How Has Globalization Affected Corporate Strategy in the 21st Century Essay Example for Free

How Has Globalization Affected Corporate Strategy in the 21st Century EssayIn the last 21 years the notion of a multinational company has changed significantly. This is best demonstrated by the 1973 United Nations definition, which ca-caly stated an enterprise is multinational if it controls assets, factories, mines, sales offices, and the like in ii or more countries (Bartlett, Ghoshal 2000 p.3). As we know a multinational corporation is much more then rightful(prenominal) that it controls inappropriate assets, it must also have a substantial direct investment in foreign countries, as well as engaging in some form of management of these foreign assets. The developing of corporations over this time has been somewhat difficult and by no means is the process of change finalized. As with most things this evolution and learning process could be seen as existence life long. The environment in which we operate clearly evolves each year and to last out ahead businesses argon no w required to stay ahead of developments to compete. Some of the softer players, such as Phillips (Bartlett 1999) merely lost market share through this evolution, others in the past and perhaps in the prox will lose their businesses.To understand the importance of multinational corporations in relation to the world economy we see that they account for over 40 percent of the worlds manufacturing output, and to the highest degree a quarter of world trade (Bartlett, Ghoshal 2000 p.3). Although the focus is often on the larger players such as Ford, Procter and Gamble, or Coca Cola as time progresses it is more the smaller companies which we will need to stay fresh an eye on, as they become important players, especially in worldwide niche markets(Bartlett, Ghoshal 2000 p.3).Traditionally at that place were three motivations for most organisations to enter international markets, or to undertake investment overseas. These were1. Suppliers the ongoing need to acknowledgment supplie s for operations (adapted from Bartlett, Ghoshal 1989, 2000).2. Markets look toing additional markets to sell products. Traditionally companies went international to sell excess production lines, or to meet one off needs. The market then moved to enlarged competition where players were keen to be the setoff mover to a market, so as to gain a competitive advantage. Corporations were often goaded by the shell country size, with the need for further consumers for ongoing viability and growth (adapted from Bartlett, Ghoshal 1989, 2000)3. Lower Cost by seeking production facilities which would attract lower labor be and hence higher profits. Clothing and electronics were the first movers in this strategy, usually looking to developing countries such as China or Taiwan. This is shut up apply somewhat today as a strategy, such as large call centers providing services in India for most Australian banks (adapted from Bartlett, Ghoshal 1989, 2000)It is not my intention to go into the advantages and disadvantages of a corporation entering an international market, or to continue to operate in an international market, beyond the above three initial drivers. What is imperative that in the 21st Century an organisation must seek a strategy that meets the organisations ongoing needs which is clear and precise so as to volunteer direction for future growth.Due to the ongoing worldwide drive after WWII, most organisations prospered when entering international markets. a great deal however the strategies to entry were ad hoc and did not provide clear objectives or guidance for ongoing management. Operations were based on an ethnocentric approach. Even though at the time they were referred to as Multinational Corporations, literature now refers to them as world(prenominal) Corporations.As international operations expanded and took on a more important role in the organisation, such as organism a key profit centre, or perhaps a product innovation being conceived in an o ffshore operation, they tended to come under increase management scrutiny, such as the case with fuji cherry Xerox (Gomes-Casseres, McQuade 1991). This then progressed the corporation to a multinational approach, international markets being as important or even more important then the home market, which is more a polycentric approach to management.The potential from these operations were check up oned by management the possibilities for make up step-downs due to standardization moved most corporations onto the next phase being the global corporation mentality. This is that the entire world is a potential market. Retaining a image from their initial home country, such as McDonalds, they seek to enter all markets to service all customers, hence a regiocentric or geocentric philosophy of management.Bartlett and Ghoshal have gone beyond this to advocate the development of the transnational corporation. This takes the concept of global corporations one step further. Corporations to p rosper in a globally competitive environment, should concentrate wheresoever possible on responding to cost pressures, leveraging of knowledge and randomness, whilst ensuring local responsiveness to consumer needs (1989 p.13).Cost reduction are imperative to ensure the ongoing viability of corporations. The sharing of costs globally for items such as R D and mass production both provide examples of significant cost reductions, while enhancing learning and knowledge. By increasing the availability of information across the group you are more likely to also butt against a higher quality product as the innovation and knowledge is shared