Globalisation Preparing for the real worlddrivers have a greater influence on particular industries, or indeed on certain organisational processes. For example, manufacturing organisations

GlobalisationPreparing for the real world

Version 1 October 1998

Globalisation

Preparing for the real world

1

WhatÕs coming up? 2

WeÕll be covering the following topicsin this presentation:

Facing the factsWhat the facts say about theinterdependence of countries andcompanies worldwide

Creating the climateThe forces driving globalisationforward at an ever increasing speed

Remembering the rewardsWhy globalisation makes shrewdeconomic sense

Challenging the complexitiesHow to balance the seeminglycontradictory responses ofglobalisation

Optimising the opportunitiesWhat your company needs to do todevelop a global strategy

Diagnosing the dimensionsHow we can evaluate your currentglobal capability

Facing the facts 3

According to the authors of Straightfrom the CEO, ÔGlobalisationÕ is a termthat triggers strong emotions.1

Depending on your point of view, it isÔdreaded or admired, perceived as agreat leap forward or a stumblebackward.Õ However, whatever yourfeelings are towards it, there is nodenying that a new economic realityexists.

These facts demonstrate that there isa growing economic interdependenceof countries and companies worldwide,as such, no organisation can afford toignore the opportunities and riskscreated by this new order.

Facing the facts 4

If your business is managed on apurely domestic basis, or as a loosefederation of subsidiaries, in the nearfuture you may not be in a position tocompete with the growing numbers oforganisations which are integratingtheir business on a world wide basis,and gaining a competitive advantage.

Many organisations claim to be global,however, very few are actuallyÔMasters of GlobalisationÕ. Thesemasters have business strategiesbased on successfully penetrating andintegrating markets around the worldwith the aim of dominating their marketsegment.2 The journal, GlobalFinance, evaluated data for the lastfiscal year from hundreds of majorinternational manufacturing andservice organisations, to identify thosecompanies which had earned strategiccompetitive advantage by virtue oftheir globalisation. Of the 150ÔmastersÕ chosen, US companiesdominated the list, claiming 64 of the150 positions. Consumer companiesrepresent the largest group (26),followed by technology companies.

Facing the facts 5

Surprisingly, the 1996/7 PW/MORIChange Management Survey of 500organisations worldwide, indicated thatchange programmes to supportGlobalisation are still not high on mostorganisationsÕ agenda.3 However, theresults do not suggest that there islittle evidence for the existence ofglobalisation (and indeed mergers andacquisitions), but that changeprogrammes accompanying theorganisational changes and processintegration are not common. This maybe because organisations, realisingthe enormity of the challenge, are stillgrappling with the complexities anddimensions of globalisation.

The survey was commissioned toidentify the key issues regardingchange programmes in organisationstoday. The question being referred toin this instance, asked respondents torate on a scale of one to five, theextent of their involvement in differenttypes of current change programmes(where one = not at all involved to five= extremely involved)

PW/MORI 1997 survey Ð brochuresdetailing particular aspects of thissurvey (Coping with Chaos) can beobtained from thePricewaterhouseCoopers European Knowledge Centre(contact +44.171.9394555)

1 2 3 4 5

merger or acquisition

g l o b a l i s a t i o n

downsizing

increased shareholder value

centralisation/decentralisation

introduction of new technology

refocusing on core business issues

restructuring

BPR

culture/people change

customer focus

LOWExtent of involvement in change programmes

HIGH

Creating the climate 6

Taken together, changes in thecustomer, market legislation, marketentrance, technology, competition andcosts are fuelling globalisation. Certaindrivers have a greater influence onparticular industries, or indeed oncertain organisational processes. Forexample, manufacturing organisationsmay benefit more from fallingtransportation costs, while serviceindustries may find greater benefits inadvances in telecommunicationstechnology.

George Yip notes that the mostsuccessful strategies find a balancebetween overglobalising andunderglobalising.4 The ideal strategymatches the level of globalisation tothe globalisation potential of theindustry.

