MANAGEMENT OF THE GLOBAL BUSINESS
Management Of The Global Business
One short sighted alternative for risk averse managers would be the termination of global activities altogether. However business will not achieve long run success by engaging only in risk free actions. Further other factors make the pursuit of global business mandatory.
Global markets remain a source of high profits as a quick look at a list of multinational firms would the Global activities help cushion slack in domestic sales resulting from recessionary or adverse domestic conditions and may crucial to the very survival of the firm. Global markets also provide firms foreign experience that them compete more successfully with foreign firms in the domestic market.
International Planning And Research
Firms must continue to serve customers well to be active participants in the global marketplace. One major that will come about is that the global manager will need to respond to general government concerns toad greater degree when planning a business strategy. Further societal concern about macro problems needs to be taken into account directly and quickly because societies have come to expect more social responsibility from corporations. Taking on a leadership role regarding social causes may also benefit corporations bottom lines since consumers appear more willing then ever to act as significant pressure point for policy changes and to pay for their social concerns.
Another trend consists of increased competition in global markets. The trend will create a need for more niches in which firms can create a distinct international competence. As a increased specialization and segmentation will let firms fill very narrow and specific demands or resolve very specific problems for their global customers8. Identifying and filling the niches will be easier in the future because of the greater availability of global research tools and information. The key challenge to global firms will be to build and manage decision making processes that allow quick responses t multiple changing environmental demands. This capability is important since firms face as logistic and operations while being confronted with the need for greater national differentiation and responsiveness at the customer level9.
In spite of the frequent short term orientation by corporations and investors. companies will need to learn to prepare for long term horizons. Particularly in an environment of heated competition and technological battles, of large projects and slow payoffs, companies their stakeholders and governments will need to find avenues that not only permit but encourage the development of strategic perspectives.
Governments both at home and abroad will demand that private business practices not increase public costs and that business serve customers equally and nondiscriminately10. The concept directly counters the desire to serve first the markets that are most profitable and least costly. Global executives will therefore be torn in two directions and to provide results that are acceptable both to customers and to the societies they serve they must walk a fine line balancing the public and the private good.
Global Product Policy
One key issue affecting product planning will be environmental concern. Major growth in public attention paid to the natural environment, environmental pollution, and global warming will provide many new product opportunities and affect existing products to a large degree. For manufacturers will increasingly be expected to take responsibility for their products from cradle to give and be intimately involved in product disposal and recycling.
Firms will therefore have to plan for a final stage in the product life cycle, the postmortem stage during which a firm continues to expend further corporate investment and Management attention, even though the product may have terminated some time ago11.
Although some consumers show a growing interest in truly natural products even if they are less convenient consumers in most industrialized nations will requires products that are environmentally friendly but at the same time do not require too much compromise on performance and value. Management is likely to resist the additional business cost and taxes required for environmental protection, at least until investors and other constituent group assure executives that environmental concern is acceptable even if it cuts into profit.
Worldwide introduction o products will occur much more rapidly in the future. Already, international product life cycles have accelerated substantially. Whereas product introduction could previously be spread out over several years, firms now must prepare for product life cycles that can be measured in months or even weeks12. As a firms must design product and plan even their domestic marketing strategies with the international product cycle in mind. Product introduction will grow more complex, more expensive, and more risky, yet the rewards to be reaped from a successful product will have to be accumulated more quickly.
Early incorporation of the global dimension into product planning, however does not point toward increased standardization. On the contrary, companies will have to be ready to deliver more mass customization. Customers are no longer satisfied with simply having a product they want it to precisely meet their needs and preferences. Mass customization requires working with existing product technology, often in modular form, to create specific product bundles for a particular customer. For Toyota is developing an information and production system that will make it possible for an individual customer to specify a car with all its options and for the car to be delivered to the home within a few days of ordering13.
