Introduction
With the advent of the internet and massive computing systems that are nevertheless small in physical scale, the world is becoming an ever-shrinking globe. National boundaries are becoming blurred as people in India begin working for companies in the United States and cultural groups are beginning to lose their sense of uniqueness as the world’s civilizations become more and more Westernized with the onset of full-scale capitalism. This globalization, or inter-nationalization, process has been a hotly debated topic in the media, political and social circles for the past several years. The International Monetary Fund defines globalization as “a historical process” involving “the increasing integration of economies around the world, particularly through trade and financial flows” (International Monetary Staff 2002). It is typically viewed as a necessary and unavoidable key to future world economic development. Others have denounced the process as it seems to increase the current inequalities that exist within and between nations, threatens the employment and living standards of individuals in all countries as talent is pulled from each, and low-paying jobs are farmed out to others and prevents the natural social progress with which each of these countries have been involved. Although this process is unlikely to change and reversal seems impossible, considering the effects this process has on the individual as well as the nations, and organizations involved, it is necessary to examine the benefits of the process as well as the negative aspects of globalization if companies are to remain successful. The primary question in the process becomes whether a company should struggle to adopt new local customs and appeals or if they should work on strengthening a core persona applicable worldwide.
Global Markets for Greater Results
Changes in the way in which organizations conduct business have been rapid and wide-spread as the globalization concept has been introduced. It is the inherent nature of the marketplace to increase efficiency within the workplace by constantly striving to produce the most products with the least expenditure of resources. It is this concept that has driven many corporations to join in the globalization process, frequently outsourcing many of their activities and production processes to less developed countries in which this process is less expensive and requires fewer restrictions, licensing, and/or controls. “Global markets offer greater opportunity for people to tap into more and larger markets around the world. It means that they can have access to more capital flows, technology, cheaper imports and larger export markets” (International Monetary Fund Staff 2002). Although the idea of globalization sounds like an ideal situation for the increased flow of goods and currencies throughout the world, as well as a possible solution for the redistribution of wealth into some of the world’s most destitute countries, “in practice, this has meant that the governments of the advanced capitalist countries, along with the I.M.F., the World Bank, and the W.T.O., have increasingly sought to force other nations to adopt market economies, privatize public companies and resources, abandon labor and environmental regulations, reduce social services, and embrace ‘free trade’ and the free movement of transnational capital” (Smith 2002). It is noted that much of the globalization effort is being organized and encouraged by the Western capitalist countries and the big businesses that have ever-increasing power in the political circles, forcing their own ideals, agendas and policies upon developing nations desperate for some help.
While the International Monetary Fund (2002) argues that “globalization offers extensive opportunities for truly worldwide development,” they also admit that the increased efficiency and division of labour does not necessarily benefit everyone involved. Because of the increased ability for these larger corporations to move into smaller markets, bringing in their greater resources, greater capital and greater ability to undercut their competitors, smaller businesses are finding it more and more difficult to survive the globalized marketplace. Rather than leading to an increased diversification in the market, as well as the associated opportunities for employment and competitive salaries, globalization is beginning to decrease the ability of local citizenry to find adequate support outside of the multi-national corporation and opportunities for entrepreneurship dwindle. “As we all search for the best deal for our consumer dollars, regional superstores and on-line shopping drives our Mom and Pop shops, local manufacturing and local service companies out of business. As local businesses close their doors, the number and diversity of local jobs decrease” (Salmons & Babitsky 2002 p. 4). This also begins to wear away the concept of local flavor.
To Global Markets through Global Minds
The concept of a “shrinking world,” a world wherein travel, trade and communications between countries is becoming easily accessible by all, is luring more and more companies into the worldwide market thanks to significant advances in transportation, communication and a recognition of the success of libertarian marketing systems. “The globalisation of markets has certainly accelerated through almost universal acceptance of the democratic free enterprise model and new communication technologies, including satellites and the Internet” (Cateora 2005). However, many of these companies that are inexperienced in marketing overseas incorrectly assume that their products or services will be easily accepted in foreign markets. Even when remaining concentrated within a single country or when marketing their goods to countries individually, companies facing international competitors will fare better if they have a global perspective in mind. As mentioned by Cateora, all these companies are or will be affected by competitive activity in the global marketplace (2005). To illustrate this concept, Cateora relates the story of US-based General Electric Lighting, who dominated the US lighting market until its rival, Westinghouse, sold its operations to Philips Electronics of Holland. Philips was then able to come in to the US market to compete from a stronger marketing position. Based on the experiences of companies such as General Electric Lighting and others, all companies that operate in international marketing arenas should adopt a modified globalisation strategy that includes a wide range of standardized products, but remains open to small market-specific variations designed to satisfy consumer needs, wants and tastes in smaller regions.