Creating the climate

Customers

7

There are obvious contradictorycustomer forces at work Ð at one endof the spectrum there is thehomogenisation of tastes andlifestyles, and at the other, there is theneed to provide products/serviceswhich accommodate local customsand habits. Achieving the balancebetween these factors is difficult, but itbrings great global returns!

Accommodation of customerexpectationsIn order to produce and sell globally,there may be a need to meet differentrequirements for a product or service.

According to David Whitwam, CEO ofWhirlpool, in Japan where fewerwomen have entered the workforcethan in the US, housewives prefer tobe more ÔinvolvedÕ with their laundry.5

So twin tub washers, where youtransfer clothes from the wash to thespin cycle, still account for half of theall washers sold thereÉ unthinkable inthe US, where twin tubs are considereda Third World technology.

McDonaldÕs restaurants in India donot serve any beef products Ðvegiburgers, or burgers made withlamb are more appropriate. In SaudiArabia, the company has a restaurantwith two dining rooms Ð one for menand the other for women and children.

Pervasive customer focusGaining a global competitiveadvantage by creating a pervasivecustomer focus in all aspects of thecustomer relationship is fast becomingthe norm.

Rhinesmith notes that the quality ofservice is fast becoming commoditisedÐ it is now a minimum entry point intoglobal competition.6

This is substantiated in the PW/MORI1996/7 change management survey:Involvement in Customer Focuschange programmes was rated highest(rated by respondents from 500organisations world-wide Ðsee page five)3

Convergence of customerpreferencesAs tastes are becoming homogenisedto a certain degree, there is aconvergence of lifestyles. This couldbe attributed to the fact that per capitaincome is converging amongindustrialised nations. According toKenichi Ohmae, consumerseverywhere above the $10,000 percapita level behave in similar ways.5

Common customer needs make iteasier to participate in major marketsbecause a few product varieties canserve many markets, for example,Perrier in America and McDonaldÕs inFrance.

The English language is now theofficial language in 45 countries, and isspoken by more than a billion peopleworldwide.7 This makes globaladvertising much easier and serves tocreate global demand.


Markets

8

Gaining share in different markets hasbeen facilitated by, amongst otherfactors, a relaxation of trade barriers,creation of trading blocs and theopening up of new markets.Governmental policies, nationalregulations and politics heavilyinfluence the degree to which marketscan be accessed and fully explored.The advantages of operating in anumber of different markets includeexploitation of economies of scale andgreater bargaining power withsuppliers and distribution channels.4

However, these opportunities must bebalanced against the costs of co-ordination (such as managementcosts, trade barrier costs, and so on).

Opening up new marketsChina and the former Soviet Unionhave contributed greatly to theincentive to go global. Nearly twobillion inhabitants of China and formerSoviet Union are now making thetransition to market-based economies.This accounts for 40% of the worldÕspopulation who are now more active inglobal commerce.

Coca-Cola estimates that by the endof next year, the US may account forno more than 10% of its profits. RobertKeough (President of Coca-Cola in1991) once said: ÔWhen I think ofIndonesia - a country on the equatorwith 180,000,000 people, a medianage of 18, and a Moslem ban onalcohol Ð I feel I know what heavenlooks like!Õ (Cohen, 1991 inRhinesmith, p.54)6

Liberalisation of regulations This is clearly evident:

Between 1970 and 1997 the numberof countries that eliminated exchangecontrols jumped from 35 to 137.

Since 1991, 570 changes have beenmade to liberalise regulations effectingforeign investment.8

Creation of trading blocsSuch as the EU, NAFTA, ASEAN andrelevant trade treaties, have furtherencouraged trade on larger scale,providing favourable circumstances forcompanies to establish operationsoutside of their home country.

1,330 bilateral investment treatiesinvolving 162 countries are now ineffect .8


Technology

9

Technology changes the way work canbe done in terms of production; co-ordination and management and ispossibly the key facilitator ofglobalisation.

Increasing power of technologyThe amount of information that can bestored, transferred and used isexponentially increasing. In 1998, asingle PC on a British AirwaysÕemployeeÕs desk is more powerfulthan the companyÕs IBM mainframewas in 1973, which held the records ofthe entire airline.