Factor endowment advantages have a significant impact on the decisions of international mangers. Given the acceleration of product life cycle, nations with low production costs will be able to develop and offer products more cheaply. Countries such as India, Israel, or the Philippines offer large pools of skilled people at labor rates much lower than in Europe, Japan, or the United States. All this talent also results in a much wider dissemination of technological creativity, a factor that will affect the innovative capability of firms.
This indicates that firms need to make no domestic know part of their production strategies or they need to develop consistent comparative advantages in production technology to stay ahead of the game. Similarly workers engaged in the productive process must attempt through training and skill enhancement to stay ahead of foreign workers who are willing to charge less for their time.
An increase will occur in the trend toward strategic alliances or partnering, permitting the formation of collaborative arrangements between firms. These alliances will enable firms to take risks that they could not afford to take alone, facilitate technological advancement and ensure continued international market access. These partners do not need to be large in order to make a major contribution. Depending on the type of product, even small firms can serve as coordinating subcontractors and collaborate in product and service development production and distribution.
The advances made in global communications will also have a profound impact on global management. Entire industries are becoming more footloose in their operations; that is they are less tied to their current location in their interaction with markets. Best Western Hotels in the United States has channeled its entire reservation system through a toll free number that is being serviced out of the prison system in Utah. Companies could even concentrate their communications activates in other countries. Communications for worldwide operations for could easily be located in Africa or Asia without impairing global corporate actives.
Staff in different countries can not only talk together but can also share and the computer screens. Worldwide rapid product development has therefore become feasible. Technology also makes in possible to merge the capabilities of computers televisions, and telecommunications. Communication costs are decreasing significantly at the same time that the capabilities of communication tools increase. As a firms have the opportunity for worldwide data exchange and benefit from virtually unlimited availability of detailed market and customer data. The challenge is to see who can use and apply information technology best.
Innovative distribution approaches will determine new ways of nerving markets. For television, through QVC has already create a $2.2 billion shopping mall available in more than 60 million homes in the United States and 4 million in the United Kingdom. The use of the Internet will offer new distribution alternatives. Over times it can easily be envisioned that self sustaining consumer distributor relationships emerge through say refrigerators that report directly to grocery store computers that they are running low on supplies and require a home delivery billed to the customer's account14.
The link to distribution systems will also be crucial to international firms on the business to business level. As large retailers develop sophisticated inventory tracking and reordering systems, only the able to interact with such system will remain eligible suppliers. Therefore firms need to create their own such systems that the able to respond to just in time and direct order entry requirements around the global.
More sophisticated distribution systems will also offer new management opportunities to firms but at the same time will introduce new uncertainties and fragilities into corporate planning. For development of just in time delivery systems makes firms more efficient yet, on a global basis also exposes them to more risk due to distribution interruptions. A strike in a faraway country may therefore be newly significant for a company that depends on the timely delivery of supplies.
Global price competition will become increasingly heated. As their distribution spreads As their distribution spreads throughout the world, many products will take on commodity characteristics as semiconductors did in the 1988s. Therefore price differentials of one cent per unit may become crucial in making an international sale. However since many new products and technologies will address completely new needs forward pricing become increasingly difficult and controversial as demand levels are impossible to predict with any kind of accuracy.
Even for consumer products price competition will be substantial, Because of the increased dissemination of technology, the firm that introduces a product will no longer be able to justify higher prices for long; domestically produced products will soon be of similar quality. As a exchange rate movements may play more significant roles in maintaining the competitiveness of the international firm. Firms can be expected to prevail on their government to manage the country currency to maintain a favorable exchange rate.
Through subsidization targeting government contracts or other hidden forms of support, nations will attempt to stimulate their worldwide competitiveness. Due to the price sensitivity of many product the global manager will be forced to identify such unfair practices quickly communicate them to his or her government and insist on either similar benefits or government action to create an internationally level playing field.
At the same time many firms will work hard to reduce the price sensitivity of their customers. By developing relationships with their markets rather than just carrying out transactions, other dimensions such as loyalty consistency the cost of shifting suppliers and responsiveness to client needs may become much more important than price in future competition.