GLOBAL STRATEGIC MANAGEMENT IS THE KEY TO BUSINESS SUCCESS

Gabriel Omolewu Professional Studies Division Wilberforce University 1055 North Bickett Road, P.O.BOX 1001, Wilberforce, Ohio 45384 gomolewu@wilberforce.edu ABSTRACT In the international competitive environment, the ability of an organization to develop a transnational organizational capability is the key factor that can help the firm adapt to the changes in the dynamic environment. As the fast rate of globalization renders the traditional ways of doing business irrelevant, it is vital for managers to have a global mindset to be effective. Globalization of business has led to the emergence of global strategic management. A combination of strategic management and international business will result in strategies for global cooperation. However, there are obstacles to progress along the way. The problems caused by these obstacles can be solved by cooperative ventures based on mutual advantages of the parties involved. Proper effective communication will be a key element for global strategies because what is proper and effective in one culture may be ineffective and improper in another. Marketing products globally is complex and difficult because of several factors including: International Strategic Alliances, coordination and control of international marketing, communication, regional trade blocks, European Union, and choice of global strategy. The firm with the choice of an effective global strategy that takes into consideration its strengths and weaknesses in the face of the opportunities and threats in the environment, will survive. Keywords: Strategic Management, Globalization, International Business, Global mindset INTRODUCTION Traditional ways of doing business are rendered irrelevant in todays business environment because of the explosive large scale globalization. There is need for managers to become global managers with a global mindset that is appropriately supported by relevant skills and knowledge. Globalization, according to Kedia & Mukherji (1999), can be defined as a market situation where political borders are irrelevant, economic interdependencies are heightened and national differences resulting from societal cultures are the central issues of business. Todays global business managers are like the Old World Explorers, Magellan and Cook who navigated the great Pacific Ocean, facing brutal storms of shark-infested waters for days without any reliable chart to guide them. The global managers face the brutal storms of competitors, unknown frontiers of technology, endless seas of change in markets, customers and completely strange cultures. It is their responsibility to face the forces of change and the challenge of leading their business organizations into the new unmapped global marketplace, Coregerson, Morrison & Black (1998). In order to succeed in the dynamic environment, the global manager needs a global mindset and experience in strategic

management. Global Corporations Global Corporations evolve from domestic to multinational and to global. The management control systems change along the way to reflect the dramatic changes in the definitions of the strategic business unit. A multinational corporation operates in each country with locally defined strategies and organizational structures. The global corporation operates with coordinated strategy that includes all the countries in which it operates. A product for global corporation may be designed in United Kingdom with components manufactured in Taiwan and assembled in Canada. A model may be produced for sale in Brazil while a fully loaded model may be manufactured for sale in United Kingdom with components manufactured in Taiwan and assembled in Canada. A standard model may be produced for sale in Brazil while a fully loaded model may be manufactured for sale in United States. In this process, there is a complex management control problem that revolves about who should earn the profit, how much should be earned and whether it would be a planned result. The standard approach to this management control according to Dyment (1987) is to measure performance and compare actual result with the expected result and take corrective action. Global Mindset A global manager must have a global mindset. There are four types of mindsets; the defender, explorer, controller and integrator. The defender is a mindset that is internally focused and is mainly for domestic market only. The explorer focuses on foreign markets to help increase sales and its business though it is internally focused like the defender. The controller tries to dominate the overseas market using well-developed systems that worked in its domestic market. The integrator has a global perspective with a worldwide web of relationships with suppliers, competitors and customers. (Kedia & Mukherji, 1999). GLOBAL STRATEGIC MANAGEMENT The rapid globalization of business has resulted in the emergence of a new field, Global Strategic Management which is a blend of Strategic Management and International Business. Strategic Management is identifying and responding to opportunities and threats in the environment (Wortzel, 1991). A global firm is organized and managed to take advantage of the opportunities across various country markets. The global firm has one global strategy, produces and or markets its products in many countries, offers standardized products in all country markets. It manufactures at any site, uses any plant sizes that minimizes delivery cost of products across its markets. It organizes itself in a way that facilitates efficient manufacture, marketing and distribution of its products. The World Future Society sponsored World 2000 to conduct a global strategic management process among business, government, education and other sectors of society to define the emerging global systems and assist institutions to adapt to changes. There are several super-trends which are driving forces that are moving the world in new directions. These include a growing population that is expected to stabilize at about

