Strategy in the Global Environment

• Author: Karl Heil, Betty Punnett
• Pages: 858-863

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Globalization was the buzzword of the 1990s, and in the twenty first century, there is no evidence that globalization will diminish. Essentially, globalization refers to growth of trade and investment, accompanied by the growth in international businesses, and the integration of economies around the world. According to Punnett (2004) the globalization concept is based on a number of relatively simple premises:

Technological developments have increased the ease and speed of international communication and travel.

Increased communication and travel have made the world smaller.

A smaller world means that people are more aware of events outside of their home country, and are more likely to travel to other countries.

Increased awareness and travel result in a better understanding of foreign opportunities.

A better understanding of opportunities leads to increases in international trade and investment, and the number of businesses operating across national borders.

These increases mean that the economies around the world are more closely integrated.

Managers must be conscious that markets, supplies, investors, locations, partners, and competitors can be anywhere in the world. Successful businesses will take advantage of opportunities wherever they are and will be prepared for downfalls. Successful managers, in this environment, need to understand the similarities and differences across national boundaries, in order to utilize the opportunities and deal with the potential downfalls.

The globalization of business is easy to recognize in the spread of many brands and services throughout the world. For example, Japanese electronics and automobiles are common in Asia, Europe, and North America, while U.S. automobiles, entertainment, and financial services are also common in Asia, Europe, and North America. Moreover, companies have become transnational or multinational-that is, they are based in one country but have operations in others. For example, Japan-based automaker Honda operates the largest single factory in the United States, while U.S. based Coca-Cola operates plants in other countries including France and Belgium—with about 80 percent of that company's profits come from overseas sales.

During the early1990s, there were reasons to feel that globalization was working. The economic success of Singapore, the rapid economic growth in the Asian Tigers (as the Asian countries that grew rapidly were called), the industrializing of countries, such as Brazil and Mexico, and a variety of other positive economic events around the world suggested that the results of globalization were indeed good for development in poorer countries, as well as in richer ones. During the 1990s, the United States experienced one of its most sustained periods of growth as well, and there was much talk of a "new economy", based on globalization, which was immune to economic shocks and recession.

Unfortunately, this rapid growth was not without consequences. The Seattle meetings of the World Trade Organization turned into a fiasco, with anti-globalization groups demonstrating against globalization on all fronts—from animal rights to environmental concerns, poverty alleviation, and jobs for Americans. The anti-globalization forces have not coalesced into a coherent whole because they represent such diverse and often contradictory views. The vehemence of their protests, however, make it clear that globalization is not a panacea for the world's problems. In addition, the Asian Tigers suffered major economic setbacks in the late 1990s. In 2002, Argentina's economy, which had been one of the stars of the 1990s, crashed, when the country could no longer maintain its currency at par with the U.S. dollar.

Further problems occurred in the Triad economies. Japan, Europe, and the United States, often referred to as the Triad, dominated international trade and investment for much of the second half of the twentieth century. The Japanese economy went into a severe period of recession and deflation in the late 1990s, and in 2001 both the European and the U.S. economies took a downward turn as well. In turn, the rest of the world was negatively affected by the economic situation in the Triad. The terrorist attacks in the United States in September, 2001, exacerbated this already negative economic situation.

In developing appropriate global strategies, managers need to take the benefits and drawbacks of globalization into account. A global strategy must be in the context of events around the globe, as well as those at home.

International strategy is the continuous and comprehensive management technique designed to help companies operate and compete effectively across national boundaries. While companies' top managers typically develop global strategies, they rely on all levels of management in order to implement these strategies successfully. The methods companies use to accomplish the goals of these strategies take a host of forms. For example, some companies form partnerships with companies in other countries, others acquire companies in other countries, others still develop products, services, and marketing campaigns designed to

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Table 1

Differences Between Domestic and International Strategy Source: World Bank

Factors	Domestic Conditions	Global Conditions
Culture	Homogeneous	Heterogeneous
Currency	Uniform	Different currencies and exchange rates
Economy	Stable and uniform	May be variable and unpredictable
Government	Stable	May be unstable
Labor	Skilled workers available	Skilled workers may be hard to find
Language	Generally a single language	Different languages and dialects
Marketing	Many media, few restrictions	May be fewer media and more restrictions
Transport	Several competitive modes	May be inadequate

appeal to customers in other countries. Some rudimentary aspects of international strategies mirror domestic strategies in that companies must determine what products or services to sell, where and how to sell them, where and how they will produce or provide them, and how they will compete with other companies in the industry in accordance with company goals.

The development of international strategies entails attention to other details that seldom, if ever, come into play in the domestic market. These other areas of concern stem from cultural, geographic, and political differences. Consequently, while a company only has to develop a strategy taking into account known governmental regulations, one language (generally), and one currency in a domestic...