Problems with Global Strategy

Many warning signals can alert a multinational corporation to the fact that its global strategy is being resisted by local branches. For instance, there could be a rise in customer complaints and a sudden downturn in sales. Or there could be increasing militancy on the part of a local trade union. Employee enthusiasm for company activities might be waning, registered in significantly decreased participation in those activities, especially if they are social events. There could be poor registration for employee development programmes, with little respect for the company's capacity to help people actualize themselves . There could be a considerable increase in the incidence of sickness or accidents. Or there could be increasing incidences of personality clashes between managers as well as dysfunctional interdepartmental rivalry. There might be difficulty in attracting personnel to the company where no difficulty existed in the past. Perhaps a sudden inability to meet deadlines has cropped up.

A single factor cannot be connected to corporate strategy. However, several factors arising simultaneously would suggest that the particular local company is having problems. This would be particularly disturbing if they surfaced suddenly or abruptly. Have they arisen after a new global strategy was initiated?

The problem could have arisen because of a hiatus between strategy formulation and implementation. A global strategy when formulated may be convincing, especially when the objectives have been projected as attainable. However, problems can arise at the local implementation stage, if the local culture has not been taken into account. This is exemplified by Pepsi's experience (see page 130). Problems can also arise when various local strategies have not been configured into the overall corporate plan in an appropriate fashion. When an attempt to configure is made, strategists can assess whether or not the local corporate plan is synchronized with the global plan. A local corporate plan that is developed keeping in mind local culture, and considered as a stand-alone feature, may be feasible . But a global strategy that just cannot strike a responsive chord at the local level can cause problems. When this happens, strategists should ask why this is happening. Is it that the global strategy has not found acceptance at the local level? Cultural mores regarding adaptation are particularly relevant to strategy, as strategy is about managing the organization-environment interface. Japan is a country that has understood the implications of adaptation:

The Japanese don't use the term 'strategy' to describe a crisp business definition or competitive master plan. They think more in terms of 'strategic accommodation' or 'adaptive persistence', underscoring their belief that corporate direction evolves from an incremental adjustment to unfolding events. Rarely, in their view, does a leader (or a strategic planning group ) produce a bold strategy that guides a firm unerringly. Far more frequently, the input is from below. It is this ability of an organization to move information and ideas from the bottom to the top and back again in continuous dialogue that the Japanese value above all things.

(Pascale and Athos, 1981)

Other researchers support Pascale and Athos's contention that the Japanese are prepared to adapt aspects of their strategies when exigencies demand this. Burgelman (1988) describes Japanese strategy as evolutionary. Top management sets an open -minded vision and vaguely delineated fields of strategic action. He is of the opinion that innovation evolves from the tension created by 'setting ambiguous directions together with very challenging parameters which serve as criteria for supporting emerging projects'. Nonaka (1988) explains that the role of middle management is to take the abstract strategies of top management and match them to the practical experience of the front lines. Strategies evolve and reevolve. He argues that:

The centrepiece of the Japanese approach is the recognition that creating new knowledge is not simply a matter of 'processing' objective information. Rather it depends on tapping the tacit and often highly subjective insights, intuitions, and hunches of individual employees and making those insights available to testing and use by the company as a whole.

Thus, Japanese organizations function as learning organizations even where strategy formulation and implementation are concerned .

As already stated, global strategizing rests on the ability to create a common overall global strategy which is also capable of cultural adjustment. Ghoshal and Nohria (1993) suggest a few industries where a global company can formulate a global strategy, which can then be more or less uniformly applied to a wide variety of cultures. The products of such industries include construction and mining machinery, nonferrous metals, industrial chemicals, scientific measuring instruments and engines. Ghoshal and Nohria also suggest companies whose strategies should be devised for near-complete local responsiveness. The products of such companies include beverages, food, rubber, household appliances and tobacco . Most products do not fall into these extreme categories. What is of the essence is the ability not merely to strategize, but to continuously remodel strategies, adding, replacing and/or removing variables in response to shifting realities. Craig and Grant (1993) suggest that high-performance global corporations worldwide are moving in that direction. They aver that once centralized Japanese companies are moving away from their orientation, while once decentralized European companies are likewise shifting away from their orientation.

Related to the notion of corporate strategy is business strategy. Business strategy is concerned with matters of competitive advantage over rivals. The internationalization of markets affects even companies that function exclusively within a domestic market and are not multinational. These companies are constrained to operate in an international business environment whether they like it or not. For instance, they may be forced to compete against global corporations who erode their customer base. As a response to such competition, domestic companies adopt the management practices of global companies. They start strategizing in some ways like their multinational competitors . When multinational corporations enter a domestic market, seller concentration in that market falls . The number and diversity of companies offering products or services in a particular market increases . This further alters the characteristics of the business market as far as a domestic company is concerned. And finally, non-government barriers to entry are reduced. Thus in particular markets, the methodologies employed to develop appropriate business strategies may be similar for both domestic and transnational corporations.

Michael Porter (1998) has argued that nations possess specific advantages. When domestic companies exploit their nations' advantages, these companies begin to enjoy an international competitive advantage. Porter has identified four factors that influence national competitiveness . These factors are: resources, related and supporting industries, demanding home customers, and domestic rivalry.

Resources

These are the resources found in relatively abundant supply within a nation. These could comprise not merely natural resources, but distinctive features associated with that country's education, culture, infrastructure and workforce capability. For instance, Craig and Grant (1993) suggest that the distinctive resources of Switzerland are a well- educated and well-trained population, many of whom have mechanical engineering skills. Additionally, this population possesses a conservative and punctual national temperament and is affluent. It has enjoyed 600 years of political neutrality and stability. All this has enabled the country to develop a competitive advantage in banking and finance. Its cultural heritage of political stability has given it a strategic and competitive advantage. Its banks have optimally used this competitive advantage. Swiss banks enjoy a global reputation for security.

Related and supporting services

This is the extent to which a market can attract world-class companies as suppliers to, customers of or partners of domestic companies.

Demanding home customers

If customers in a home market are educated, sophisticated, discerning and demanding, they exert pressure on companies for high-quality products and services. Thus, the Germans' love of high-performance cars has driven up the quality of cars in Germany and made those cars some of the best in the world. The cultural heritage of a nation influences the type of industry that will enjoy a competitive advantage. This in turn influences the type of corporate and business strategies those companies foster.

Domestic rivalry

When a domestic market has a large number of rival companies, each trying to develop a best in class product, such rivalry is likely to push up the quality of that product.

According to Porter's model, a key aspect of international competition within an industry is whether companies hail from nations with the required competitive advantage for success in those industries or not. Shifts in a nation's competitive advantage can occur. New natural resources may be uncovered or existing reserves may get depleted. A nation's workforce may develop certain expertise through changes in the educational system. Companies with natural resources may develop a strategic link with those emphasizing education. According to Porter (1990), Holland is the world export leader in flowers because of the synergistic nexus between flower producers and top research institutes. France has placed a great deal of emphasis on engineering and administration in its educational system. This has enabled French companies to invent the TGV high-speed train and the Ariane rocket.

The foregoing discussion may suggest that companies are limited by the cultural heritage of the countries they hail from, and strategizing cannot transcend this. There is no evidence in support of this contention, however. Porter himself has not implied this. What can be suggested is that companies can make it part of their corporate strategy to develop the natural resource of people in the countries they hail from.