Shrinking communication barriersThese are making national bordersmeaningless.

Co-ordination and managementthrough e-mail; video conferencing andknowledge databases shrink distancesand ignore time zones, allowing forseamless information flow.

More than 80% of the market value ofthe ten leading 500 companies isintellectual capital.1 Knowledge

management creates value fromIntellectual capital eg groupwaretechnology communicates andorganises unpredictable informationallowing dynamic groups to interactacross time and space.

Linking value chainsThis is at the core of globalisation.

Xerox connects design, engineeringand manufacturing personnel within itssystem of local area networks Ð end toend value chains which do not need tobe located in one country.

Dow Chemical utilises high-speedinformation tools to operate integratedglobal production scheduling. Using acomputerised linear programmingmodel, the company evaluateseverything from currency and tax ratesto transportation and local productioncosts to identify the cheapest maker ofeach product. In some cases, thenetwork chooses among factories onthree continents to supply customersthroughout the world.9

The Internet, doubling in size annually,is thought to be developing into anautonomous global market .10

Examples range from ÔvirtualcompaniesÕ such as Amazon.comwhich offers customers a hugeselection of books and delivers world-wide, to Federal Express, which usesthe web to reduce its customer servicecosts by enabling users to arrangepackage pick-up, track delivery statusand order merchandise.

Creating the climate 10

The phenomenal progression oftechnology can be seen in the exampleof a simple birthday card.

A greetings card that sings ÔhappybirthdayÕ contains more computer powerthan existed on the earth before 1950(source: Don Tapscott, The DigitalEconomy)11


Competition

11

The lure of leveraging existingproducts in new markets as domesticmarkets become saturated is creatingan economic battle ground. Marketshare muscle is becoming the order ofthe day, as organisations turn toalliances, mergers and joint ventures.

Increasing number of strategic alliancesAs the level of world trade increases,more and more countries arebecoming competitive war zones,evident in the increasing number ofstrategic alliances across nationalboundaries.

Gaining market share and sharingresources have led to relationshipsbetween such organisations as BritishAirways and American Airlines; ChaseManhattan and Chemical Bank, PriceWaterhouse and Coopers Lybrand, toname just a few. Joint ventures arealso attractive strategic moves,especially since they allow for spreadof risk (particularly important in volatilemarkets, such as Asia).

Serving global customersGlobal organisations may buy on acentralised basis for decentralised use,or at a minimum they select vendorscentrally. In serving these globalcustomers, a supplier needs to bepresent in all the customerÕs majormarkets.6

For example, the US advertisingagency that used to have theCocaÐCola account was unable toserve CocaÐCola when it expanded toBrazil. So McCannÐErikson, anotherAmerican agency, took the account inBrazil. Then McCann used theBrazilian relationship to win the entireCocaÐCola account worldÐwide

Ford , in its Ford 2000 globalisationeffort, hopes to reduce its suppliers by90%, from 50,000 to 5,000.6 The onlysuppliers will be those who can delivertheir products on time to vehicledesign centres and manufacturing andassembly plants throughout the world.

Consolidating global market position Consolidating a market position maylead organisations to enter anddominate a market before a competitordoes.

Just such an example is BectonDickenson.12 In an effort to preventthe Japanese from becoming acompetitive nuisance in disposablesyringes, this major American medicalproducts company decided to enterthree markets in the JapaneseÕsÔbackyardÕ. Becton entered the HongKong, Singapore and Philippinemarkets to prevent further Japanesepenetration

There is also the Ôdomino effectÕ in thatwhen one national frontier is crossed,it becomes easier and easier to crossothers (especially if there are marketsimilarities).


Cost

12

Globalisation is also driven by the lureof attaining economies of scale.Pooling production and takingadvantage of lower factor costs indifferent countries, together with fallingcommunication and transport costs,means that business on a global scalecan be cheaper!

Reduction in communication costsWith increased competition, deregulationand advanced technology in thetelecomms industry, a reduction intelecommunication costs has allowedglobal business to thrive.

Over the last 60 years the cost of athree minute telephone call betweenNew York and London fell from$244.65 to $3.32.8

Competitive transport costs These have also enabled greatermovement of people and cheaper flowof products.

The unit cost of sea freight fell 70% in real terms between the early 80Õs to 1996.

Between 1930 and 1990 the averagerevenue per mile in air transport fellfrom 68 cents to eleven cents.8

Differences in country costs There is a strong incentive toconcentrate activities in thosecountries with lower factor costs.

Volkswagen, under attack from lowerpriced cars, saw the need to reduce itscosts. In Spain, hourly costs havebeen less than those in Germany. Totake advantage of this differential, thecompany moved production of Polosfrom Wolfsburg to Spain, freeing upthe high-wage German labour toproduce the higher priced Golf cars.

Exchange rates and their fluctuationprovide a major source of variation incosts between countries, as a resulthave a key impact on the decision onwhere to locate production or sourceinputs.

Remembering the rewards 13

Despite the complexity, globalisation isworth the effort. A study undertaken byTempleton College and Citibanklooked at the links between globalityand performance in the period 1987 to1996.13 They studied 50 of the largestfirms in four sectors Ðpharmaceuticals, food manufacturing,chemicals and automobilecomponents. The organisations ineach sector were compared using aglobality index. This index is aweighted formula based on theproportions of firmÕs assets, sales andoperating income which were foreign.

The study concluded:That there was a marked increase inglobalisation across all four sectors;

There was a strong positiveconnection identified betweenglobalisation and performance;

The more global organisationsdefinitely fared better than their lessglobal competitors;

Performance may initially suffer due tohigh globalisation start-up costs,however pay-off comes in the longer term;

There were significant industrydifferences, with the relationshipbetween performance andglobalisation being strongest in thepharmaceutical sector, followed byfood manufacturing, chemicals andthen auto components.

The graphs referring to thepharmaceutical and food industriesindicate the following interestingaspects of the globalisation process:

Sometimes performance can initiallysuffer due to high globalisation start-upcosts, however, the payoff comes inthe longer term.

In some industries (eg food industry)there are markets for both more globaland less global players but the moreglobal players still perform best.

Challenging the complexities

The whole is better than the sum of the parts

14

The global corporation is a verydifferent animal to the multinationalorganisation. It has to function as asingle organism and must be moreclosely integrated across all functionaland geographic areas Ð hence theword seamless is key to definingeffective globalisation. It impliesoptimising results for the wholeorganisation by:

Integrating organisational strategiesThere is an emphasis on managingthe organisation as a whole, not as acollection of individual subsidiaries ormarkets which characterises atraditional multinational organisation.

Leveraging resources world-wideThere is an emphasis on enablingefficiencies through sharing knowledgeand operating in the most ÔappropriateÕlocation (from a cost and market pointof view).

Permeable boundariesThere is an emphasis on breakingdown inhibiting boundaries by buildingrelationships between and acrossorganisational levels, functions,suppliers, regulators, customers,markets and cultures.

Contradictory responses

Globalisation is fraught with seemingly contradictory responses

15

However, the rewards attained fromglobalisation are not simply throughspread of operations. There are anumber of strategic and operationalissues which need to be managed.

Competing with other globalorganisations, while maintainingpartnerships to share certainresources Ð Swisscom uses a globalalliance to provide complementaryservices in any world market.1

Members of the AT&T-Unisourcealliance, deliver each others customertraffic to its final destination. Thealliance also offers global solutions Ðfor example, international intranets andVirtual Private Networks Ð that no onecompany would be able to offer on itsown.

Leveraging opportunities in newmarkets, while containing risks ÐItochu derives $120 billion in annualsales from over a thousandsubsidiaries, employing more than 10,000 people who handle acornucopia of different industrial andconsumer products.1

Itochu has taken major positions in adiverse portfolio of strategic and

technological assets, ranging frommore than a score of industrial anddistribution system set-ups stretchingfrom East to West.

