultural awareness in your senior managers. 4. Develop analytical methods for assessing regional drivers of success rather than globalization drivers because the former may be more useful in the future in gaining and holding market share. 5. Encourage all your managers to think regional, act local - and forget global!
2626 Exhibit 1 EXPORTS IN THE BROAD TRIAD NAFTA 1010.9 intra-NAFTA 496.4 (49.1%) 220.0 182.1 226.0 155.3 ASIA EUROPEAN UNION 1042.6 153.3 2092.3 intra-Asia intra-EU 553.4 (53.1%) 197.6 1268.5 (60.6%) Note: Data are for 1997, in US$ billion. Source: Alan M. Rugman The End of Globalization (London: Random House Business Books, 2000 and New York: AMACOM/McGraw-Hill, 2001).
2727 Figure 1 THE INTERNATIONAL MANAGEMENT STRATEGY MATRIX National Responsiveness Low High Economic 1 3 Integration High 24
Low Source: Adapted from Christopher A. Bartlett and Sumantra Ghoshal. Managing Across Borders : The Transnational Solution. Boston: Harvard Business School Press 1989, 2nd Edition 1998.
2828 Figure 2 MNE STRATEGIES AND THE INTERNATIONAL MANAGEMENT STRATEGY MATRIX National Responsiveness Low High Economic 1 Coca-Cola 3 Procter & Gamble Integration Disney Nortel Networks Saatchi & Saatchi P&O High Matsushita IKEA Nokia Ericsson 2 4 Philips Unilever Kingfisher Low
Rugman, A. and R. Hodgetts. 2000. International Business, 2nd edition. London: Pearson Education /Prentice Hall: 615. The definition of ³globalization´ is a subject of intense academic debate. Most business school scholars would adopt the economics-based definition used here, where integration across national borders yields the potential for firm-level economies of scale and/or global brand name products. Contingent upon this definition of ³pure´ economic globalization is the need for products to be uniform across markets. A much broader definition of globalization is used by other writers such as Anthony Giddens, a sociologist. He defines globalization as ³the worldwide interconnection at the cultural, political and economic level resulting from the elimination of communication and trade barriers´ and he states that ³globalization is a process of convergence of cultural, political and economic aspects of life´, Giddens A. 1999. Runaway World : How Globalisation is Reshaping our Lives. London: Profile Books. Again, convergence (of cultures, tastes, regulations etc) is an extreme version of homogeneity of products and services. The thesis of this article is that such convergence and homogeneity has not
occurred; instead of globalization we observe regional/trial production and distribution. Therefore, MNEs do not need global strategies; regional ones are more relevant. 2 Yip, G. 1995. Total Global Strategy. Englewood Cliffs: NJ: Prentice Hall. However, Schlie and Yip (2000) have suggested that automobile firms can be observed as following a µregional´ strategy (equivalent to our ³triad´ regional strategy.) They argue that, first, any firms develop globally and only selectively regionalize as a second step. Examples of triad products are the Honda Accord (with the flexible-width platform), the VW group cars, and the old Ford and GM European versions of their cars. See Schlie, Erik H. and George S. Yip (2000) ³Regional Follows Global: Strategy Mixes in the World Automotive Industry´, European Management Journal 18 (4), 343356. 3 For more on these firms see the ³Top 100 TNCs Ranked by Foreign Assets,´ World Investment Report 1997 New York: United Nations, 1997. 4 NAFTA consists of the United States, Canada, and Mexico. The European Union is made up of Belgium, France, Italy, Luxembourg, the Netherlands, Germany, Great Britain, Denmark, Greece, Ireland, Portugal, Spain, Austria, Finland, and Sweden. The major Asian countries included here include Australia, China, India, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Taiwan, and Thailand as well as Japan. 5 Rugman, A. 2000. The End of Globalization. London: Random House, Chapter 1. (This book is to be published by AMACOM/McGraw-Hill, 2001 in North America). 6 These data have been adapted from ³The Fortune Global 500,´ Fortune, August 2, 1999. 7 Rugman, A. 1996. The Theory of Multinational Enterprises. Cheltenham: Elgar and Rugman, A. and J. D¶Cruz 2000. Multinationals as Flagship Firms: Regional Business Networks. Oxford: Oxford University Press. 8 Rugman, A. 2000. The End of Globalization. London: Random House Business Books, Chapter 7. The initial focus on the triad is due to the work of former McKinsey consultant, Kenichi Ohmae; Ohmae, K., 1985. Triad Power. New York Free Press. However, Ohmae has subsequently become a strong advocate of Quadrant 1 ³pure´ economic globalization and is not supportive of policies of national responsiveness; Ohmae, K., 1990. The Borderless World. New York: Harper Business; Ohmae, K., 1995. The End of the Nation State. New York: Free Press. 9 Bartlett, C. and S. Ghoshal, 1989. Managing Across Borders. Boston: Harvard Business School Press.
10 A referee has suggested that the axes may be orthogonal. The vertical axis of Figure 1 represents economic integration with centralized decision making at head office and high product line authority (Quadrant 1). The horizontal axis is characterized by
strong decentralization and rapid local response (Quadrant 4). The referee wonders how can the MNE be both centralized and decentralized? The answer is that it is in Quadrant 3, where there are organizational tensions in attempting to conduct the two required strategies of integration and localization simultaneously. For further discussion of this matrix, and strategies of the use of it in nine MNEs see Bartlett, A., and S. Ghoshal, 1989. Managing Across Borders Boston: Harvard Business School Press.
11 Yip, building on Levitt and Porter, is representative of many international business and international marketing professors in advocating a ³pure´ global strategy. In terms of Figure 1, Yip would argue that ³national responsiveness´ is a sign of weakness for a firm. His vision of global strategy is to exploit foreign markets by using a standard capability, usually developed in the home base. Firms should only go into countries where they can use their core capability; if they need to adapt to the local market then it is better to avoid the liability of foreignness. This logic of Yip, Porter and Levitt is captured entirely by quadrant 1 of Figure 1. Here, indeed, local adaptation is a sign of weakness and firms are successful due to a pure globalization strategy of low cost, differentiation, or niching. Yet, the logic of Figure 1 is that quadrant 4 is, conceptually, just as important. Here success is achieved by national responsiveness alone, and is not due to Yip¶s conventional strategies. Being nationally responsive itself can be a core competence. Finally, in quadrant 3, firms need to wrestle with both types of strategy and develop an organizational capability to resolve these differentiation. This organizational capability then becomes a core competence in itself. Yip, G. 1995. Total Global Strategy, Englewood Cliffs: NJ: Prentice Hall; Porter, M. 1990. The Competitive Advantage of Nations, New York: Free Press; Levitt, T. 1983 ³The Globalization of Markets´, Harvard Business Review, 61 (May-June): 92-102. 12 Giddens A. 1999. Runaway World: How Globalisation is Reshaping our Lives. London : Profile Books;
Friedman, T. 1999. The Lexus and the Olive Tree; Gray, J. 1998. False Dawn: The Delusions of Global Capitalism. London: Granta Books. 13 Most of the ³domestic´ strategy literature also is confined to Quadrant 1, e.g. the work by Michael Porter on the competitiveness of nations uses a ³diamond´ framework, in which MNEs build Quadrant 1 global strategies based on the strengths of their home country diamond. This is also consistent with Vernon¶s product life cycle explanation of the global spread of U.S. MNEs. Porter, M. 1990. The Competitive Advantage of Nations. New York: Free Press; Vernon, R. 1966. ³International Investment and International Trade in the Product Cycle´, Quarterly Journal of Economics LXXX.2.
Daft, D. ³Back to Classic Coke,´ Financial Times, March 27, 2000: pp 20 15 Greenhouse, S. ³Playing Disney in the Parisian Fields,´ New York Times, February 17, 1991, Section 3, pp. 1, 6;
³Euro Disney Resignation,´ New York Times, January 16, 1993, p. 10; W. Heuslein, ³Travel,´ Forbes, January 4, 1993, p. 178; S. Toy and P. Dwyer, ³Is Disney Headed for the Euro-Trash Heap? Business Week, January 4, 1994, p. 52; T. Stanger et al. ³Mickey¶s Trip to Trouble,´ Newsweek, February 4, 1994, pp. 34-39; ³International Briefs: Revenue for Euro Disney Up by 17% in Quarter,´ New York Times, January 22, 1998; and http://www.clubblue.com/text/headlines/9«nment/stories/industry_eurodisney_1.html; http://www.informatik.tumuenchen. de/~schaffnr/etc/disney/his8891.htm; http://www.informatik.tumuenchen.de/~schaffnr/etc/disney/finhist.htm. 16 Levitt, T. 1983. ³The Globalization of Markets,´ Harvard Business Review, 61 (May-June): 92102.
ABB is one of the core nine cases discussed by Bartlett, Christopher and Sumantra Ghoshal (1989) Managing Across Borders. Boston: Harvard Business School Press, Second Edition, 1998. It is also discussed in Ghoshal, Sumantra and Christopher Bartlett (1997). The Individualized Corporation. New York: Harper Business, in which the former CEO of ABB, Percy Barnevik is used as a spokesperson for a Quadrant 3 transnational solution.
Porter, M. 1980. Competitive Strategy. New York: Free Press. Gestrin, M., R. Knight and A. Rugman 2000. The Templeton Global Performance Index 2000. Oxford: University of Oxford: Templeton College Executive Briefings. 20 Nokia annual report, 1999. 21 Ericsson annual report, 1999.
Nortel is a ³transnational corporation´, (TNC) on three grounds. First, Nortel has decentralized decision making, to reflect the regional nature of the telecommunications market for products and services. A large degree of autonomy is given to product-sector and country managers. Second, Nortel has an international managerial resource strategy which decentralizes major decision making to some 200 top executives in more than a dozen markets around the world. In 1987, Northern Telecom was run by five to ten people out of head office in Mississauga, Ontario. The 200 top managers making vital decisions today operate with the large degree of autonomy typical of the TNC. Third, Nortel¶s decentralized top management structure is held together by heavy use of the Internet for inter-office communication. Nortel has its own internal electronic voice mail, and data network, which is heavily used by senior managers, as well as all other employees. The senior managers are members of the President¶s Council, which conducts its business through the corporate intranet.
Orr, D. ³A Giant Reawakens,´ Forbes, January 25, 1999, pp. 52-54; ³Unilever to Purge Three out of Four Brands´, The Times, September 22, 1999, p. 45; ³Munching on Change ± Unilever¶s food business´, The Economist, January 6, 1996, pp. 56-61; http://www.unilever.com. 24 P&O, Annual reports. 25 Gestrin, M., R. Knight and A. Rugman 2000. The Templeton Global Performance Index 2000. Oxford: University of Oxford: Templeton College Executive Briefings.
Global manager: A myth or reality? The profile of a global manager is not just looking at the global market but also the domestic market. And the ingredients which make a global manager are simple basics which are imbibed into us but lose their prominence. Awareness, exposure, comprehension, conviction and maturity are the qualities which make the global managers of today, said corporates. At the other end of the spectrum, management institutions need to constantly upgrade their knowledge and be sensitive to the changing environment to help create global managers. These were the thoughts elucidated by speakers at the 8th Directors Conclave in Mumbai which was organised by All India Management Association and Bombay Management Association in collaboration with Narsee Monjee Institute of Management Speaking to FE, R Gopalakrishnan, executive director, Tata Sons Ltd said that global managers are made not through inherent quality but ones which are acquired. There are three or four criteria which make global managers. They are the awareness of the world beyond your realm, need to gain exposure, comprehension of the fact that the information is relevant for me as well and conviction, said Mr Gopalakrishnan. At the conclave, speakers from the industry said that in the era of globalisation, there is no such thing as a global manager. Instead business managers of today have to operate in a climate which comprise the changing
aspirations of customers, shareholders, employees and Government. Mr Arvind Agarwal, president - corporate development & HR, RPG Enterprises, said that there are business managers, country managers and functional managers, who have their own set of responsibilities. At the core of a global manager is personal maturity and the maturity comprises of discipline, focus, respect for the cultural differences, ability to manage own's growth in the highly competitive atmosphere and emotional intelligence, said Mr. Agarwal. He added that the hallmarks of a global managers is that they are hands on and tend to take the responsibilities on themselves instead of passing it onto others. The traits of a global manager are fundamental and are present in all managers. They are not Chinese, Japanese or Indian, said Mr. Agarwal. Satish Pradhan, executive vice president, Tata Sons Ltd believed that the idea should not be to become what he called export quality manager. Explaining further, he said that globalization today means that a company is competing in the domestic market and protecting its turf from international players making an entry. Alternatively, it is the same company foraying into international market. So in essence, the traits of a global manager are as useful internationally as it is when it comes to the domestic market. A global manager is one who understands and recognizes the patterns. The manager is able to withstand the pressure and is sensitive to issues and lastly the family or social moorings also play an important role in making a good manager, said Mr.Pradhan. Dr Prakash Apte, director, IIM Bangalore said that the export quality tag is fine as long as the consideration is not just costs but the capability and talent of Indian managers. And the process of fine tuning the talent and capability of the Indian managers also rests largely with business schools and management institutions. The
institutions have to keep the course content on par with the rest of the world. The faculty has to keep itself abreast with the latest practices and techniques. The idea is to take the international standards and marry it with the socio-economic context of India, said Dr Apte.
What is a global manager? Bartlett CA, Ghoshal S. Source Harvard Business School. Abstract
To compete around the world, a company needs three strategic capabilities: globalscale efficiency, local responsiveness, and the ability to leverage learning worldwide. No single "global" manager can build these capabilities. Rather, groups of specialized managers must integrate assets, resources, and people in diverse operating units. Such managers are made, not born. And how to make them is--and must be--the foremost question for corporate managers. Drawing on their research with leading transnational corporations, Christopher Bartlett and Sumantra Ghoshal identify three types of global managers. They also illustrate the responsibilities each position involves through a close look at the careers of successful executives: Leif Johansson of Electrolux, Howard Gottlieb of NEC, and Wahib Zaki of Procter & Gamble. The first type is the global business or productdivision manager who must build worldwide efficiency and competitiveness. These managers recognize cross-border opportunities and risks as well as link activities and capabilities around the world. The second is the country manager whose unit is the building block for worldwide operations. These managers are responsible for understanding and interpreting local markets, building local resources and capabilities, and contributing to--and participating in--the development of global strategy. Finally, there are worldwide functional specialists-the managers whose potential is least appreciated in many traditional multinational companies. To transfer expertise from one unit to another and leverage learning, these managers must scan the company for good ideas and best practice, cross-pollinate among units, and champion innovations with worldwide applications.