Globalisation and management

Updated 9.12.12

Globalisation is an interesting word for me as being British, I spell it with an ‘S’ and Americans spell it with a ‘Z’. Proof that even languages, such as English (currently, the global language for business) have become affected by globalisation. I also find it fascinating that in the land of my fore fathers (historically known as the Indo/Pak sub continent –currently, India, Pakistan and Bangladesh), the word, ‘anyway’ is always spoken as, ‘anyways’. These permutations of language also affect how we trade, live and interact as a global society.

Globalization or globalisation as we know it was termed, in 1983, by Theodore Levitt, a former Harvard Business Review editor who used the term for an article about the emergence of standardised, low- priced consumer products. Globalisation has been fuelled within the last 10-15 years by IT. That includes hardware (HW), software (SW), connectivity (falling costs of HW, SW, ever larger pipes globally and VOIP solutions), cheaper travelling costs and a truly global workforce. As a result, CEOs and boards have used successful globalisation case studies to convince their businesses that it would lead to profitability and competitive advantage. For example, a software problem submitted at close of play (COP) today could be solved by the time America wakes up the following day (arguably saving costs and solving problems while sleeping).

The decisions that need to be explored in great detail are the reasons for deciding to go beyond your own border with a view of going global. I would categorise the reasons as one of the following:

  1. International opportunity
  2. Saving costs
  3. Skills shortage
  4. Legislative requirements
  5. Social and Corporate responsibility (CSR)
  6. IT Challenges

1. International opportunity:

This decision is usually taken when management realise that there is a demand for their product in another part of the world or that a demand for their product can be created. There are many examples of this such as Coca Cola. Coke as it is also known as is a trendsetter as it firstly; created a demand for their product (Did our grandparents know they needed to drink Coke?). This was followed by then satisfying the international demand. Recent success stories are led by Apple and the iPhone.

2. Saving costs:

Arguably, many would argue that this is an opportunity. I will discuss this later but for now let’s take it as it is. I would term this as ‘cost savings’ that can be realised through leveraging access to cheaper materials, labour or anything else that costs less than the local equivalent within a business’s own borders. Again, there are many examples of this such as Nike and Primark who outsource manufacturing facilities to countries such as India, Pakistan and South Africa etc.

3. Skills shortage:

Many businesses need to take this step and it is particularly true for IT led businesses, such as, software. Sometimes due to, for example, a skills shortage  a business may be forced to go beyond its borders. In my Indian software example (Para 2 above), it is recognised that another reason/advantage to outsource was the time difference.

4. Legislative requirements:

Countries allow international trade but will, for example, place a restriction on the amount of a product that can be imported by legislating import tariffs etc. For example, Toyota got around that problem in the early eighties by opening manufacturing plants in the US.

A business that wants to take advantage of this global reach has to consider the social and corporate responsibilities of globalisation and the IT challenges.

5. Social and corporate responsibility:

Anita Roddick of the body shop set the standard for being one of the first to prove that ethical business could be done globally. She pioneered the ‘green movement’ as we know it today by including only natural ingredients in her products, sourced globally at fair trade prices while protecting the local workforce, both at Littlehampton where she was born and bred and internationally where her products were used, sourced and produced. Businesses also need to ensure that a balance is struck between moving jobs abroad just to save costs against investing in the local workforce. Arguably, all businesses need to save costs and the rule to apply in these situations is that if a business is commercially profitable (for example, in millions of dollars) is to appreciate the effect of moving jobs abroad (in many cases referred to as outsourcing) against training workforces locally and producing a skilled workforce for the future.

In the short term that may translate to fewer profits but in the long term the business will benefit from a truly dedicated workforce and an investment in people that transcends the short term skills shortage. Globalisation should not be at the expense of a lack of investment in local people and infrastructure. Short term competitive advantage ( in a situation where saving costs is the primary driver) is usually lost to the outsourced country in the long term.

6. IT Challenges:

Connectivity costs within IT are falling daily and newer areas of the globe are becoming easier to connect. IT challenges still remain and businesses need to involve Chief Information Officers (CIOs) in the decision making process when they start to think globally. The earlier the business involves the CIO, the quicker the eventual deployment of IT enabled business becomes. In an earlier post on competitive advantage, I have emphasised the importance of the direct connection between the CEO and the CIO and that has to continue when businesses have global aspirations.

Providing IT internationally always has challenges and I would suggest that for globalisation to be successful, the CIO needs to be a visionary, businessman and a leader. The CIO will have to deal with issues where the IT capability may have to be imported, sourced locally (as importing IT may be too costly), have to deal with poor infrastructure, connectivity (in many parts of Africa) and have to deal with local legislation. Successful global CIOs will be the ones that can provide ‘out of the box’ solutions, have created great teams locally and globally, stay connected with their global staff, understand the different cultural variations and their impact to the business and have a network of advisors within and outside the business. CIOs have a great overview of how IT works and how it can assist the business but CIOs will never know everything, so they need to have access to peers, other CIOs and a network they can turn to and learn from without reinventing the wheel. If a CIO doesn’t have global exposure prior to a business going global it can sometimes be an advantage as it’s a clean slate and the CIO can utilise their own experience gained in various other industries.

To conclude, as the Coke slogan says, “Think globally, act locally?” Do you agree?

Advertisements

About mubbisherahmed
I am passionate about IT and its ability to deliver cost effective, value for money solutions that can enhance performance and in many cases provide competitive advantage by using a range of solutions and approaches in innovative ways.

