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

In the last 21 years the nonion of a multinational comp some(prenominal) has changed signifi pottytly. This is best demonstrated by the 1973 United Nations definition, which distinctly stated an enterprise is multinational if it controls assets, factories, mines, sales offices, and the like in deuce or more countries (Bartlett, Ghoshal 2000 p.3). As we k straight off a multinational locoweed is much more then just that it controls exotic assets, it must withal own a substantial direct investment in foreign countries, as well as engaging in some crap of management of these foreign assets.The evolution of corporations over this succession has been middling ch aloneenging and by no means is the process of change finalized. As with some things this evolution and learning process could be seen as universe flavour long. The environment in which we operate fairly evolves each year and to bank check ahead rail linees argon now required to stay ahead of developments to compet e. nigh of the s turn away players, much(prenominal) as Phillips (Bartlett 1999) merely lost market division through this evolution, others in the past and perchance in the future go out lose their businesses.To understand the importance of multinational corporations in telling to the humanity economy we see that they account for over 40 percent of the worlds manufacturing output, and almost a quarter of world trade (Bartlett, Ghoshal 2000 p.3). Although the focus is often on the larger players much(prenominal) as Ford, Procter and adventure, or Coca Cola as time progresses it is more the smaller companies which we will pick out to keep an midsection on, as they be shine important players, especially in foreign respite markets(Bartlett, Ghoshal 2000 p.3).Traditionally there were three motivations for most schemes to enter orbiculate markets, or to undertake investment overseas. These were1. Suppliers the current indigence to source supplies for operations (adapte d from Bartlett, Ghoshal 1989, 2000).2. Markets desire additional markets to sell products. Traditionally companies went international to sell excess turnout lines, or to meet one off needs. The market then locomote to increased competition where players were keen to be the first mover to a market, so as to gain a matched advantage. Corporations were often drive by the home country size, with the need for further consumers for ongoing viability and egression (adapted from Bartlett, Ghoshal 1989, 2000)3. Lower Cost by anticipateing production facilities which would attract first gearer labor costs and hence higher(prenominal) profits. Clothing and electronics were the first movers in this strategy, usually looking to developing countries such as China or Taiwan. This is still used 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 adva ntages and disadvantages of a corporation entering an international market, or to continue to operate in an international market, beyond the preceding(prenominal) 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 clean up and precise so as to provide direction for future growth. callable to the ongoing worldwide demand after WWII, most organisations prospered when entering international markets. Often 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, lit now refers to them as International Corporations.As international operations expand and took on a more important role in the organisation, such as being a key profit centre, or perhaps a product innovation being conceived in an offshor e operation, they tended to come under increased 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 reviewed by management the possibilities for cost reductions due to standardization moved most corporations onto the bordering 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 multinational corporation. This takes the conception of global corporations one stair further. Corporations to prosp er in a globally competitive environment, should concentrate wheresoever possible on responding to cost pressures, supplement of knowledge and information, whilst ensuring local anaesthetic reactivity 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 substantial cost reductions, magic spell enhancing learning and knowledge. By increasing the availability of information across the concourse you are more likely to also encounter 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 somewha t 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 capture global-scale economies to remain competitive. As we have discussed, the need to constitute competitive through reduction in costs is imperative for both business. However Levitts concept of a unified marketplace with self-colored 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 in spite of appearance each country. The provision of a standardise 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 the number of products which meet a particular(prenominal) consumer groups needs. The alternative is to standardize products to achieve economies of scale during production and marketing. Caterpillar 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 land the component costs and provide economies of scale. Machines are then transported to foreign markets where localize knowledge and components adapt the machines to the needs of local consumers (Srinivasa 1985). The overall approach is that they are able to combine all three elements of the transnational approach.Corporations also need to be aware of the increasingly complex nature of undertaking business in an international market. Social, cultural, and political environments, as well as notes fluctuations, and geographic diversity need to be conside red carefully in any decision to undertake a foreign operation. It is best to research good and constantly review any strategy for overseas ventures as situations can change as in any business venture sort of 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 unbalance and also terrorism most corporations would be considering the ongoing viability of continuing in this market.Finally corporations need to be aware that to make any significant changes to an corporation strategy or structure 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 resolution 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, duration f or some it 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 village (1983). Perhaps the key lies with Bartlett and Ghoshal when they tell us that companies must now respond simultaneously to diverse and often counterpoint strategic needs. Today, no firm can succeed with a relatively unidimensional 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 put together, interpreted from Bartlett, Christopher A. & Ghoshal, Sumantra 2000 Text, Cases, and Readings in Cross-Border Management, third Edn, McG raw-Hill International Editions, Singapore, pp 632 647.Bartlett, Christopher A. & Ghoshal, Sumantra 1989 Managing Across Borders The Transnational Solution, Harvard business organization 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, asa dulcis & 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 Int egrated Approach, sixth Edn, Houghton Mifflin Company, 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.