Building a Companies without Borders - Literature review Example

?Building a companies without borders Becht narrated the story of the company Reckitt Benckiser. According to Becht , Reckitt Benckiser has been outperforming her corporate rivals Procter &Gamble, Unilever and Colgate in corporate growth even in the current downturn. Becht (2010) attributed the success of Reckit Benckiser to being a “company without borders” (Benckiser, 2010, p. 1). When companies described themselves as global, the usual meaning is that “they have operations around the world, they work virtually and in all time zones, and their key people are developed through stints in other markets.” However, Becht (2010) said that being a global company or a “company without border” for Reckitt Benckiser has another meaning. According to Becht (2010, p. 2), this means that most of the top managers of Reckitt Benckiser “haven’t held jobs in their company of origin for years and view themselves as global citizens rather than as citizens of any given nation.” The company operates in 60 countries and its 400 managers are from 53 nationalities (Becht 2010). According to Becht (2010, p. 1), the company adopted the strategy of being a “company without borders” because “it’s one of the best ways to generate new ideas and create entrepreneurs.” Becht (2010) claimed that Reckitt Benckiser’s strategy of “global cross-fertilization” led to good results because the strategy accounts for 35 to 40% of net revenue. Becht (2010) implied that “global cross-fertilization” promoted the invention of innovative products in Reckitt Benckiser. In turn, innovative products enabled the company to enjoy “steady, profitable growth, even during the downturn” (Becht 2010, p. 1). Thus, according to Becht (2010), Reckitt Benckiser has outrun all her competitors since 2005. In the Becht (2010, p. 2) narrative, Reckitt Benckiser deliberately deploy managers in unfamiliar territories and not in their country of origin but they are expected “to find their footing very quickly.” Most managers, however, “grow tremendously” when they are taken out of their “familiar zone” (Becht, 2010, p. 2). Despite the multiplicity of nationalities in Reckitt Benckiser, the company insists on a common language in all meetings (Becht 2010). All are expected to say their piece no matter how blunt one’s piece is expressed. Thus, Reckitt Benckiser’s meetings are “chaotic” because “what takes over” is “an intensity and a feeling that we have to fight for better ideas” (Becht, 2010, p. 3). At Reckitt Benckiser, consensus is not highly valued but “conflict that simply slows down decision-making or is for political or personal gain is not tolerated” (Becht, 2010, p. 3). Nevertheless, “almost every key decision is made in meetings where it’s first discussed” and all must agree 100% to implement the decisions and “move quickly” (Becht, 2010, p. 3). However, minority views are not crushed (Becht, 2010). Those who do subscribe to the majority position are allowed to experiment with their ideas (Brecht, 2010, p. 3). Some of the questions that can be raised are as follows? How to the diversity of cultures impact on business? Do international connections play a role in business profitability? Are “companies without borders” a global trend? How do companies without borders organize themselves as a business? On the impact of diversity of cultures in managing businesses, John et al. (2011, p. 7) argued that “cultures that vary in value orientations should also vary in the level of control and participation.” John et al. (2011, p. 7) pointed out that “in a truly global marketplace, managers working in cross-cultural interactions need a better understanding of the impact of cultural orientation on an individual’s expectation at the service encounter.” This means, for example, consumers in diverse cultures vary with regard to how fast services should be, how faithful advertising should be on claims with regard to product quality, how assertive consumers can be with regard to claims regarding product quality and the like. It is possible that cultures associated with less technological and legal sophistication may be passive as consumers. In contrast, consumers in cultures associated with more advanced technologies and legal sophistication may be very assertive regarding business claims on the quality of their products. Nevertheless, John et al. (2011, p. 8) cited several studies indicating that increased consumer participation “strengthens bonds between customers and employees.” Thus, the implication of the John et al. (2011) study is that the “companies without borders” or international firms must exploit this handle on strengthening their footholds over markets given an international market to lead and dominate Do international connections play a role in business profitability? Hoffman studied the determinants of bank profitability in the banking industry but his study does not confirm whether international connections play a role in the profitability of banks in the United States. In contrast, based on econometric and regression studies, Hoffmann’s study indicated that there is a “strong negative relationship between capital and profitability” of banks (2011, p. 262). According to Hoffmann (2011, p. 263), “an unexpected increase in capital tends to lead to a decrease” in bank profitability. Further, according to Hoffmann (2011, p. 263), “a higher capital ratio tends to reduce the risk on equity and therefore lowers the expected return on equity that investors seek.” Hoffman argued that “there is diseconomies of scale