Instilling a global organisationculture while being aware ofnational cultures Ð ABB (Asea BrownBoveri) was founded in 1988 bymerging and acquiring companies inmany countries Ð many of them morethan 100 years old with proud nationalhistories.1 While the national culturesare respected and promoted, ABB hasdeveloped a global culture Ð anÔumbrellaÕ culture. This is what holdsthe national companies together andmakes the entire company stronger.ABB has summarised their visions,values and policies in a sort of ÔABBBibleÕ.

Being globally efficient while being locally responsive Ð In order to meet this complexity,PricewaterhouseCoopers evolved aglobal structure with superiorresponsiveness to client needs, and amore finely tuned service delivery of itsknowledge resources from/to localbases. For example, a few years ago

our supply-chain consultants wereconcentrated in our largest regions:US and European markets. Today,such geographically limiteddeployment is inconceivable. There isa need to maintain a dynamic networkof supply chain experts fromZimbabwe to Singapore.

Standardisation of products while reflecting unique socio-cultural issues Ð Carlsberg beers arecurrently sold in 120 countries, a highnumber considering that the top sixglobal brands (Colgate, Lipton, Lux,Maggi, Nescaf� and Palmolive) aresold in no more than 67 countries.1

While Carlsberg headquarters imposethe uniformity, consistency andcontinuity necessary to give brandstheir lasting identity and power, localoperators are given considerablelatitude to respond to local marketconditions.

With beer, the big variable isbitterness. The product formulation ofa global beer has to adapt preferenceson the bitterness scale at the locallevel, while still maintaining the brandÕsÔfingerprintÕ.

Optimising the opportunities 16

Given that globalisation is such acomplex, yet rewarding undertaking,where would you want to start?

Is it about developing the rightpeople?

ÔGlobal managers are not born Ð theymust be developed. Among ourtwenty-five thousand managers weneed some five hundred truly globalmanagers with global businessresponsibilities. One key route tocreating this group is to transferpromising young managers to othercountries.Õ

Percy Barnevik (Asea Brown Boveri)1

Is it about integrating the rightoperations?

ÔAt Philips, the focus is no longer onmaking stand-alone electronicproducts, the strategy is now movingtoward an emphasis on creating totalsystems that combine the productsand services of Philips Ð and those ofother companies, even competitors Ðinto turnkey solutions that add valuefor customers and build profits forPhilips.Õ

Justus Veeneklaas (Philips Australia)1

Is it about building the rightorganisation structure?

ÔWe decided to transform theenterprise into a truly global group andnot just a sum of national, single-minded companies. We felt this wouldallow us to meet the demands comingfrom clients who were themselvesinternational.Õ

Serge Tchuruk (Alcatel Alsthom)1

Is it about having the right strategicresponse?

ÔWe have two options: We can wait forour competitors to make it happen andsay, ÔWe want to be like thosecompanies.Õ Or we can get out in front,shape the globalisation of this industry,and let other people try to catch up withus. WeÕre pursuing the second option.Õ

David Whitwam (Whirlpool)5

Is it about creating the rightculture?

ÔWhether addressing key productdevelopment priorities or implementingsophisticated enterprise widecomputer systems, the dismissive Ônotinvented hereÕ attitude has no place ina culture of challenge and renewal.Õ

Eckhard Pfeiffer (Compaq)1


Following a global strategy has animpact on all aspects of theorganisation. Some elements of theorganisation, depending on theenvironment, industry and operationalcontext, need different levels ofattention than others. However, inorder to assess the impact, the fullintervention landscape has to beidentified and organised into aneffective framework.

You need to:

Choose the right direction: thisrefers to your mission; objectives;strategies; structure; leadership andculture.

Build strong strategic deploymentcapability: this refers to yourmanagement processes.

Select effective operational moves:this refers to your business processes;information technology; people andinfrastructure.


Managers donÕt need a perfect crystalball to forecast the timing of globalisation.But what they do urgently need isvigilance and preparedness indeveloping capabilities and aptitudesfor globalism.

They need to decide where to makekey interventions, focusing on enablingthree critical success factors:

Global Visibility

Global Mindset

Global Capability

You cannot be successful on a globalscale without all three being evident tosome degree.

VisibilityTransparency of all operations aroundthe world, enabling the comparison ofstrategies, information and resourcesfor effective utilisation and deploymentdecisions.

MindsetMaking decisions from the perspectiveof the global organisation, rather thana purely national, regional or localperspective. Understanding and beingable to work effectively with cross-cultural differences.

CapabilityLeveraging and integratingcompetencies, processes andbusiness systems across alloperations to optimise globalorganisation performance.

Optimising the opportunities

Visibility

19

Visibility helps to create an efficientand seamless inflow and outflow ofinformation between the externalenvironment and the organisation,thereby enabling the identification ofopportunities and problems on aworld-wide basis.

Key issues include how to:

Communicate strategic informationEnhanced by new technologies, someorganisations are taking advantage ofthe new communication tools toimprove information flows within theorganisation.

British PetroleumÕs top 300managers worldwide are connectedvia video conferencing technology intheir offices. In other companies,computer-based technology known asGroup Decision Support System(GDSS) facilitates group discussions,group brainstorming and teamsessions by allowing participants tocontribute their ideas simultaneously.

Identify distinctive opportunitiesThe ability to track and monitorchanges in the environment is key.Volkswagen changes locations forproducts to take advantage of differentcountry costs, for example they movedmanufacturing the Polo from Wolfs-burg to Spain to free up higher wagelabour for higher priced Golf cars.

Alfred Zeilen, CEO of Gilletteresponded to the Asian crisis by slicingspending on marketing there.14 ÔWhyshould we spend a lot of time andmoney trying to sell our products inMalaysia right now?Õ asks Zeilen ÔWeÕllfocus on eastern Europe instead.Õ Thiswould be difficult if operations indifferent regions were treateddifferently and viewed throughseparate ÔlensesÕ.

Optimise strategic partnershipsStrategic alliances with other telecomoperators have enabled Swisscom todeliver global solutions which no onecompany could achieve alone.1

Competitive advantages to consortiummembers include global reach,economies of scale and scope,common service offerings, singlebrand promotion, joint procurement,network standardisation anddevelopment collaboration.

Another example includes SunMicrosystems.15 The companyÕsgrowth has been greatly enhanced bythe structuring of links with firms thatconventionally would have been archrivals: Sun built its empire using chipsfrom Toshiba and NEC of Japan;outsourced microprocessor productionto Fujitsu; bought chips made fromseveral American firms in Scotland,Singapore, Japan and Philippines andequipment made in Germany, GreatBritain, the Netherlands andSwitzerland; and called on TEL ofJapan to market its products in Asia.


Mindset

20

There is a need for people in theorganisation to be able to interpretissues as they affect the organisationas a whole as well as being able toassess the implications of local issues.

Build global competenciesTo gain an international perspective,attention needs to be paid to thedevelopment of personnel. Identificationof global talent is essential to Chubb& Son Inc.16 With more than 15% ofthe companyÕs employees outside theUS, and rapid overseas growth, globalawareness is a must-have criteria forevery new hire.

To progress to senior manager level inSmithKline Beecham, individualsmust have achieved 2 x 2 x 2 (ÔIÕveworked in two companies, twocountries, two functionsÕ).

Define global valuesMerely sticking the word ÔglobalÕ intothe company mission statement doesNOT make for global values.

At Canon, decisions are based upon acorporate philosophy of ÔkyoseiÕ, orliving and working together for thecommon good Ð the world-widecommon good.17 Some instances ofputting kyosei into practice include: theTshushin Corporate Plan, whichemphasises Ôheart-to-heart and mind-to-mindÕ communication to helpbreakdown cultural barriers.

Don Argus of the National AustraliaBank Group states that ÔManagingglobally means that the companyÕsvalues must be relevant in the US, orthe UK, or Asia, as well as Australia or New Zealand. This need has beenmet by carefully blending the corevalues with local requirements worldwide. The values arenÕt different, buttheir application may be different insome areas.Õ

Management of DiversityTo globalise effectively, there is a needto utilise and value the many differentstrengths inherent in employees world-wide.

After decades of routinely appointingmanagers from its domestic operationsto key positions in overseassubsidiaries, Proctor & Gamble cameto understand that this practice notonly was insensitive to local culturalneeds but greatly underutilised its poolof non-American internationalmanagers who were often moreappropriate for international positions.6


Capability

21

The core ability is to be able toexecute global strategy, locally. Thefollowing capabilities help ensure this.

Leverage resourcesWhirlpool integrates geographicalbusinesses wherever possible, so thatthe most advanced expertise in anyone given area (whether it is refrig-eration technology or distributionstrategy) is not confined to onelocation or division. Aiding the designprocess is a special Whirlpool internetwebsite for fridge features, containingdetails of about 170 ways of specifyingor arranging parts of the fridge. Anengineer in Brazil could look up on thewebsite and borrow an idea that wasalready invented for a product in US orEurope.18

MazdaÕs sports-car was designed inCalifornia and financed in Tokyo andNew York; its prototype was created inWorthing, England; and it wasassembled in Michigan and Mexicousing advanced electronic componentsinvented in New Jersey and fabricatedin Japan.6

Centres of expertise are pivotal inleveraging resources. Philips1 has setup an Ôinternational competencecentreÕ in Australia. It serves as thekey clearing house for new ideas andthe development of best practices forPhilipÕs digital broadband businessworld-wide.

Integrate processesThe ability to integrate processes is akey competitive edge, particularly if itaccelerates product to markettimescales.

At Nike, the designs for the productsare developed in the US and thentransmitted by satellite to CAD/CAMsystems of the contractors, whodevelop and test them and then faxthe detail to manufacturing location forproduction. The processes do not notnecessarily have to be downstream.

Allied Signal IncÕs Europeanoperation, based in Paris, has aninformation system which containsinformation on 12,000 employees in 30facilities, running the payroll for eightcountries (France, Italy, Germany, UK,

Ireland, Spain, Belgium, Netherlands)Ð allows them to eliminate duplicatetasks and standardise HR and payrollprocedures.19

Development of cross-boundary teamsAs a part of the implementation ofFordÕs 1995 global organisationalstructure, in which 25,000 employeesfound themselves working with newcolleagues, many of whom in differentcountries, Ford conducted a leadershippreparation programme for its top3000 managers.

The benefits of cross-boundary teamsbecome clear very quickly Ð 180Whirlpool product engineers broughttogether from across the US andGermany have realised thatdifferences between them are fewerthan they thought. Consequently, thesix basic platforms used to supportdifferent dishwasher models will be cutto three by 2002.18

Diagnosing the dimensions 22

Visibility, mindset and capability arecritical success factors which need tobe built into those areas of yourorganisation identified as key globalimpact areas.

We have an established approach fordeveloping an organisationÕs ability toexcel on a global basis. Our initialevaluation includes a diagnostic whichhighlights issues at a number ofdifferent levels. Once identified, thepriority issues can be probed further,leading to the development of achange plan and subsequentimplementation actions.

The next few slides illustrate particularissues affecting an organisationÕsglobal capability Ð before weintervened. The analysis is presentedin the form of a GeoMetric: adiagnostic tool which is designed toidentify, at a high level, the extent towhich key organisational elementscontribute to the direction, strategicdeployment and operational aspects ofa global strategy.

Diagnosing the dimensions

SkyChefs

23

Background

Global supplier to the airline industryundertaking a major acquisitionprogramme

Turnover: $1.7bn

Number of employees: 25,000

Globalisation Issues

¥ Need for pay back on acquisitions

¥ Inconsistent managementcapabilities across territories

¥ Different operational processesacross territories

¥ Patchy control systems in place

¥ Infrastructure incapable of quicklyleveraging acquisition opportunities

Lessons learned

During an acquisition process givemore attention (due diligence) tomeasuring value chain not simplymetrics.

Allow sufficient time to re-buildmanagement processes across adisparate group of organisations.

Recognise the time constraintsimposed by operating across differentcultures/languages/regulations.


Philips Consumer Communications

24

Background

Strategic joint venture between anAmerican telecommunications giantand a European electronics giant tocreate a global consumer telephoneand messaging products organisation

Turnover: $2.5 billion



¥ New business model shifts powerfrom regions to global lines ofbusiness.

¥ Demands a new mindset.

¥ Americans fear a European invasion,Europeans fear an American-centricapproach to their markets.

¥ Asians feel further isolated by shift ofglobal HQ from Paris to New Jersey.

¥ Internal competition (eg betweendevelopment organisations in Franceand the US) distracts organisationfrom external competitors

Organisational cultures of previousentities were significantly different. Aculture which prized an emphasis onprocesses (sometimes at the cost ofspeed) needed to be reconciled with aculture with a strong premium onspeed to market (sometimes at thecost of quality processes).

Lessons learned

While organisational structures can bedesigned and installed in concept, ittakes time to build the sharedunderstanding Ð and global trust Ðrequired to operate optimally.

As a business globalises, the skillsand talent to move it forward change.The organisation must be ready andresponsive to that change. It needs torecognise that not everyone will beable to work in that dynamicenvironment.

Joint ventures create a period ofinstability and uncertainty that drives amore inward and emotional responseto the business and to change.

It is vital to remain focused on thecustomer, who is the only real arbiter.


British Aerospace

25

Background

Dominant player in consolidation ofEuro defence industry.

Partner in Europe's biggest politicalalliances.

Supplier to major world governments

Turnover: $10.3bn



¥ How to position for a leading role inEuropean industry?

¥ How to sell different highly technicalproducts to the same limitedpopulation of international markets?

¥ How to grow quickly to compete withglobal players?

¥ How to treat BAe people assigned toJoint Ventures (ie shared values)?

Lessons

Relationships between individuals arekey to alliance structures/performance.

Joint ventures/alliances require a newinfrastructure to deliver appropriatemanagement information.

Final thoughtsÉ 26

Globalisation is more of a journey thana destination. It is a multifacetedphenomenon, both real and symbolic,tangible and prospective.

References 27

1. Dauphinais, W. And Price, C.(eds). Straight from the CEO. Nicholas Brealey Publishing, 1998

2. Masters of Globalization: special report. Global Finance, February 1998, p65 - 68

3. Coping with Chaos. PW/MORI 1996/7 Change Management Survey

4. Yip, G. Total Global Strategy. Englewood Cliffs, New Jersey: Prentice Hall, 1992

5. Taylor, W. and Webber, A. Going Global. New York: Viking, 1996

6. Rhinesmith, S. A ManagerÕs guide to globalization. New York: McGraw-Hill, 1996

7. Marquardt , M. And Reynolds, A. The Global Learning Organisation. New York: Irwin, 1994

8. Wolf, M. The heart of the new world economy. Financial Times, October 1st 1997, p16

9. Kupfer, 1988 in Rhinesmith,S. A Managers Guide to Globalisation. New York: McGraw-Hill, 1996, p16

10. Mangold, K. Services and globalisation at the threshold of the 21st Century. Speech delivered to the December 1997European International Business Academy Conference, Stuttgart

11. Tapscott, D. The Digital Economy: Promise and Peril in the age of Networked Intelligence. McGraw-Hill, 1995

12. Marquise R. Cvar, Case Studies in Global Competition: Patterns of Success and Failure, in Porter, Competition inGlobal Industries: A Competitive framework, in Competition in Global Industries

13. Mason, P and Moore, K. The impact of globalisation on company performance: an analysis of the Auto-Components, Chemicals, Pharmaceuticals & Food Industries. Templeton/Citibank study, 1998

14. Gillette: as close as a group can get to global. Financial Times, Tuesday April 7th, 1998

15. Journal of Business Strategy May/June 1996, p1116. Personnel Journal March 1996, p9-11

17. CIO Volume 9, Issue 19, August 1996, p24 (ISSN: 0894-9301)

18. Marsh, P and Tait, N. WhirlpoolÕs global clean-up Financial Times, Tuesday March 24th 1998, p.16

19. Human Resource Focus November 1996, p15

Globalisation Preparing for the real worlddrivers have a greater influence on particular industries, or indeed on certain organisational processes. For example, manufacturing organisations

Documents