Need for Complex Strategies in Todays Global Business Landscape - Essay Example

?INDIVIDUAL REFLECTIVE REPORT Introduction Unarguably, globalization is like an implacable avalanche. Whether we like it or not it is here to stay today and will persist in a number of years to come. My full appreciation for this point came with my understanding on this module, particularly with the three readings: “How Local Companies Keep Multinationals at Bay” by Arindam Bhattacharya and David Michael; Making Global Strategies Work by Chan Kim and Renee Mauborgne; and, “Global and Transnational Business” by Stonehouse, Campbell, Hamill and Purdie. Collectively, they explained the dynamics of the global business landscape and the variables that drive the numerous processes at work within it. Concepts such as culture, technology, knowledge and the legal and political diversities found in various national economies all combined to demand new and complex requirements for multinational companies. These has called for their transformation as truly global organizations through changes in their organizational structure and the adoption of new business strategies in order to address the unique challenges and issues posed by the global environment. Before this module began, I have an inkling on what globalization is and its impact on both organizations, national economies and consumers. But my knowledge was limited to the superficial, abstract and general concepts. For instance, I know that globalization threatens local companies and could endanger their very survival because of the superior strength of the resources available to multinational companies that are invading the local market. But this module enlightened me further on the fact that it is not always easy for multinational companies to do this. This is demonstrated in the way many local enterprises has effectively thrived and held themselves in competition with them. Main Body According to Stonehouse, Campbell and Hamill, there is no single form of globalization and they promptly cited some of the most important of these. First, there is the so-called globalization of markets, which is “the development of products satisfying customer needs that are common throughout the world” with ‘market’ in this context referring to “the demand side of an economic system of exchange.” (p8-9) Secondly, there is the form of globalization that relates to the way organizations structure, control and manage their value-chains in terms of global operations. This is done “according to the availability of resources, cost levels, skills, quality and a host of other variables. (p. 9) These two forms of globalization supposedly were responsible for the emergence and the perpetuation of multinational companies who have already surpassed small national-economies in revenue generation. The third form, is characterized by how globalization adversely impacts several areas such as the democratic system, the environment, national cultures and identities, among others. (p. 12) The sheer complexity of the globalization economic model, hence, calls for a multidimensional approach by which stakeholders navigate its processes. Stonehouse, Campbell and Hamill emphasized, for example, that it should already be obvious how multinational/transnational companies must never adopt a global strategy that is primarily characterized by global standardization because it will fail. (p. 8) Companies have to make some fine-tuning in their strategies every time they enter a market. The reason is that each country has its own national circumstance. This can also be demonstrated in the numerous organizational configurations developed in order to pursue different objectives and address specific areas in the global business environment (see figure 1). Motives, Strategies and Organizational Configurations (Source: Bartlett and Beamish) As I saw from the diversity in organizational structure, I understood the sense in rejecting a global standards in strategy. For example, the Centralized Hub organizational model may work in some economies or markets with fierce competition but may not work in business environments that are dominated by few players. This theme in global business is highlighted in Bhattacharya and Michael’s investigation on how local enterprises successfully kept multinationals from wiping them out. The idea is that these local organizations and the wider national economies, which they belong to, are neither “behind developed ones nor show signs of converging with them.” (p86) As previously mentioned, this is one of the most interesting areas for me. I have always thought that local businesses tend to be overwhelmed because, in terms of resource, they are at a disadvantage. Bhattacharya and Michael was able to cite several compelling evidences that changed my point of view. For example, there is the case of reforms that are being implemented by national economies. These reforms supposedly allow local entrepreneurship to flourish. This reforms are not even designed primarily to protect them against competition from multinational companies. There was no talk about subsidies and regulatory mechanisms. Rather, there was the emphasis on eliminating challenges such as the bureaucratic red tape and the way capital became available at a cheaper cost. (p86) Then there was also the point raised by Kim and Mauborgne that multinational companies tend to fail when strategies drafted by the main headquarters are not being implemented by subsidiary managers. The subsidiary executives supposedly clamor for “due process” and increased involvement in decision-making process (see Fig. 2). I think that this finding shows how management at the local level see a lot of disconnections in the way their headquarters perceive their jurisdictions. This also highlights the previously cited fact about the failure of globally standardized strategies. Only the subsidiary managers could understand local circumstances that is why they are often at odds with the global strategies drafted by the global managers. Fig. 2: What is Due Process in Global Strategic Decision Making (Source: Chan and Mauborgne, p12) Then, there is also the case of culture, knowledge and technology variables. I think they are the most potent factors that shape the way business is conducted globally. A discussion of these variables is always present in all of the readings I’ve had in this module. They universally cited their present enabling role and their future impact on global business. Currently, technology and knowledge fundamentally plays a transformational role as transnational companies had just only began to scramble to integrate them into their operations. Culture and national circumstance, posed the challenges. Conclusion All in all, I have learned that in today’s global business landscape there is a need for complex strategies on the part of multinational companies. They should be suited for each and every market/economy that they operate in or plan to penetrate. First, there are the different cultural, political and legal landscapes present in national economies. Secondly, there is the case of technology and knowledge that empowers local companies to be more competitive. Clearly, I believe that it is no longer an issue of resources alone. Multinationals need clever strategies that addresses numerous factors simultaneously. They should never be standardized. Bibliography Global and transnational business: strategy and management 2nd edition (2004) John Wiley and Sons Stonehouse, G, Campbell D, Hamill, J and Purdie, T How Local Companies Keep Multinationals at Bay (March 2008) Harvard Business Review Bhattacharya, A and Michael, D Making Global Strategies Work (1993) Sloan Management Review Kim, C and Mauborgne, R Appendix 1 Global Transnational Business Strategy and Management File 1 Stonehouse, Campbell and Hamill allowed me to understand that there are many variables that are involved in the development of strategy and management of multinational companies today. I found that it is a complicated process involving a global and local perspective as companies struggle to reconcile the dynamics between he global and national systems. One of the fundamental issues that I learned was how globalization impacts business strategy and management. Besides an understanding of the concept I came to gain deeper insights as to its positive and negative characteristics especially from the point of view of the business sector as well as the national economies. I found that globalization is ideally the culmination of the capitalist system, integrating the world as one huge marketplace. It allows for the more rapid flow and transfer of capital, the increased competition among countries, and the increased production and, hence, profit of multinational companies, the enormous benefits for consumers, among others. Globalization has several perceived ill effects. For example, as has been cited by the authors, threatens national cultures and identities of both the developing and developed countries through international media, the Internet and increased geographical mobility of people. There is also the claim that globalization threatens democracy and damages the environment because of the capitalists’ preoccupation with profit. The cultural theme in globalization has given rise to nationalistic reactions to its impact. An important issue against globalization was its supposed capacity to breed inequality, widen the income gap between developed and developing countries and the accusation of exploitation as multinational companies seek the cheapest labor for their production in poorer countries. The discourse of the global landscape enabled me to understand the crucial role that technology plays in its persistence. The Internet, computing technology and mobile communications demonstrate this best as they enable people, organizations, businesses and groups to communicate swiftly reinforcing globalization. In many respects, technology streamlines production and the sale of goods. As Stonehouse, Campbell and Hamill covered all issues as comprehensively as possible, I came to know why there is a need for the so-called “global organization”. I understood why there is a need for unique core competencies, best practices, strategies and resources. By understanding that organizations are systems, I found greater insights on its activities especially in the context of the global landscape. Another important issue that I was able to understand in good measure was the nature of global competition. Crucial to this understanding was the authors’ analysis of the seven areas that composed the global competitive environment. Finally, with the discourse on competitive advantage, I was able to fully appreciate the idea of a truly global strategy in business management, particularly in the importance given to culture, technology and knowledge. With this factors, I came to know how global organizations are structured, controlled and managed. All in all, Stonehouse, Campbell and Hamill, provided an excellent insights about the present and future trends in global business. An interesting prediction for instance, which I take makes a lot of sense, was the concept of virtual corporation and the so-called intelligent organization. Appendix 2 How Local Companies Keep Multinationals At Bay File 2 I found that in the early stages of globalization, many countries have been wary about the entry of multinational companies, fearing that it would kill domestic enterprises. Countries such as Brazil, China and Mexico are cases in point. For fear of disadvantage for homegrown businesses, they have welcomed foreign investments with painstaking caution. Bhattacharya and Michael made it clear for me that such fears as displayed by China are, in fact, unfounded, or at least according to the arguments they raised. For example, many countries have thriving domestic enterprises even with the entrance of big multinational companies. What is even more interesting in this area is that the survival of many local companies are not achieved because of protectionist government