Organizing for globalization

The concept of globalization is not new. In the 21st century, the locus of power has shifted from an industrial to an information economy worldwide. There is a close relationship between modern communication technologies, transnational companies and the economic processes of globalization.

Modern characteristics include new communication technologies, international marketing, fast transport, global language, internationalization of credit, removal of barriers to free trade and international recruiting of labor. After the fall of communism in Europe it is probable that money previously spent on fighting the Cold War then went into consumer goods and trade.

These factors have enabled a greater level of global capitalist integration than ever before. The literature no longer refers to First, Second and Third World economies – they are all part of global markets. By acquiring earth-spanning technologies, by developing products that can be produced anywhere and sold everywhere, by spreading credit around the world, and by connecting global channels of communication that can penetrate any village or neighborhood, transnational corporations are becoming the world empires of the 21st century.

On a more practical level, no matter what the stage of internalization, a firm's structural choices always involve two opposing forces: the need for differentiation (focusing on and specializing in specific markets) and the need for integration (coordinating those same markets). However, global trends and competitive forces have put increasing pressure on multinational corporations to adopt a strategy that treats the world as much as possible as one market by using a standardized approach to products and markets.

Such attempts at standardization through the omnipresence of information technology can be abused as well as used to implement this ‘one-market’ concept, and consumers may need legal protection from such abuses. The following are examples of companies reorganizing to achieve globalization by unacceptable activities.

In 2007 the Australian Communications and Media Authority (ACMA) fined the Pitch Entertainment Group (Pitch) $ll 000 for extensive breaches of the Act. This was the largest fine imposed by the ACMA to date under the Spam Act. Pitch and its directors were also required to give an enforceable undertaking that required future compliance with the Act and contained stringent reporting and staff education obligations. The ACMA found that the Pitch Entertainment Group, which trades as Splash Mobile in Australia, sent over one million commercial electronic messages to mobile phones without a functional unsubscribe facility.

In an unrelated investigation, the ACMA also fined International Machinery Parts Pty Ltd (IMP Mobile) $4400 for breaches of the Spam Act. IMP Mobile also failed to provide a functional unsubscribe facility when sending messages to mobile phones.

When managers reorganize their companies for globalization they usually rationalize existing practices and develop strategic alliances. For example, they choose the manufacturing location for each product based on where the best combination of cost, quality and technology can be achieved. Often this involves producing different products or component parts in different countries. Typically, it also means that product design and marketing programs are essentially the same for all end markets around the world – to achieve optimal economies of scale. The downside of this strategy is a lack of differentiation and specialization for local markets.

Standardizing products worldwide requires close coordination between representatives of the various countries involved. This is easier to achieve if one manager – or one team – at headquarters becomes responsible for a specific product around the world. However, this is not always easy to arrange in multi-product companies. Perhaps the solution is for managers to center overall control headquarters while treating national subsidiaries as partners in managing the business. They might act as holding companies responsible for the administration and coordination of cross-divisional activities.

An example of this strategy is provided by Nexon Asia Pacific Pty Ltd.18 In 2003 Nexon announced that it had acquired the customers and all support infrastructure of Zircon Systems Pty Ltd (formerly PSINet Australia and a wholly owned subsidiary of the National Telecoms Group Ltd). Nexon is one of Australia’s growing service providers and a key supplier of technology infrastructure and communication services.

Nexon claims it has a 'unique combination' of qualities: strong industry and vendor relationships backed by client-focused and professional staff. This combination, the company claims, ‘creates new opportunities and value for its customers and partners'. In acquiring other companies in this way, organizations like Nexon hope to broaden the base of their operations while gaining cost saving and adding value to the services they provide.

Nevertheless, managers are aware that structurally sophisticated global networks built to secure cost advantages, leave their firms exposed to environmental risks from multi-country sourcing and supply networks.

Organizing to 'think global, act local'

This much-abused slogan was devised in 1997 by Mary Brandel as a warning to international managers that in their rush to get on the globalization bandwagon they might be in danger of losing the ability to respond to local market structures and to cater for individual consumer preferences.

The competitive environment for SMEs is not just local but global. It is essential for managers of the enterprises to get the balance right for their business by exploiting new technologies at appropriate levels, times and places.

Managers now realize – depending on relevant products, services and markets – that a compromise must be made along the globalization-regionalization continuum, and they are experimenting with various structures that will enable them to 'think global’ but 'act local’.

Kalena Jordan, writing for Site Pro News (a webmaster news source) in 2007, warned that many designers of websites appear to be thinking more locally than globally in spite of the fact that the Internet by its nature is worldwide.

There is the case of a US firm that sells high-quality gold chains throughout North America, Europe and Australia, whose owner complained of poor sales in the UK and Australia. There are actually a number of cultural mistakes on the webpage likely to deter non-US customers:

· US American spelling throughout

· Toll-free phone number for US customers but no contact number for overseas callers

· Use of the word 'national' throughout the advertisement, thus excluding everybody outside the US

· Offer of free shipping throughout the US’ but no mention of transport costs for overseas.

These are the kinds of mistakes that many Internet marketers make. They alienate thousands of potential clients, maybe more, by publishing a one-size-fits-all webpage: they do not even consider, for example, that potential customers from overseas might search for keywords in varieties of world ‘Englishes’ and would want information about international air and shipping costs.

The term ’glocalization’ is used also to indicate the symbiotic relationship between local and global corporate strategies. It originated in the 1980s from business practices in Japan, became popular through publications by the British sociologist Roland Robertson in the 1990s, and in the 21st century has been applied to responses to the threat of global warming. One example is a report by Silvia Marcoccio and Salvatore Nigro on the history and activities of the C40 Large Cities Climate Leadership Group.

Marcoccio is a writer with the Glocal Forum, an international organization for the promotion of city-to-city cooperation in peace building and international development in the non-governmental sector. She and Salvatore Nigro reported in 2007 that the first C40 Large Cities Climate Summit was held in London in October 2005 to create long-term international collaborations among large cities to drive down carbon emissions and encourage cities to work with businesses and national governments to accelerate action on climate change.

As an outcome of the summit, the С10 Large Cities Climate Leadership Group was formed and partnered with the Clinton Climate Initiative to address climate change. At the 2007 Summit in New York, ex-US President Bill Qlinton announced a landmark program – the global Energy Efficiency Building Retrofit Program, a project of the Clinton Climate Initiative (CCI). This program brought together four of the world's largest energy service companies (ESCOs), five of the world’s large banks, and 16 of the world’s largest cities to reduce energy consumption in existing buildings. It is remarkable example of globalization.

EMERGENT STRUCTURAL FORMS

Because of the difficulties experienced by companies trying to be ‘global’, managers increasingly are abandoning rigid structures in favor of becoming more flexible and responsive to the dynamic global environment. For example they form interorganizational networks, global e-corporations and transnational corporation network structures.