Some companies have enjoyed the expected benefits of globalization such as new growth and economies of scale. But cases such as DaimlerChrysler and ABN Amro show that globalization can fail to yield the expected payoffs and can even be disastrous. The fact is, stress Alexander and Korine, that global strategies are tremendously tough to execute—a fact that many businesses fail to see, being blinded by a globalization mania. Not so long ago, companies were caught up in a diversification mania. Many of them went on to be broken up or thoroughly overhauled. Businesses with ill-considered globalization strategies are likely to share their fate. In this article, Alexander and Korine point out industries where globalization mania has been prevalent, some companies that have fallen victim to it, and how you can reduce your risk by carefully considering three big questions.
Three industries that face particular globalization challenges are deregulated industries, service industries, and manufacturing industries. The first of these assume, often erroneously, that they can use their existing competencies in new markets to achieve cross-border economies. Service industries can find it unexpectedly difficult to coordinate people and processes. Manufacturing industries such as automobile and communications equipment makers have often run into delays due to the complexities of integration. Too many companies in these and other industries rush to globalize because they have allowed themselves to fall victim to the latest management fad. This fad is fed by dangerous assumptions reinforced by academic frameworks, investor pressures, and sloppy use of terms and trends.
To avoid blindly jumping on the globalization bandwagon, the authors recommend asking three questions to determine whether a global move makes sense for your firm: Could the move generate substantial benefits? Do we have the capabilities (for example, experience in post-merger integration) required to realize those benefits? Will the benefits outweigh the costs (such as the complexity that comes with coordinating far-flung international operations)? Pondering these questions can help you more realistically estimate the size of the prize, assess the skills needed to unlock the coffer holding the prize, and more accurately assess the costs.
Payment required for full access. ManyWorlds receives no money from this referral.