14 billion by mid twenty-first century, industrial output that will increase by a factor of 5 10, high-tech revolution, and information technology that will wire the globe into a single network, global integrated economic, political and universal banking and international cultural system (Italal, 1993). Why Strategic Management? Business decision making is so complex and sophisticated that for a firm to deal with it effectively and grow profitably, requires strategic management. Strategic Management, according to Pearce and Robinson (1985) is a set of decisions and actions that results in the formulation and implementation of strategies that will help the organization achieve its objectives. It involves planning, directing, organizing and controlling of the decisions and actions of the organization. It deals with nine initial areas: 1. Determining the organizations mission, philosophy and goals 2. Internal analysis of strengths and weaknesses 3. External analysis of opportunities and threats 4. Identifying the present and desired situations 5. Identifying and defining the problem 6. Identifying alternative strategies 7. Strategic choice of the best alternative strategy 8. Implementation of the best strategy and 9. Review of the evaluation of the success of the process as basis of control and future decision making. Dimensions of Strategic Decisions The strategic decisions have six dimensions. They require top management decisions, they involve allocation of large amounts of resources, they have significant impact on long-term prosperity of the organization, they are future oriented, usually have major multi-functional consequences on the organizations strategic Business Units (SBUs) and they usually impact and are impacted by the organizations external environment, (Pearce & Robinson, 1985). There are three levels of decision-making hierarchy of business firms: the corporate level, the business level and the functional level. The characteristics of strategic management decisions depend on the level of decision-making hierarchy. Corporatelevel decisions are value oriented, conceptual, have greater risk, cost and profit potential. The functionallevel decisions are usually quantifiable, operational, and periodic and lead directly to implementation of the overall strategy at the corporate and business levels. The business-level decisions are strategic decisions that fall between those of corporate-level and functional-level decision making. Forces in the Design of Strategic Management Systems There are many forces that influence the design of strategic management systems. They can be classified into six major categories: 1. Organization small or large firms.

2. Management styles democratic, authoritarian, policy maker, intuitive thinker, experienced in planning. 3. Complexity of environment stable, severe competition, many markets and customers. 4. Complexity of production processes capital intensive, labor-intensive, high technology, long production lead time. 5. Nature of problems new, complex tough problems. 6. Purpose of planning system coordinate division activities, and train managers. (Pearce and Robinson, 1985). Benefits of Strategic Management Strategic management has several benefits. It enhances problem prevention capabilities of a firm, improves employee motivation and participation. It leads to a clarification of role differentiation which reduces gaps and overlaps in activities among diverse individuals and groups. It also reduces resistance to change because participation eliminates the uncertainty associated with change. However, there are some unintended negative consequences of strategic management. The process is costly in terms of the time spent by participants away from their regular work. The managers must therefore be trained to minimize the negative effect on operational responsibilities. Participating subordinates may become disappointed or frustrated over unattained expectation.

GLOBAL PLANNING Firms that engage in global operations are usually involved in two types of planning: strategic and operational. The strategic planning is a long-term planning with time horizon of 3 to 7 years. It is the most significant and complex. It is significant because it establishes the future directions and major courses of action. It is therefore a major responsibility of top management. The operations management is tactical planning. It is usually a set of highly detailed plans, procedures and budgets for the firm for day-to-day decision making for one or two years. Strategic planning in both domestic and global are similar. The uniqueness and complexity of strategic planning in the global market creates differences in the types of decisions the multinational corporations make such as: what countries to expand to and when, when to enter a new market and how, when to introduce a new product, and when to close up a plant (William, 1984). Strategic Planning Model Strategic planning model starts with defining the business in which the firm is, analyzing the strengths and weaknesses of the company and the opportunities and threats facing it. Objectives are then formulated with strategies for dealing with them. The strategies are evaluated with some criteria in order to select the best. Action plans are developed to deal with the implementation of the strategies with contingency plans to cope with the changing and unexpected developments.

