Assignment on How to Take a Company to the Global Market

Deciding how to deal with the globalization of markets poses tough issues and choices for mangers. There are both external business forces, and internal organizational factors to consider. External business forces revolve around the interaction of industry drivers of globalization and the different ways a business can be global. Understanding this interaction is key to formulating the right global strategy. Internal organizational factors play a major role in determining how well a company can implement global strategy. This paper provides a systematic approach to developing and implementing a global strategy. Most managers have to face the increasing globalization of markets and competition. That fact requires each company to decide whether it must become a worldwide competitor to survive. To Take A Company to the Global Market, is not an easy decision. The division of a multibillion-dollar company, a company that's very sophisticated and has been conducting international business for more than fifty years. The division sells a commodity product, for which it is trying to charge 400% more in Europe than it does in the United States. The price was roughly the same in the United States and in Europe when the dollar was at its all-time high. The company built a European plant which showed greater return on investment with that European price. But the dollar has fallen and, if the company drops its European price to remain roughly the same as the US price, the return on the plant becomes negative, and some careers are in serious jeopardy. So it is attempting to maintain a 40% European price premium by introducing minor upgrades to the European product.

But its multinational customers will have none of it. They start buying the product in the United States and transshipping it to Europe. When the company tries to prevent them from transshipping, they go to a broker, who does the work for them; they still save money.

On the other hand, The manufacturer doesn't have a choice. It's working in a global market. And it's going to have to come up with a global price. But management is fighting a losing battle because it is unwilling to make the hard strategic and organizational changes necessary to adapt to global market conditions.

European and Japanese corporations also face these kinds of organizational roadblocks. Large European firms, for example, historically have been more multinational than US companies. Their international success is due, in part, to decentralized management. The companies simply reproduced their philosophy and culture everywhere, from India to Australia to Canada. They set up mini-headquarters operations in each country and became truly multinational with executives of different nationalities running them.

Now they are having problem running operations on a worldwide basis because these multinational executives are fighting the global imperative. In one European company, for example, the manager running a Latin American division has built an impenetrable wall around himself and his empire. He's done very well, and everyone has allowed him to do as he pleases. But the company's global strategy requires a new way of looking at Latin America. The organization needs to break down his walls of independence. So far, that's proved next to impossible.

Japanese companies face a different set of problems. On the whole, they have followed a basic, undifferentiated marketing strategy: make small Hondas, and sell them throughout the world. Then make better Hondas, ending up with the $30,000 Honda Acura. It's incremental, and it has worked.

Now, however, the Japanese must create various manufacturing centres around the globe and they're facing many difficulties. They have a coordinated marketing strategy and have built up infrastructures to coordinate marketing, which requires one particular set of skills. But now they've begun to establish three or four major manufacturing operations around the world, and they need a different set of skills to integrate these manufacturing operations. In addition, many Japanese companies are trying to add some elements of a multinational strategy back into their global one.

American multinationals have tended to take a different path. The huge domestic market, combined with cultural isolation, has fostered an "Us-them" mentality within organizations. This split has made it difficult to fully adapt to the needs of international business. Until recently, overseas posts have been spurned. A marketing manager for new products in a United States consumer products company told us that running the sizeable United Kingdom business would be a step down for him. As a result of others' similar views, many American firms face two conflicting challenges today. They need to complete their internationalization by increasing their adaptation to local needs, while at the same time they need to make their strategies more global.

But some companies are better off not trying to compete globally because of the difficulties of their internal situation. The CEO of one Midwest manufacturer decided that his company had to go global to survive. He gave marching orders. And the organization marched. Unfortunately, they started marching over a global cliff. For example, they set up a small operation in Brazil since they had targeted South America as part of their global strategy. But the executives they appointed to run the operation had never been outside the United States before, and the company started losing money. Company analysis found that going global was just too unnatural to its cultural system and that a viable strategic alternative was to stay in the United States and play a niche strategy.

Most international companies have grappled with the types of problems we have been describing, and have tried to find a solution. This paper provides a framework for thinking through this complex and important issue. In particular the framework addresses the dual challenge of formulating and implementing a global strategy. Readers may find the framework a convenient way to analyze globalization issues.