Global Strategies for a Single Market
Globalisation, at its most basic, “is often presented as a strategic effort to treat the world, or a significant part of it, as a single market in which to do business” (Sharma 2004). The strategy seemed to work when first applied to Coca-Cola sales in the 1990s. The globalisation program introduced by then CEO Roberto Goizueta, “think global, act global,” treated the whole world to a standardized set of everything the company had to offer to great initial success (Ghemawat 2004). Early globalization efforts initiated by companies such as Bozell in representing Heinz tomato ketchup saved money by utilizing assets such as the same television commercial for both UK and Russian markets, with only a simple change included in the final line (Wheeler 2000) to decent effect. With such strategies, companies with strong brand identifications have been able to move into and even take over foreign markets. Strongly identified with US values and culture, the restaurant chain “McDonald’s now claims to be the leading restaurant chain in France. Its French sales and profits were both up by over 9 percent in 2001—a year when the company saw global net profits fall by 17 percent” (Delicious Irony 2002). For companies such as Coca-Cola, the acceptance into the worldwide market was not so difficult. “More than 70 percent of our income comes from outside the U.S., but the real reason we are a truly global company is that our products meet the varied taste preferences of consumers everywhere” (Coca-Cola 2005). For these companies, the answer seems to be in successfully selling the brand. In Larry Bodine’s article on “Penetrating local markets with branding,” he quotes Richard Levick, president of Levick Strategic Communications, as indicating Burger King food scores better in taste tests than McDonald’s food, yet McDonald’s is the market leader with its dominant brand. Why? Because McDonald’s is selling an experience, a relationship (2005). For Proctor and Gamble, the entry of the Pringles potato chip brand into the global market was as easy as translating the packaging to a foreign language, but when the unique product became an instant success, meeting the demand became a liability. Rather than a market to rid themselves of surplus product, the company found it necessary to quickly obtain overseas manufacturing plants to keep up with the new demand (Smith 2001). Yet, even with the early successes, subsequent reductions in sales in recent years across several industries have indicated “a responsible and relevant globalization approach is more sustainable.” William Mougayar urges companies to work in close connections with the governments and existing corporations in each country they enter for greater economic impact (2002).
Local or Global?
Despite the apparent threat to local businesses brought on by the concept of globalization, developing nations are eager to accept the influx of big business as the international corporation operating in the right third world country can substantially increase that nation’s GNP. This interaction among nations leading to the overall economic growth of those countries has been historically demonstrated. “In the inter-war era, the world turned its back on internationalism … and countries retreated into closed economies, protectionism and pervasive capital controls. This was a major factor in the devastation of this period, when per capita income growth fell to less than 1 percent during 1913-1950. For the rest of the century, even though population grew at an unprecedented pace, per capita income growth was over 2 percent, the fastest pace of all coming during the post-World War boom in the industrial countries” (International Monetary Fund Staff 2002). This unprecedented growth was due to the increased interaction among countries in the realms of international business and financing. “Outward-oriented policies brought dynamism and greater prosperity to much of East Asia, transforming it from one of the poorest areas of the world 40 years ago. And as living standards rose, it became possible to make progress on democracy and economic issues such as the environment and work standards” (International Monetary Fund Staff 2002).
Globalization offers extensive opportunities for truly worldwide development but it is not progressing evenly. Because companies expand into new markets based on how well that market can meet their own needs, this process sees some countries becoming integrated into the worldwide economy much faster than others. As would be expected, those countries that have been able to integrate are seeing faster growth and reduced poverty. “A larger number of developing countries have made only slow progress or have lost ground. In particular, per capita incomes in Africa have declined relative to the industrial countries and in some countries have declined in absolute terms” (International Monetary Fund Staff 2002). In addition, the growing power of these corporations as they come into developing nations has had a wide impact on the policies and restrictions that are created. The effect of having less restrictions in terms of humanitarian, environmental and operational procedures has led to an economy that rewards cutthroat business practices at the cost of a great deal of progress in these areas made in more advanced countries.
Global Competition for Jobs
Of course, all this change filters down to ultimately affect the individual citizens in a very real way. No longer sure of their livelihood thanks to increased competition for less jobs available, the globalized economy has made it difficult, if not impossible, for the poor to dig their way out of their poverty while increasingly helping the wealthy add to their fortunes. In addition, the jobs that do become available are not always jobs that would be open to local residents as they might require skills or knowledge that were not previously necessary. “Those with jobs know that they could lose them at any time. Downsizing by companies moves the bulk of workers into contract and temporary employment” (Salmons & Babitsky 2002). This increased competition for jobs has led to a Westernized way of living that places emphasis on fast lifestyles and a constant pressure to keep up with the latest advancements and social opportunities in order to have a chance at the best jobs. “In this world of intense competition, social networking is everything. Who you know and how they can help you is the coin of the realm. The result is that we increasingly isolate ourselves into gated communities and exclusive membership organizations” (Salmons & Babitsky 2002).
Those who wish to advance in life know they must do so by sacrificing family values and traditional belief systems in order to fit in with the correct social crowd to obtain the types of employment that will provide them with the lifestyle they have been told is best. Increasingly, the world is operating upon a Western definition of the ideal life, neutralizing cultural differences in an effort to be politically correct and to avoid cultural clashes and changing the roles of family members to bring them into the capitalist ideology. The pressure to become a part of this infamous ‘rat race’ filters quickly into the society, realized by adults and then distributed down to the children. “Parents increasingly feel that they must help their kids learn how to get in the race as early as possible to increase their chances for the best jobs and a good life in the future” (Salmons & Babitsky 2002). Those who don’t fit into the model, who don’t buy into the set standard ideals or who refuse to relinquish their cultural heritage for the benefits associated with blending in are quickly lost to the bottom of the income stack. “The gap between social classes widens as a result of this voluntary sorting” (Salmons & Babitsky 2002). However, local flair, customs and belief systems remain an important part of life for many of these individuals. How they define the top of the stack differs from one culture to another even while culturally ingrained systems, such as a system of symbology (the meaning of the color yellow among different cultures for example), remains heavily influential.
Therefore, in moving into other countries and other environments, companies need to take into consideration not only their own products and services, but the resources of materials and workers available in a local market as well as the individual tastes and desires of the consumers in that area that have been formed by a combination of cultural background, national identity and personal preference. In “Why global brands are not always cost-effective,” Lindsay Williams quotes Laurie Young, global head of marketing at PricewaterhouseCoopers as saying “Local culture is a powerful barrier to the success of a global brand. It really is time that we recognised the power of cultural differences and their effect on global enterprise” (Williams 2004). To help work around that barrier, US-based United Airlines opted to join Air China based in Beijing in the Star Alliance, a group of airlines reserving the ability to sell air passage tickets on each others’ planes (United 2003), thereby retaining their local brand draw while gaining a more globalised reach.
Global Brand building
Although early predictions held that the world would be highly globalised in a short period of time, “experience has shown that companies need not always create one-size-fits-all global brands just because the world appears to be shrinking. Indeed, firms should recognize that adapting brands to local conditions will on many occasions be the best approach, and at times the only approach, because local conditions will leave them no other choice” (Managing brands 2005). Inditex, the parent company of the popular Zara clothing stores, achieved its success through a unique company structure in which all design, prototyping, decision-making, supply procurement, planning, production and delivery schedules are done in a single room while reports stream in daily from each of the more than 650 stores located in more than 50 countries, keeping the company in touch with the wants, needs and desires of localized regions (Harkness 2003).