4 Responses to Globalisation and management

  1. mubbisherahmed says:

    David Chan Centre Director: the Interdisciplinary Centre for Information Leadership at City University, London commented on a social media site that I am a member of:

    Globalisation or globilization no matter how you spell it is just one other factor contributing to the complexity of the Information Leadership agenda. The CIO or as I would term it, the Information Leader needs to deal with the growing complexity of the role and also the complexity or even turbulence in the business environment. See my article Technology Chiefs need to evolve into Information Leaders .

    The key issues with globalisation is that we have regulatory frameworks that favour certain vested interests We allow virtually free movement of capital yet we do not allow free movement of labour. The technology allows us to exploit differences in social welfare regimes to minimise labour related costs – cf American Car manufacturing has been saddled by high pension costs. Now these ethical issues may seem distant from the current issues IT Director or CIOs agenda but these issues that need to be considered.

    Also, using global sourcing has its own risks. Outsourcing contracts are difficult to frame. Only about 50% of the large scale deals are successful which implies 50% aren’t. With the BSkyB v EDS ruling, the time scales procurement is likely to be extended as vendors try to ensure their risks are quantified. While this is happening, enterprise’s ability to forecast, i.e. its span of foresight is foreshortening.

    Today’s IT is based primarily on a command and control paradigm.Its premise is that we can foresee with perfect insight what happens in the future. The reality is we cannot. The ability to adapt business processes (normally constrained by legacy IT systems) may become a much higher priority.

    When the bankers drove us into the Credit Crunch, it was because they did not understand the systemic risks of short-term profit making. If we do not consider the wider aspects of decisions we could also be reducing flexibility and committing to higher long term costs through focus on short-term cost cutting.

    So globalisation must be considered as another factor that makes the Information Leader’s agenda more complex. You can’t just rely on what has worked in the past!

    • mubbisherahmed says:

      I replied:

      David, thanks for your comments and the link to your article in Computing – Technology Chiefs need to evolve into Information Leaders. I enjoyed reading that article in September and I also attended the NCC annual conference in October where you were a panelist on IT Leadership and IT skills of the future. I am also a fan of your new Master’s course; Masters in information leadership (MIL) that I feel will help immensely towards future CIO development.

      This blog post, Globalisation and management – was written with a view of exploring:

      1. The reasons why businesses choose to go global
      2. To ensure that businesses take into account the social and corporate responsibility of being a global business
      3. To discuss the IT challenges of globalisation

      We have many similar opinions regarding IT and as such I would like to take your summation, ‘So globalisation must be considered as another factor that makes the Information Leader’s agenda more complex. You can’t just rely on what has worked in the past!’ and add a few comments of my own. In the future, Information leaders, as you term them, will have to change their role from being purely management to one of supporting their staff within IT, moving them away from the command and control structure that you have alluded to. Insightful companies such as Aviva, – (Please read, A very social business) – http://cde.cerosmedia.com/1D4b8b996935155012.cde/page/18
      are utilising the new ways of working, such as social media – (covered in my blog post – The Social Networking dilemma and the CIO – http://tinyurl.com/socialdilemma ) to engage the entire spectrum of their employees and to capture their expertise and knowledge. I agree that future leaders will need to be ‘visionary, businessman and a leader’ as I have covered in my blog post. If, for example, On the other hand, Toyota had monitored social media, it would have become aware much earlier that its customers were unhappy and that it could impact Toyota’s reputation covered in my blog – (How Toyota became the werewolf
      http://wp.me/pw27T-6l )

      In the future, we need information leaders who lead and avoid management failure such as the ones, caused by the five deadly diseases of management -that I covered in – http://preview.tinyurl.com/edemming2 . It is also true, that currently IT itself has become so bureaucratic that the systems and processes that were setup to deliver better IT systems and projects stifle innovation itself. Now, organisations worry too much about PMI, Prince2, CMMI, IT-CMF, ITIL, ISO2000 etc. As a result organisations fail to innovate and inspite of all this process fail to deliver credible projects. This can be attributed to having too much emphasis on delivering the perfect business case and not the delivery of the project. Meanwhile, organisations such as Apple on the other hand strive to deliver innovations without the bureaucracy (covered in Steve Job’s (CEO Apple) management style and CIOs –
      http://wp.me/pw27T-65 )

      Thanks for your contribution and for sparking the debate.

  2. mubbisherahmed says:

    Johnny Da Silva WSI – Internet Marketing Consultant commented on a social media site:

    In my opinion there is times that we need to support local, which brings the social media card into play. Buy local, serve local and be your community loyal supplier. In return you gain a lot of support in your direct vicinity. It has great face value.
    But in the same token you sit in a situation sometimes, where expansion is restricted and one finds it necessary to go global to achieve exceptional return on investments. Also depending on the industry a company needs the volume to justify the expansion and money laid down.
    It has become very apparent that the internet has crossed many bridges to ease the challenges facing sales and services when trying to do business abroad. Control measures and system that is available online has also changed how we do business.
    I would most definitely say that all business today has an equal opportunity of doing business globally and still nurture the local support. It would also give more credibility to a local business when your local support is aware of this business that they support also is globally known.
    I, Johnny da Silva, would with my 20 years of retail experience (Fast Food Franchise) definitely advice the small to medium business to look into online solutions to discover how they too can benefit from this evolution of technology that is available. Not just large companies at millions of $ but at affordable prices comparing the same standard of solutions irrespective your business volume and size.

    • mubbisherahmed says:

      I replied:

      Johnny, Thanks for your valuable comments. It is so true that with today’s technology even the smaller business can act big. With the advent of cloud computing – What is Cloud Computing? Its Pros/Cons and making it work –
      http://tiny.cc/mXOJA , it even makes it possible to have access to and setup a system for new startups. For example, upto a few years ago that just could not be afforded by the smaller business or small to medium enterprises (SME’s).

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: