TRENDS IN GLOBAL MARKET PLACE
When organizations do go international, they often use different approaches. Managers who want to get into a global market with minimal investment may start with global sourcing (also called global outsourcing), which is purchasing materials or labor from around the world wherever it is cheapest. The goal: take advantage of lower costs in order to be more competitive. For instance, Massachusetts General Hospital uses radiologists in India to interpret CT scans.Although global sourcing may be the first step to going international for many companies, they often continue to use this approach because of the competitive advantages it offers.
Each successive stage of going international beyond global sourcing, however, requires more investment and thus entails more risk for the organization. The next step in going international may involve exporting the organization’s products to other countries—that is, making products domestically and selling them abroad. In addition, an organization might do importing,which involves acquiring products made abroad and selling them domestically. Both usually entail minimal investment and risk, which is why many small businesses often use these approaches to doing business globally.
Managers also might use licensing or franchising, which are similar approaches involving one organization giving another organization the right to use its brand name, technology, or product specifications in return for a lump sum payment or a fee usually based on sales. The only difference is that licensing is primarily used by manufacturing organizations that make or sell another company’s products and franchising is primarily used by service organizations that want to use another company’s name and operating methods.
When an organization has been doing business internationally for a while and has gained experience in international markets, managers may decide to make more of a direct foreign investment. One way to increase investment is through a strategic alliance,which is a partnership between an organization and a foreign company partner or partners in which both share resources and knowledge in developing new products or building production facilities.
A specific type of strategic alliance in which the partners form a separate, independent organization for some business purpose is called a joint venture.For example, Hewlett-Packard has had numerous joint ventures with various suppliers around the globe to develop different components for its computer equipment. These partnerships provide a relatively easy way for companies to compete globally. Finally, managers may choose to directly invest in a foreign country by setting up a foreign subsidiary as a separate and independent facility or office. This subsidiary can be managed as a multi domestic organization (local control) or as a global organization (centralized control). As you can probably guess, this arrangement involves the greatest commitment of resources and poses the greatest amount of risk. For instance, United Plastics Group of Weston, Illinois, built two injection-molding facilities in Suzhou, China. The company’s executive vice president for business development said that level of investment was necessary because “it fulfilled our mission of being a global supplier to our global accounts
THE CHALLENGE OF OPENNESS
The push to go global has been widespread. Advocates praise the economic and social benefits that come from globalization, but globalization also creates challenges because of the openness that’s necessary for it to work. One challenge is the increased threat of terrorism by a truly global terror network. Globalization is meant to open up trade and to break down the geographical barriers separating countries. Yet, opening up means just that—being open to the bad as well as the good. From the Philippines and the United Kingdom to Israel and Pakistan, organizations and employees face the risk of terrorist attacks. Another challenge from openness is the economic interdependence of trading countries. As we saw over the last couple of years, the faltering of one country’s economy can have a domino effect on other countries with which it does business. So far, however, the world economy has proved to be quite resilient. And as we discussed earlier, structures that are currently in place, such as the World Trade Organization and the International Monetary Fund, help to isolate and address potential problems. The far more serious challenge for managers in the openness required by globalization comes from intense underlying and fundamental cultural differences—differences that encompass traditions, history, religious beliefs, and deep-seated values. Managing in such an environment can be extremely complicated.
Even though globalization has long been praised for its economic benefits, some individuals think that globalization is simply a euphemism for “Americanization”—that is, the way U.S. cultural values and U.S. business philosophy are said to be slowly taking over the world. At its best, proponents of Americanization hope others will see how progressive, efficient, industrious, and free U.S. society and businesses are and want to emulate that way of doing things. However, critics claim that this attitude of the “almighty American dollar wanting to spread the American way to every single country,” has created many problems. Although history is filled with clashes between civilizations, what’s unique now is the speed and ease with which misunderstandings and disagreements can erupt and escalate. The Internet, television and other media, and global air travel have brought the good and the bad of American entertainment, products, and behaviors to every corner of the globe. For those who don’t like what Americans do, say, or believe, this exposure can lead to resentment, dislike, distrust, and even outright hatred.
CHALLENGES OF MANAGING A GLOBAL WORKFORCE.
“As more Americans go to mainland China to take jobs, more Chinese and Americans are working side by side. These cross-cultural partnerships, while beneficial in many ways, are also highlighting tensions that expose differences in work experience, pay levels, and communication.”66 Global companies with multicultural work teams are faced with the challenge of managing the cultural differences in work-family relationships. The work-family practices and programs that are appropriate and effective for employees in one country may not be the best solution for employees in other locations.67 These examples indicate challenges that are associated with managing a global workforce. As globalization continues to be important for businesses, it’s obvious that managers need to understand how to best manage that global workforce. Some researchers have suggested that managers need cultural intelligence or cultural awareness and sensitivity skills.
Cultural intelligence encompasses three main dimensions:
(1) knowledge of culture as a concept—how cultures vary and how they affect behavior;
(2) mindfulness— the ability to pay attention to signals and reactions in different cross-cultural situations; and
(3) behavioral skills—using one’s knowledge and mindfulness to choose appropriate behaviors in those situations. Other researchers have said that what effective global leaders need is a global mind-set, attributes that allow a leader to be effective in cross-cultural environments
Leaders who possess such cross-cultural skills and abilities—whether cultural intelligence or a global mind-set—will be important assets to global organizations. Successfully managing in today’s global environment will require incredible sensitivity and understanding. Managers from any country will need to be aware of how their decisions and actions will be viewed, not only by those who may agree, but more importantly, by those who may disagree. They will need to adjust their leadership styles and management approaches to accommodate these diverse views, and at the same time be as efficient and effective as possible in reaching the organization’s goals.
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