Without some of these tools, or wishing to make more of a global splash upon their venture into the waters, new companies have developed that specialize mainly in helping other companies to globalize through constantly evolving research methodologies (Whitney 2003). To address some of the technical demands of a differing world market, companies such as Lionbridge have sprung up to help large corporations adapt their products to more localized specifications such as software programs and computer hardware compatibility (Lionbridge 2000). The need to localize within the global corporation is just as important as localizing without it, as Pastore indicates through his conversation with Kevin Keohane, director of user experience for the Intranet Benchmarking Forum — “In Keohane’s experience, global corporations tend to have an umbrella group in their home country that will update company news that impacts everyone involved. There are intranet groups in certain regions around the world that add their own personality for local employees” (2005).
Yet even turning to a mostly localized strategy is not always enough to ensure success. While most companies recently are gravitating toward more localization and less standardization, analysts such as Ghemawat propose these firms should focus more on arbitrage, or the strategy of difference. “In fact, many forms of arbitrage offer relatively sustainable sources of competitive advantage, and as some opportunities for arbitrage disappear, others spring up (Ghemawat 2004). According to Galbraith, “In most industries, customers prefer fewer suppliers and closer, longer-term relationships with them” (2001). An example of such attention to local conditions can be seen in the growing number of multinational entrepreneurships such as that of Ismail Karaoglu, who recognized the fine leather and high quality accessories he could obtain in Italy to fashion into wallets and other goods in Istanbul to sell in Russia and other former Soviet republics (Karra and Phillips 2004). More and more of the larger corporations are also starting to see some of the advantages of playing to the strengths of individual economies. “For instance, Rupert Murdoch’s News Corporation has its chief markets in the UK, the US and Australia but places its acquisitions in these countries in holding companies headquartered in the Cayman Islands, which does not tax corporate income. The result is an average tax rate of 10 percent on Murdoch’s company’s profits, whereas competitors such as Disney are paying close to official tax rates of 30 to 35 percent. The advantage has allowed Murdoch to expand further into the United States, growing the company and driving up employment” (Ghemawat 2004). Other companies, such as Dutch-based Phillips Electronics, have managed to make their brand both local and global at the same time. “’Today,’ says Dawar, ‘[Philips] is not just a Dutch brand that has gone international, but it is in fact a local brand. People will tell you this in Austria, Australia, India and Canada—there are a number of places around the world where Philips has gone very local.’” (Frost 2005). Capitalizing on local identity, the athletic shoe manufacturer Nike propelled itself from an average everyday tennis shoe to the worldwide giant it is today by riding on the coattails of celebrity endorsements, starting with Michael Jordan in the 1980s and continuing with golf star Tiger Woods (Tran 2004).
Whether companies choose to enter the global marketplace or not, evidence has shown there is no guarantee that the globalize marketplace may not come in to compete; therefore, it would be wise for all companies to adopt a modified globalization strategy that takes into account the use of global strategies, local interests, wants and needs and leaves room for maximizing on the strengths of a given region. Companies such as General Electric Lighting learned too late that opting out of globalization cost them greatly in later years as stronger competition from other countries moved in while others such as Proctor and Gamble and Coca-Cola managed to find almost instant success with nothing more than a simple change in language. However, to make globalization a success, fast-growing corporations such as Inditex have learned to keep their brand identity globalize while placing their fingers on the pulse of consumers at the local level. Companies without the ability to completely restructure have found success by forming cooperations with existing companies and governments in other countries, as is evidenced in the Star Alliance that allows airliners such as United Airlines and Air China to cross-sell. As shown in previous discussion, many of the most successful global companies have learned to change with the local climate even while maintaining a worldwide identity.
Conclusion
With the ill effects of globalization acutely felt in some areas of the world, it might be questioned as to why any organization, nation or individual would consider encouraging its spread. However, it could be argued that globalization has been in existence ever since the first two countries established communication with each other. The only difference now is that the advances in technology and communication have enabled business to be conducted over longer distances in less time, enabling this kind of interaction to occur regardless of geographic location. In addition, there are benefits to be gained through globalization as countries such as Asia see dramatic improvement in their GNP, which is further transferred down into the general populace. Although there is still poverty in these nations, it can be argued that the poor are living better quality lives as a result of the influx of capital and resources. The question, then, is not how to stop globalization, but rather how to make globalization work in such a way that it does not break down the cultural ideals, family structures or provide corporations with unchecked controls over developing nations even while it works to benefit the world economy.
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