Being Global in Business

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A Discussion of the dual pressures faced by the MNE’s to “think global, act local” Introduction …………………………………………………………………………… 2 Meshing the Realities to “Think Globally, and Act Locally” ……………….…..… 5 Conclusion …………………………………………………………………….……… 7 Bibliography .……………………………………….……….………..……..…….…… 9 Introduction The Financial Times (1997) refers to an MNE as a company that operates as well as aspires to operate on an international scale and consequently thinks of its sales in terms of shares of the global marketplace rather than on a national or regional basis. Globalization, shareholder interests and competitiveness have created a climate where multinational enterprises (MNE’s) must expand or either be acquired and lose market share. To achieve such ends, they have resorted to attempting to standardize products, operating procedures, selling methodologies and approaches in what Levitt (1983, Pp 92-100) terms as homogenized operations. Global firms in today’s environment operate as a unified as well as consistent business system utilizing the proven Japanese platforms of just-in-time delivery, quality circles as well as continued improvement, and international corporations as a result have to transcend the considerations of local idiosyncrasies. However, recent experiences have found that said local and regional and national idiosyncrasies are in fact providing the opportunity to distinguish one’s products and firm from the bland me too image and capture the imagination as well as sales of local and national market segments. But, the requirement as well as need for multinational enterprises to “think global, act local” is not just bound in sales, it also constitutes a need to become a good corporate citizen. The preceding does not mean the sacrificing of profits for public opinion, rather it is a source via which to increase bottom line performance as the offering of services and or products in multiple markets and countries requires an understanding of the national dynamics, which are its people, customs and values (Watts et al, 2000). The premise for what seemingly is a radical approach is that business is an element of society, thus the two are interdependent (Watts et al, 2000, p. 3). We have arrived at this juncture as a result of the spread and influence of American multi national corporations since the end of World War II (Studer-Noguez, 2001, p. 2). The abuses of MNE power as evidenced by Monsanto, Cargill and Dow in agribusiness in developing countries, to companies such as Exxon, Chevron and other oil companies that undermine alternative energy forms as they drive pollution in the quest for profits are clear examples (Corporate Accountability International, 2005). MNE’s need to expand and increase market share as well as profits in a competitive environment that provides no quarter for the losers. At the same time such a singular vision can serve as the blinders that lead to a decrease in the forgoing through abuses, fraud, overbearing tactics and losing touch with the very foundation upon which their enterprises were built, to fill a need. Chakrabarty et al (1996, Pp 123-35) along with Bettis et al (1996, Pp 549-569) expressed, respectively, that how firms distribute, develop as well as deploy their accumulation of knowledge gained from cultural exchanges represent a major factor in the differences in performance and thus the contributing aspects of other organizational competencies and capabilities that define the differences in performance between corporations. European automotive firms such as Mercedes Benz and BMW, as well as Toyota, Honda and Nissan illustrate the foregoing. Contrary to the inwardly bound vision of American automotive forms General Motors and Ford, whose design and engineering focuses were tied to model obsolescence, these foreign automotive companies concentrated on slight model changeovers and quality thus resulting in lowered engineering costs through progression and higher overall quality whereby their vehicles out lasted and performed their American rivals (Studer-Noguez, 2001, Pp 73 – 97). They adapted their underpowered and under featured vehicles to fit the American preferences while maintaining their core competencies instead of copying the American automotive model and succeeded to the point where American made vehicles no longer dominate in their home market. The foregoing is maintained by Kostiva (1999, Pp 308-324) who states that the transference of organizational practices in a successful manner requires:

a degree of distance, in terms of the corporation, between the locale and the headquarters office,
a corporate culture that provides a degree of fit between the parent organization and the recipient,
the attitude of the company with regard to openness for new ideas, and
the dependency level of the subsidiary with respect to the headquarters company

Chang (1995, Pp 383-407) adds that the foregoing learning process can potentially enable a company to overcome weaknesses it might have in terms of product or operating competencies and thus strengthen the company to be able to make inroads in markets where it lacked the operational foundation at the onset. The preceding aspects are important internal considerations as well as philosophies that companies must be open to in order to be receptive as well as responsive in meeting the new global dynamics as represented by international competitiveness. The preceding strikes a clear case for the fact that local influences and idiosyncrasies can add dimensions to a firm’s global competencies in product as well as operational and organizational terms. The American model of acquisition and continuing to operate in the manner that was successful in the home market represented poor sales results for General Motors as well as Ford in Europe until they changed their operational mindset (Studer-Noguez, 2001, Pp 73 – 97). The lessons go further than the outer manifestations as represented by product look, changes, adaptations and modifications to fit the demands and dictates of varied markets, it also requires an inward vision. Foreign subsidiaries must be mindful of that fact that corporate social responsibility interacts with the employees and communities in which the company markets and sells its goods or services, and this represents a substantial opportunity to gain valuable expertise as well as new methods of operation. Specifically, conclusions reached as a result of the World Business Council for Sustainable Development (Watts et al, 2000, p.4) found that:

the recognition of corporate social responsibility as an aspect of human rights, along with employee rights, community, suppliers and environmental concerns,
clear benefits are a result of a coherent corporate social responsibility strategy which utilizes integrity, values and a long term involvement,
an opportunity for companies to utilize their own codes of conduct and core values along with the introduction and implementation of codes and values as represented by others,
and the importance of the company being responsive to the cultural as well as local differences which are inherent in global business and international trade

As provided in the examples as outlined for Mercedes-Benz and other European and Japanese vehicle manufacturers, the foregoing corporate social responsibility aspects can and do contribute to bottom line objectives thus presenting a framework that benefits stakeholders, shareholders and the local as well as national community in which the firm operates. Meshing the Realities to “Think Globally, and Act Locally” The achievement of the maxim of ‘thinking globally and acting locally’ is not a result that will occur of and on its own, it requires that the firm take a proactive stance to encourage and implement methodologies to cause this to happen. Lee (1999, Pp 37-44) states that the approaches to achieving the foregoing can be accomplished through:

the utilization of explicit policies and a reward system which encourages the gathering, discussion, modification and utilization of knowledge gained with respect to local and national markets,
having flexible corporate policies and systems in place that provide the platform for local adaptations to be received, aired, tried and implemented,
policies in the human resource arena that permit as well as encourage the training, placement and utilization of local managers through a system of position and departmental rotations,
a culture within the company and organization that is mindful of as well as supports the participation and input of subsidiaries,
a communications platform that consists of formal as well as informal information transfer that is open to the sharing and discussion of information,