for the corporations greater good. Often companies forget that knowledge does not just reside in just the home country. Important information such as the local consumer market are often best to be determined by local managers so as to respond to local needs.In relation to local responsiveness Theodore Levitt (1983) provides a somewhat extreme view of the global market. His philosophy is that technological, social and economic developments over the last two decades have combined to create a unified world marketplace in which companies must hoodwink global-scale economies to remain competitive. As we have discussed, the need to become competitive through reduction in costs is imperative for every business. However Levitts concept of a unified marketplace with homogenous needs has still some way to go. As researched by Procter and Gamble even how we wash our clothes differs throughout the world, sometimes even within each country. The provision of a standardized product to suit all in this industry would be a failure due to not meeting the needs of local consumers (Bartlett 1983).When we review these three elements of cost reduction, leverage of knowledge and local responsiveness we are aware that these terms are somewhat contradictory. History tells us that to provide local responsiveness you need to increase costs to increase t he number of products which meet a specific consumer groups needs. The alternative is to standardize products to achieve economies of scale during production and marketing. computerized tomography has somewhat successfully implemented such a strategy.They redesigned their products around the use of standardized components. These are produced on mass through large production facilities to reduce the component costs and provide economies of scale. Machines are then transported to foreign markets where localized knowledge and components adapt the machines to the needs of local consumers (Srinivasa 1985). The overall approach is that they are adequate to combine all three elements of the transnational approach.Corporations also need to be aware of the increasingly composite plant nature of undertaking business in an international market. Social, cultural, and political environments, as well as cash fluctuations, and geographic diversity need to be considered carefully in any decisio n to undertake a foreign operation. It is best to research thoroughly and constantly review any strategy for overseas ventures as situations can change as in any business venture quite quickly. An example of this would be the increased use of Indonesia as a low cost production base for Australian corporations. With the increased political instability and also terrorism most corporations would be considering the ongoing viability of continuing in this market. at long last corporations need to be aware that to make any significant changes to an corporation strategy or social organization it is both extremely complex, time consuming and challenging. As Ford has discovered, by constantly changing strategies to seek higher profitability, all they have been able to achieve has been another announcement of huge losses in 2001 from failed global ventures (Hill, Jones 2004 p276). The move to a transnational approach for most corporations would need to be a slow progression, while for some i t is even perhaps out of reach.By focusing on the main elements of cost reduction, knowledge leveraging and local differentiation perhaps this will provide an avenue in the future for continued competitive advantage in an environment which is slowly moving towards Levitts concept of the global closure (1983). Perhaps the key lies with Bartlett and Ghoshal when they tell us that companies must now respond simultaneously to assorted and often conflicting strategic needs. Today, no firm can succeed with a relatively linear strategic capability that emphasizes only efficiency, or responsiveness, or leveraging of parent company knowledge and competencies. To win, a company must now achieve all three goals at the same time (1989 p 25).REFERENCE LISTINGBartlett, Christopher A. 1983 Case 6-1 Proctor and Gamble Europe Vizir Launch, interpreted from Bartlett, Christopher A. Ghoshal, Sumantra 2000 Text, Cases, and Readings in Cross-Border Management, 3rd Edn, McGraw-Hill supranational Edit ions, Singapore, pp 632 647.Bartlett, Christopher A. Ghoshal, Sumantra 1989 Managing Across Borders The Transnational Solution, Harvard Business School Press, Boston Massachusetts.Barlett, Christopher A. 1999 Case 2 -4 Phillips and Matsushita 1998 Growth of 2 Companies, taken from Bartlett, Christopher A. Ghoshal, Sumantra 2000 Text, Cases, and Readings in Cross-Border Management, 3rd Edn, McGraw-Hill International Editions, Singapore, pp 164 -180Bartlett, Christopher A. Ghoshal, Sumantra 2000 Text, Cases, and Readings in Cross-Border Management, 3rd Edn, McGraw-Hill International Editions, Singapore.Gomes-Casseres, Benjamin McQuade, Krista 1991 Case 4-1 Xerox and fuji Xerox, taken from Bartlett, Christopher A. Ghoshal, Sumantra 2000 Text, Cases, and Readings in Cross-Border Management, 3rd Edn, McGraw-Hill International Editions, Singapore, pp 418 443Hill, Charles W. L Jones, Gareth R. 2004 Strategic Management Theory An Integrated Approach, sixth Edn, Houghton Mifflin Com pany, Boston, Massachusetts.Levitt, T. 1983 The Globalization of Markets Harvard Business Review, May June, pp. 92 102.Srinivasa, Rangan V. 1985 Case 3-1 Caterpillar Tractor Co., taken from Bartlett, Christopher A. Ghoshal, Sumantra 2000 Text, Cases, and Readings in Cross-Border Management, 3rd Edn, McGraw-Hill International Editions, Singapore, pp 259 279.