interventions. Instead, they held their on and this is all because of sound strategies and implementation. There are instances wherein local businesses are more successful than multinational companies as evidenced by the experiences of Grupo Positivo against Dell and Hewlett-Packard in Brazil or the search engine Baidu against Google in China. The cases of Yahoo and EBay and NEC and Panasonic further underscored this point as they all withdrew from the Chinese market, unable to cope with the local competition. The researchers posited that many multinational companies fail to perform well in some countries and were repelled by the domestic competition because they underestimated the capacity of these local companies to compete. It became clear that, as multinational companies assume their local competitions are years behind to pose any significant threat, they were caught flatfooted when the latter proved more capable and resilient. I found that there are nation-specific advantages or characteristics that provides strength for homegrown companies. For instance, the Chinese telecommunications infrastructure proved to be better than many multinational companies such as those in the United States. There is also the case of the educated elite in India and the abundance of venture capitalists in Russia. Many developing countries have undertaken reforms that encourage entrepreneurship. The researchers cited how Third World bureaucracies were reformed, drastically addressing problems such as red tape and encouraging cheap capital. These changes supposedly contribute to the volatility and diversity of business landscape across many countries making it impossible for multinational companies to compete better because of old and/or inappropriate business models. Bhattacharya and Michael suggested at least six strategies that many local enterprises have adopted that gave them competitive advantage. These are: 1) the creation of customized products or services; 2) the development of new business models to address obstacles; 3) the use of technology; 4) low cost labor; 5) rapid expansion; and, 6) investing talent to sustain rapid growth. Finally, the article proposed that in order to beat local companies, multinationals should adopt a two-pronged strategy. On one hand, they should work to compete according to the strategies of local companies; while, on the other hand, they should be able to develop unique models that are hard to be emulated. The combination of these two approaches supposedly would result in competitive advantage. Appendix 3 Making Global Strategies Work File 3 I found that the research was based on the argument that much of the academic interest today are focused on the content of global strategies and that very little emphasis is given to how such strategies are implemented and whether they are effective and successful. For this purpose, the researchers surveyed top managers of multinational subsidiaries to find out what motivates them to implement strategies that are designed back at their headquarters. Kim and Mauborgne decided to use top managers of multinational subsidiaries as respondents to their primary research because these personnel are perceived to be the "key catalysts for, or obstacles preventing, global strategy execution." (p. 11) Research questions mainly revolved around the factors that motivated them to execute or defy their companies' global strategic decisions and initiatives. Based from these points, it is easy to understand how the study has outlined the expected motivational variables such as incentive compensation, monitoring systems, and rewards and punishments. The study, however, found that the most important factor the drives the subsidiary executives' attitudes towards their organizations' global strategy was "due process" in decision-making. The authors, based on their study, found that there are five components that typify due process and these are: 1) familiarity of the decision-makers at the head office with the local situation; 2) the avoidance of one-sided communication in the strategy-making process; 3) the consistency of the head office in making decisions and judgments across subsidiary units; 4) the ability given to the subsidiary management to provide input and challenge even the legitimacy of strategy and policy decisions; and, 5) the subsidiary is never kept out of the loop, which means that they receive notice and explanation regarding the head office strategy making actions. Based from these factors, I found that the absence of any one of these often leads to the subsidiary management's negative attitude. I also understood how subsidiary managers can be favorably disposed toward resulting decisions, thought them wise, and were motivated to implement them even if these decisions were not in line with their individual subsidiary units' interests. The five components, hence, were extensively explained and they provided insights with how global strategies can fail on account of implementation on the lower ranks in the organizational hierarchy. It is clear, based on my readings, that due process for subsidiary managers is crucial because it covers and addresses several important concepts and issues that are critical in strategy implementation. The most important of which, as listed by the authors, are motivation, the collapse of appraisal and control capability of multinational organizations, the emergence of global learning and the suitability of due process to traditional implementation mechanisms. I found that there is, indeed, a positive relationship between due process and a host of benefits such as an increase in organizational commitment, trust in the head office management and the excellent relationship between the head office and the subsidiaries. (p. 19) The exercise of due process was also found to be responsible for the high level and compulsory execution. Most importantly, it affects the salutary attitudes and implementation behavior especially among those at the receiving end of unfavorable decision outcomes. Read More