The foregoing can achieve measurable results, thus eliminating the perceived notion that the introduction of socially responsive actions are negative factors in bottom line performance. Salk et al (1996, Pp 877-904) state that the preceding can be measured by the instance in which concepts are acquired in a range of areas, such as new technology applications and expertise, marketing approaches, product development, knowledge of consumer tastes, preferences, management and human resource techniques as well as manufacturing processes. Salk et al (1996, Pp 877-904) indicate that in order for the preceding to occur, the corporate climate has to be open as well as receptive to learning and evaluating, rather than utilizing a tunnel vision approach that the way things have been done are or is the way things should be done. The preceding is a variant of what Schon et al (1996, Pp 121-145) refer to as single loop learning, whereby a company continues to utilize existing routines and knowledge as well as structures. Levinthal et al (1990, Pp 128-152) point out that the preceding is detrimental in that it does not provide for or contribute to increased or enhanced learning within the organization, and thus renewal or re-examination. Ghoshal et al (1998, Pp 464-476) indicate that the preceding can be enhanced through the establishment of social networks which help to provide for a smooth transition as well as exchange of new knowledge and information within an organization. Globalisation has the tendency to blur the vision of a corporation to the importance of the individual markets and their local customs, cultures and contributions as a part of the bigger picture. The fact remains that multinational enterprises have to remember that they are a product of their home culture and as such must resist exporting this as a commodity that does not blend, adapt and modify itself based upon the realities of the global stage. The notion that multinationals need to act and resemble their home country based upon reasons ranging from brand or consistency has some validity, but not at the expense of forcing these values upon foreign operations and locations. As the success of various corporations captures the consciousness of the business world, the tendency to emulate their practices is a natural outgrowth (Morris, 1995, Pp 25-42). Corporations in the United States, Europe and Asia need to be aware and mindful that their dominance in terms of their percentage of world trade tends to make them compete on regional terms bringing with it the attitude that their views and approaches represent the edge that contributes to their successes. The emergence of the huge trading blocks represented by the United States – Mexico and Canada, the European Union and Asia – China is causing global trade to develop a more regionalized view in terms of expansion as firms within these blocks seek to capitalize on the inherent opportunities that exist in close proximity to their home operations (Verbeke et al, 2004, Pp 3-18). Conclusion The continually shifting fortunes of international trade, forces multinational enterprises to define and redefine themselves in keeping with the dictates and demands of seeking and maintaining a competitive edge. This global view is an inherent aspect of maintaining growth in keeping with the demands of shareholder and corporate objectives. However, as shown by the examples of the American automotive companies, General Motors and Ford, a limited perspective with regard to world markets and thinking globally can leave a company without the understanding or knowledge of what is occurring in national and local markets that are imperative in capturing the minds of prospective consumers. By tapping into this cultural foundation companies stand to benefit from an increased understanding of what consumers want in their own local and national worlds, which differs from a global vision. Thinking globally and acting locally is not a trend, fad or phase that represents a new philosophy, it is a strategic initiative that is based in the realities of the demands and dictates that different markets demand customized approaches that can only be gained via corporate structures and process organized to recognized, evaluate and accept them. The processes of bottom line, growth and market share are not at odds with local dictates, consumer preferences and corporate social responsibilities, in fact they are integral aspects of the process of being a global company. Perhaps David Lilienthal’s (1985) definition provides the clearest insight “… corporations which have their home in one country but operate and live under the laws and customs of other countries as well”. The operative thought in Lilienthal’s (1985) definition is “… laws and customs of other countries as well”. It provides a clear perspective for ‘thinking globally and acting locally’! Bibliography Bettis, R., Lei, D., Hitt, M. (1996) Dynamic Core Competencies Through Meta-Learning and Strategic Context. Vol. 22, Issue 4. Journal of Management Chakrabarty, A., Bierly, P. (1996) Generic Knowledge Strategies in the U.S. Vol. 17. Strategic Management Journal Chang, S. (1995) International Expansion Strategy of Japanese Firms. Vol. 38. Academy of Management Journal Corporate Accountability International (2005) Current Campaigns. Financial Times (1997) The Global Company, Business on the World Stage. October – November 1997. Financial Times Ghoshal, S., Tsai, W. (1998) Social Capital and Value Creation: The Role of Intrafirm Networks. Vol. 41. Academy of Management Journal Kostova, T. (1999) Transnational Transfer of Strategic Organizational Practices. Vol. 24. Academy of Management Review Lee, J. S. (1999) Organizational Learning in China. Vol. 42, Issue 1. Business Horizons Levitt, T. (1983) The Globalization of Markets. Vol. 61, Issue 3. Harvard Business Review Levinthal, D., Cohen, W. (1990) Absorptive Capacity: A New Perspective on Learning and Innovation. Vol. 35. Administrative Science Quarterly Lilienthal, David (1985) Management and Corporations. April 1985. Symposium at the Graduate School of Industrial Administration, Carnegie Institute of Technology Morris, J., Innes, E. (1995) Multinational corporations and employee relations. Vol. 17, Issue 6. Employee Relations Salk, J., Lyles, M. (1996) Knowledge Acquisition from Foreign Parents in International Joint Ventures. Vol. 27. Journal of International Business Schon, D., Argyris, C. (1996) Organizational Learning II: Theory, Method and Practice. Addison Wesley. ISBN: 0201629836 Studer-Noguez (2001) Global Strategies of MNE’s and Government Policies. 1st Edition. Routledge. ISBN: 0415205794 Watts, Phil, Holme, Richard, Tinto, Rio (2000) Corporate social responsibility: making good business sense. January 2000.World Business Council for Sustainable Development, Geneva, Switzerland Verbeke, A., Rugman, AS. (2004) A Perspective on Regional and Global Strategies of Multinational Enterprises. Vol. 35, Issue 1. Journal of International Business Studies

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