in the U.S. banking industry” (2011, p. 263). He interpreted his econometric and regression results to mean “that the profitability of the banks as financial intermediaries is mostly the result of the application and efficient usage of new technology rather than the size of their portfolio investment” (Hoffmann, 2011, p. 263). On the same question, Jasra et al. (2011, p. 274) studied the determinants of success of small and medium-scale enterprises and found that financial resources, marketing strategy, technological resources, information access, government support, business plan, and entrepreneurial skill are the most important determinants. The said variables were identified as the most important determinants based on regression analysis and the variables mentioned were identified as the most important determinants based on the associated t-statistics and p-value of the statistics. The countries covered by the Jasra et al. (2011) study included Hong Kong, Thailand, Philippines, Japan, Malaysia, Singapore, and Taiwan. The Jasra et al. (2011) study did not identify a role for multinational operations or being “companies without borders” but it does not necessarily mean that being “companies without borders” does not play a role at all in corporate success. It is possible that the role of being “companies without borders” are simply being distorted by the variables identified as independent variables in the study. Are “companies without borders” a global trend in business? It is difficult to confirm whether “companies without borders” constitutes a global trend in business today. However, Palugod and Palugod (2011, p. 13) identified that “global trends in offshoring and outsourcing” and pointed out that “the rapid growth of offshoring and outsourcing has transformed the way businesses are managing their operations.” Thus, in effect, the Palugod and Palugod (2011) confirmed that many business operations in the 21st century has to operate in an international business environment because the nature of their businesses alone imply that the business has to be operated within an international backdrop. The definitions of outsourcing and offshoring imply this. As pointed out by Palugod and Palugod (2011, p. 13), “outsourcing refers to the decision of a firm whether to handle the function internally or to have another firm handle the function while offshoring refers to different dimensions of a firm’s decisions.” Palugod and Palugod (2011, p. 13) elaborated that “outsourcing occurs when a company uses another company to undertake some functions previously performed internally or in-house.” According to Palugod and Palugod (2011, p. 13), the trend is that “outsourcing of manufacturing or production processes is the normal way of producing goods and services.” However, “the new phenomenon of outsourcing refers to the recent dramatic growth of outsourcing of services” (Palugod and Palugod, 2011, p. 13). Palugod and Palugod (2011, p. 13) revealed that “offshoring occurs when a company performs a production or services function in another country.” Another trend that Palugod and Palugod (2011, p. 13) also identified is simultaneous offshoring and outsourcing. Offshoring and outsourcing simultaneously occurs because “the basic driving force was the growth and technological improvements in information and communication technology” (ICT). Developed countries, particularly the United States, are the biggest clients for business process outsourcing and information technology outsourcing (Palugod and Palugod, 2011, p. 14). Nevertheless, “in terms of growth rates, the European market has grown significantly at a rate of 41% for the UK and more than 50% for the rest of continental Europe” (Palugod and Palugod, 2011, p. 14). At the same time, a very important trend that Palugod and Palugod (2011, p. 16) identified is multisourcing. According to Palugod and Palugod (2011, p. 16), “multisourcing appears to be a strategy that is being adopted with increasing frequency.” This implies that the theme articulated by Becht (2011) will continue to be relevant. How do “companies without borders” organize themselves as a business? On this question, Wong et al. (2011, p. 13) articulated that many multinational companies “have begun to move from geocentric control systems towards a more transnational structure, which involves greater autonomy to subsidiaries” (Wong et al., 2011, p. 10). In addition, Wong et al. (2011, p. 13) pointed out that “some companies are also moving from single tier control (headquarter-subsidiary) to a more regional system where there is a two-tier system (headquarer-region-subsidiary).” References Becht, B. (2010). Building a company without borders. Harvard Business Review, April, 1-4. Hoffmann, P. (2011). Determinants of the profitability of the US banking industry. International Journal of Business and Social Science, 2 (22), 255-269. Jasra, J., Khan, M., Hunjra, A., Rehman, R., and Azam, R. (2011). Determinant of success of small and medium enterprises. International Journal of Business and Social Science, 2 (20), 274-280. John, J. (2011). Control and participation at the service encounter: A cultural value-based perspective. International Journal of Business and Social Science, 2 (22), 7-14. Palugod, N. and Palugod, P. (2011). Global trends in offshoring and outsourcing. International Journal of Business and Social Science, 2 (16), 13-19. Wong, H., Nassiripour, S., Mir, R., Healy, W. (2011). Transfer price setting in multinational corporations. International Journal of Business and Social Science, 2 (9), 10-14. Read More