GLOBAL STRATEGY AND

DIVERSIFYING IN DIFFERENT
CULTURES
Presented by: Arman Jay L. Dizon
 GLOBALIZATION
• Globalization is the process by which geographic constraints on economic,
social and cultural arrangements recede, thus increasing our global
interdependence (Branson, 2007)
 INTERDEPENDENCE
• Increased magnitude and intensity of global flows
• Distant events affect local scenarios
• Action and reaction across the world
• Increased interaction: networks, telecommunications, MNCs
• Supported by:
• Telecommunications
• Transport
• Global customer demand
• Knowledge exchange
• MNCs
• Institutions
• Bilateral and multilateral agreements
HOW GLOBAL ARE WE?
 THEODORE LEVITT, 1983
• The globalization of markets is at hand. With that, the multinational
commercial world nears its end, and so does the multinational corporation…
The multinational operates in a number of countries, and adjust its products
and processes in each, at high relative cost. The global corporation
operates with resolute constancy… it sells the same things in the same way
everywhere.
 THOMAS FRIEDMAN, 2005
• He argues that a number of important events, such as the birth of the
Internet, coincided to “flatten” the competitive landscape worldwide by
increasing globalization and reducing the power of states, including the fall
of the Berlin Wall; the rise of Netscape and the dot-com boom that led to a
trillion-dollar investment in fiber-optic cable; the emergence of common
software platforms and open source code enabling global collaboration;
and the rise of outsourcing, offshoring, supply chaining, and insourcing. These
flatteners converged around the year 2000, creating “a flat world: a global,
web-enabled platform for multiple forms of sharing knowledge and work,
irrespective of time, distance, geography and increasingly, language.
 PANKAJ GHEMAWAT
• Semiglobalization
• Vast majority of all phone calls, web traffic, and investment around the world
remains local; that more than 90% of the fixed investment around the world is
still domestic; that while trade flows are growing, the ratio of domestic to
international trade is still substantial and is likely to remain so; and, crucially,
that borders and distance still matter and that it is important to take a broad
view of the differences they demarcate, to identify those that matter the
most in a particular industry, and to look at them not just as difficulties to be
overcome but also as potential sources of value creation.
 MOORE AND RUGMAN
• Reject the idea of an emerging single world market for free trade and offer
a regional perspective.
• Business activity tends to be centered in certain cities or regions around the
world, and suggest that regions—rather than global opportunity—should be
the focus of strategy analysis and organization.
 DE-GLOBALIZATION
• Global financial crisis 2009 called for increased controls on globalization
• Alternative ideology to neo-liberal globalization
• 10 pillars (Bello,2009)
• 1. Production for the domestic market must be the focus
• 2. To encourage the production of goods at the community level if it can be done at a reasonable cost
• 3. Trade policies to protect local industry (quotas and tariffs)
• 4. Industrial policy to revitalize the manufacturing sector (subsidies, tariffs and trade)
• 5. Measures of equitable income distribution
• 6. Emphasis on upgrading quality of life and equity (not growth)
• 7. Use of environmentally friendly technology in agriculture and industry
• 8. All vital questions must become subject to democratic discussion
• 9. Civil society must monitor and supervise the private sector and the state
• 10 Mixed economies: community cooperatives, private enterprises and state enterprises; transnational corporations
must be excluded
• Centralized institutions (IMF, WB) should be replace by regional institutions to work not on free trade but
cooperation
GLOBAL AND
INTERNATIONAL
COMPANIES
 INTERNATIONAL
• Operations in 2 or more countries.
 MULTINATIONAL CORPORATIONS
• Assets and / or operations in more than one country
• Operations are managed from a main office in its home country.
• Long supply chain:
• Acquisition of raw materials in one country
• Manufacturing in another country
• Sales in another country
 DRIVING FORCES (WHY
INTERNATIONALIZE?)
• New markets
• Diversified activities
• Proximity to the customer
• Cost related-motivations
• Domestic market-related motivations
• Survival
 KEY BENEFITS
• Sales
• Employment: more and more qualified
• Competitiveness
• Productivity: companies who invest abroad are 25% more productive than
those who only export and 77% more productive than domestic companies.
• More resistant to adverse economic cycles
 KEY RISKS
• Political
• Global risk – affects the company’s global operations
• Country-specific risk – company’s specific investments in a given country
• Macro – how FDI is treated (expropiation, nationalization, etc)
• Micro – accounting practices, breach of contracts, etc.
• Legal
• Legal system
• Enforcement of local regulations (IPR)
• Financial
• Macroeconomic stability
• Currency competitiveness and fluctuations
• Societal
• Ideologies, religious and ethnic groups
• Local leaders
KEY BARRIERS
2 APPROACHES
GLOBAL STRATEGY
 DILEMMAS OF COMPETING IN A
GLOBAL WORLD
• Convergence vs. homogenization
• Global citizenship vs. local identities
• Global market vs. global segments
• Globalization vs. semi globalization
• Global sourcing vs. regional business
• Bridges vs. barriers between countries
5 IMPERATIVES TO BECOME MORE
GLOBAL
CAGE
 AAA GLOBAL STRATEGY
FRAMEWORK (GHEMAWAT, 2007)
ADAPTATION
AGGREGATION
ARBITRAGE
 WHICH “A” TO USE?
