Globalization has become a goal for many companies.
But simply spreading activities around the globe is not enough; companies need coherent global strategies.
In the past, multinationals tailored their products and services to local markets. This represented a multi-local rather than global approach.
The challenge now is to develop truly integrated global strategies that leverage competitive advantage across all markets.
In the 1980s and the 1990s, many companies were still debating whether they should globalize. For most, this debate has now ended. Companies assume that they should globalize unless they can find very good reasons not to.
The spread of the internet and the Web provides one compelling reason. Any company that creates a website has instant global reach, with corresponding demands for delivery and service. In addition, evidence shows that companies that globalize achieve better competitive and financial performance.
But globalizing, in the sense of spreading activities around the world, is not enough. Companies also need to be globally integrated. They need globally coherent strategies, global networks, and the ability to maximize profits on a global basis. However, turning a collection of country businesses into one worldwide business that has an integrated, global strategy is not easy. It presents one of the stiffest challenges for managers today. Developing and implementing an effective global strategy is the acid test of a well-managed company.
The Case for Globalization
Whatever the anti-globalization protestors may say to the contrary, a range of forces is driving companies around the world to globalize. Many managers view this as expanding their participation in foreign markets. But companies also need to globalize in another sense. They need to integrate their worldwide strategy. This contrasts with the traditional multinational approach.
In the past, multinationals have tended to set up country subsidiaries that design, produce, and market products or services that were tailored to local needs. But this model is now in question. Increasingly, the multinational approach is seen as a “multilocal strategy” rather than a truly global strategy.
Today, a growing number of managers are asking, if they are in a global industry, whether their business should have a global strategy. Better questions are: how global is our industry, and how global should our business strategy be? This is because virtually every industry has aspects that are global or potentially global. But some industries have more aspects that are global, and more intensely so.
Similarly, a strategy can be more or less global in its different elements. An industry is global to the extent that there are inter-country connections. A strategy is global to the extent that it is integrated across countries. Global strategy should not be equated with any one element—standardized products, or worldwide market coverage, or a global manufacturing network. Instead, global strategy should be a flexible combination of many elements.
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