Complexity of Strategic Planning in MNCs The globalization of businesses with increasing activism of business stakeholders has made strategic planning more complex in a multinational corporation (MNC). The factors that contribute to this complexity in a global operation include International Strategic Alliances, coordination and control of international marketing, communication, regional trade blocks, European Union, and choice of global strategy. The multinational corporations face a challenge of balancing economic imperative of global integration with the political imperative of prudent stakeholder management and their own strategic predisposition, according to Chakravarthy & Perlmutter (1991). Considering the economic imperative, an MNC has two strategic options: a global strategy and a countrycentered strategy. The global strategy deals with cost leadership differentiation and segmentation. A country-centered strategy deals with national responsiveness or protected markets. The proportion of the value added in the activities of the industrys value chain determines the strategy the organization will pursue. Obstacles to Progress In global strategic management, there are obstacles that are dilemmas which may slow down progress. These include making a leap from the fragmented economic and political systems of the industrial past to a global order, reconciling various economic interests into a sound global productive economy, managing the complexity of the new global environment, achieving sustainable development and closing the gap between the wealth of the southern and northern hemispheres. The elements of a master strategy that will overcome these obstacles are disseminating advanced technology to unify the Globe, integrating economics and society by reconciling economic life and social life, creating a harmonious economic-societal relationship that will form a symbiotic society environment interface, developing decentralize institutions that will empower individuals and fostering collaborative international alliances. Globalization Drivers Global managers need to be aware of four globalization drivers: market drivers, cost drivers, competitive drivers and government drivers. The market drivers include the increasing per capital income which has increased the purchasing power and the demand for goods coupled with increased global travel. Cost drivers include lowered manufacturing and production costs. Competitive drivers are the new global competitors and global strategic alliances. Government drivers are trading blacks and large scale privatization (Kedia 1999). One major factor that has also influenced the globalization effort is the reduction of barriers as a result of communication and transportation technology. The key to successful development of total global strategy is to develop the core strategy, internationalize the core strategy and globalize the international strategy by integrating it across countries. Apart from the industry drivers that influence the potential for

globalization: competitive cost, government and market, other drivers that play vital roles are revolution in information technology, globalization of financial markets like multiple exchanges that list corporations, and improvements in business travel. The benefits of global strategy include cost reduction, improved quality of products and programs, enhanced customer preference and increased competitive leverage. Global strategy, however, has some drawbacks. It creates earlier or greater commitment to a market than the market warrants on its own merits. Global strategy is less responsive to local needs and distances activities from customer. It reduces adaptation to local customer behavior and marketing environment. It increases currency risk and the risk of creating competitors. It sometimes sacrifices local competitiveness. In order to succeed, therefore, there will be need to develop world wide strategies that find a balance between over globalizing and under globalizing. MSCs Strategic Planning Systems The Strategic Planning Systems used by MNCs are top-down planning, bottom-up planning, portfolio planning, and dual structure planning. In top-down planning, the MNC uses tight integration of its worldwide activities to provide global competitive advantage. The firm is usually organized by product group and is focused on economic imperative. In bottom-up planning system, the firm is organized by geographic areas and is focused on political imperative. Monitoring and control are financially oriented in the system. Portfolio planning is most effective when the planning is either regional integration or national responsiveness. Dual structure planning requires simultaneous global integration and national responsiveness. In order to use this system, the MNC must utilize matrix structure with product and area as its two dimensions. Global Managers Characteristics for Success According to Gregersen, Morrison & Black (1998), the characteristics the global managers need to succeed are inquisitiveness, personal character, duality, and savvy. Inquisitiveness is the key for success because it is the fuel that increases their global savvy, enhances their ability to understand people and maintains integrity and augments their capacity for dealing with uncertainty; personal character involves emotionally connecting with people from various backgrounds and showing uncompromising integrity. Duality involves having a capacity to manage uncertainty and knowing when to act, what needs to change and what needs to stay the same, and balancing tensions as they confront the pressures for global integration and local responsibilities. Savvy deals with global business savvy and organizational savvy. The global business savvy will assist the managers to recognize the increased worldwide market opportunities that globalization provides. Organizational savvy deals with the great depth and breadth of the organization which is required for effective business operation. Skills Needed for Success by Global Managers In order for managers to be globally competitive, they need the knowledge and skills to cope with the dynamic increasing complexity of the globalization environment. They need the skills of acculturation of other cultures and leadership for managing diversity.