• The goal is to create global value
• Many companies will focus on just one “A”
• Most likely all of them will be considered at some point
• Strong marketing focus – adaptation
• R&D – aggregation
• Labor intensive industries – arbitrage
VALUE PROPOSITION MATRIX
 GLOBAL MIX
• Pure aggregation
• Rare
• It requires:
• Global usage patterns
• Economies of scale
• Standardization leads to a sustainable competitive advantage
• Example: Basic electronic components
 GLOBAL OFFER
• Same offer
• Different positioning
• Core benefits are identical but a local message is needed to reach
customers
• Difficult to sustain – consistency and global expectations?
 GLOBAL MESSAGE
• Same message
• Product adaptation
• Customers with similar aspirations
• Cost of adaptation is low
• Global brand leverage
• Risk: global customers do not find a global offer
• Example: McDonalds’ tagline “I’m lovin’ it”
 GLOBAL CHANGE
• Pure adaptation
• Best fit
• Often linked to acquisitions
• Requires higher local R&D costs
• May lead global customers to confusion
DIVERSITY - AN ENABLER
FOR GLOBALIZATION
 DIVERSITY
• Cultural diversity refers to the wide range of cultural differences found
between and within nations
• Can be a result of natural circumstances (climate, geography) or social
circumstances (technology or demographics)
• Societies can be homogeneous or heterogeneous
• When societal tensions arise, people may look for others on whom they can
place blame or single out persons or groups who are the “outsider”, who do
not belong.
 DIVERSITY
• As the business is becoming more and more globalize, diversity in an
organization is a competitive advantage for leveraging the opportunity of
business globally (Zainuba, 1998).
• A good management of such diversity can help in enormous improvement
of team work and also helps in improving the productivity of an organization.
• Companies who run their business in multiple companies face competitive
issues. For understanding those markets and competitive issue, a cross
cultural collaboration and understanding is very much important. Due to this
reason many companies has kept their managerial level employees or top
level executives in foreign countries to be from a different country or culture
to understand the global business and to pursue the advantage of the
market.
 CROSS CULTURAL ISSUES
• It is obvious that when a diversified team work together, due to many
reasons like language barriers, cultural difference etc., many issues may
occur.
• But in any organization it is critical to analyze the cause of these issues and is
necessary to find out what hinders the team work in such situations.
 HOFSTEDE’S DIMENSION
• Individualism / collectivism
• extent to which individuals are valuing their self determination which is as opposed to
their behaviour, determined by collective will of organization.
• Power-distance
• Employee shows involvement in and also has a participative style of management in
the low power-distance culture. The other side of this is that the employees always
tend to accept and behave in certain ways as directed by the higher management
hierarchy
• Uncertainty avoidance
• employee tolerance of uncertainty in the work place
• Masculinity / femininity
• It is considered that the masculine culture values mostly related to material
acquisition and assertiveness where as feminine culture values relates to the
relationship and person and the quality of life
 MANAGING DIVERSITY AND
CROSS CULTURAL ISSUES
• Efficient management is very much necessary to leverage the competitive
advantage of the diversified team in an organization for achieving success
and for the expansion of business through innovation.
• Diversity management has become the priority in most of the countries
especially in work place and in institutions of higher education (Aoun, 2007).
• Friday & Friday (2003) also give systematic strategic management approach
starting from strategic formulation, implementation and strategic evaluation.
 STRATEGIC MANAGEMENT ON
MANAGING DIVERSITY AND CROSS
CULTURAL ISSUES
• In strategic formulation we develop the mission, vision and the goal,
conduct the SWOT analysis and also set the criteria for selection and then
select the strategy.
• Then in strategic implementation phase we allocate appropriate resources
and execute the strategy.
• In the evaluation process of managing the diversity, we set the control
process, review and access the strategic execution and takes corrective
actions whenever it is necessary.
 EIGHT STEPS WHICH CONTRIBUTE TO
THE EFFICIENT DIVERSITY
MANAGEMENT
• Exposure
• Experience
• Understanding
• Respect
• Knowledge
• Appreciate
• Modifying attitudes and the behaviours
• Healthy interaction
 CONCLUSION
• Diversity management has been one of the most important things in strategic
management as it affects the overall performance of the organization. As a
part of globalization, companies operate their business across the globe for
expanding the business as well as to pursue the opportunity available in the
world market. Such a working environment will be diversified with people from
different countries with different philosophies, culture, language, gender,
mentality, thoughts and lot more. For the successful operation of a firm
globally, it requires a tight coupling between these people in an organization.
For this tight coupling, a good relationship as well as trust is required. An
efficient management of diversity will allow reducing or even avoiding the
friction caused due to cross cultural issues. An efficient management of
diversity could also help an organization to better understand the national
difference and this will better help an organization to establish business across
globe with out much issues. As a part of diversified management, companies
should also give importance to language differences and need to try to
make a common language.
~THE END~
Thank you and God bless!