Global managers must know how to use different cultures to meet organizational objectives. They also need a wealth of knowledge of the international socio-political and economic perspective and mastery of technology. For success, globalization will require thinking strategically by identifying different ways for people to meet their goals and determine which actions will set them where they need to be. The following strategies will help in developing successful global managers: foreign travel to other countries that will expose them to the culture, economy, political system and other factors or they may be transferred to work overseas. Forming work teams of different backgrounds and perspectives and purposeful training developed around effective structured learning environment (Kedia & Mukheerji, 1999). According to Linregerson, Morrison & Black (1998), a survey of U.S.A. fortune 500 firms that was conducted in 1997 showed that though 85% of the firms felt that they have adequate number of effective global leaders, 67% of the firms felt their leaders needed additional skills and knowledge required to meet or exceed the needed capabilities. Success in the global market Success in the global market can be illustrated with the story of three kings who wanted to lead and manage a country called CEO, according to Gordon (1992). In order to become a CEO King, each of them would have to make a presentation to twelve stakeholders, who had periscopes to see around in all directions and to see the comprehensive picture. Using the periscope they would be able to have enough information and will be able to vote on their choice of king. The first king in his presentation said he could see the whole forest with his telescope. He could foresee great things that the CEO country can achieve. The telescope helps him to lead and he would surely be the best CEO King. The second king had a microscope. He said he would surely be the best CEO King because his microscope would be able to see the details of the problems to solve and develop rules for ideal managing and that would make him to be the best CEO King. The third king said he had a kaleidoscope that he would use to see colors and beautiful things that change. He could sing, dance, entertain, and keep people happy. He could strategically use that to keep the CEO country in happy mood that would make him to be the best CEO King. The twelve stakeholders, using their periscopes voted for the best CEO King and each of the three presenters got four votes - a deadlock. How was the best to be chosen? Telescope (leader) The telescope empowers the leader to see farther than would ordinarily be possible. It is a directed vision. The leader is able to build a collective vision and to forecast from it. True leader has telescopism - the ability to see farther into the vision into closer reality. Microscope (Manager) The manager uses the microscope to focus on the health of the corporation, to see

potential ills and avoid problems. Through the functions of management, the manager keeps operation headed toward its goals and objectives. The good manager then has microscopism - power or ability to scrutinize details. Kaleidoscope (Strategic Actor) The strategic actor uses kaleidoscope to inspire, motivate, and demonstrate the quick change perspective. He adds the charm, beauty, joy and humor to the corporate endeavor. Collaboroscope (Synergistic Team) The synergistic team uses collaboroscopism to see about and beyond, see details, and to see changing inspiring patterns, through thinking and laboring together. In order to succeed, the team must use interdependent collaboration, participative management, communication and consensus. The managers, as leaders, must understand where they belong, set direction and align strategy, structure and process. They must understand and have the corporate culture and encourage change through adaptability. They must deal effectively with conflict, inspire, motivate, commit together and eliminate barriers. They must listen, communicate, perceive, and provide feedback.

CONCLUSSION This paper examines why global strategic management is vital as the traditional way of doing business is becoming irrelevant for todays dynamic environment. It discusses the complexity of strategic planning process for MNCs, globalization drivers, and obstacles to progress. In order for firms that engage in global operations to succeed, the global managers need to develop global mindset, and understand global strategic management process. The managers should analyze their firms strengths and weaknesses, the opportunities and threats, the present situation of the firm and the desired situation. The organizational problem should be thoroughly defined. The best strategy should be selected after a thorough evaluation of available alternatives and using effective management control to see that the selected strategy is successfully implemented. Success requires interdependent collaboration, consensus, participative management and effective communication among managers with feedback. REFERENCES Bartlett, C. A. & Ghoshal, S. 1992. What is a Global manager? Harvard Business Review, 70, 124-132. Chakravarthy, B.S. & Pertmutter, H. V. 1985. Strategic Planning for a global business. In Vernon-Wortzel, H. & Wortzel, L.H. 1991. Global Strategic Management the Essentials. John Wiley & Sons, New York. 3-10. Dyment J. J., 1987. Strategies and Management controls for global corporations. The

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