appropriate to utilize multiple segmentation processes and criteria simultaneously
within the corporation.” Additionally, many international market segments are less well
defined than domestic ones and normally not truly global in scope and finally, the
linkage between segmentation and the desire for standardization in global marketing is
significant (Walters, 1997).
In the production function Collins (1995) suggest, that corporations need to
adopt a global view in order to alleviate the impact of downward pressure of costs, to
slash excess capacity and to realize the synergy benefits of mergers and acquisitions.
When pursuing a global manufacturing strategy, which means assessing a portfolio of
plants and reviewing total manufacturing costs rather than assessing costs on a
plant-to-plant-basis, six different issues need to be considered (Collins ,1995):
1. Avoid manufacturing shortsightedness: This means slashing over-capacity
(many European manufacturers are operating at less than 50% capacity utilization
rates), avoiding duplication and attaining critical mass. Here, a managerial mindset
change may be required.
2. Build product focused plant networks: This implies launching product
focused operations, concentrating expertise in a few carefully chosen locations, finding
a proper relationship between the head office and subsidiaries and centralizing control
and co-ordination.
3. Create pan-regional organization structures: Rationalize plant location
decisions by e.g. consolidating operations to low-cost sites, considering governmental
regulations and incentives of setting up a plant in a certain area and taking customer
influences on plant location and plant product palette into account. This may lead to
improved plant designs that facilitate teamwork, better quality and better and more
rapid materials handling. Ultimately, this aspect is about balancing centralized task
sharing and local autonomy.
4. Adopt rigid flexibility: The type of flexibility desired should be examined
carefully. Then simple operating ways are combined with company internal discipline in
order to attain the right kind of flexibility. Often, this means undergoing Business
Process Reengineering (BPR) for establishing a stable, fundamental framework that
facilitates the factory’s flexibility. Thus adopting rigid flexibility implies increased
standardization where possible and attention to manufacturability, production
co-ordination, problem solving, and experimentation.
5. Standardize systems, procedures, products and packages to gain
effectiveness of material flow and information exchange. This implies standardizing
product formulations or engineering specifications, product numbering,
components/parts numbering, quality assurance standards, and computer systems.
6. Identify obstacles to implementation: Be aware of implementation problems
due to various internal and external factors, such as demolition of executive’s status or
esteem, expatriates, cultural differences, governmental regulations, problems in
harmonizing products for different countries, union/management relations,
environmental concerns, incompatibility of computer information systems, etc.
Management Strategy-(ABB)
Unfortunately, no universal global management strategy can be outlined, rather,
groups of specialists including business managers, country managers and functional
managers should work together to create organization-wide processes and structures
in support of their global commitment (Taylor, 1991). Asea Brown Boveri (ABB) is an
example of a global enterprise that combines global scale and world class technology
with deep roots in local markets. It is more multidomestic than multinational and
therefore can be seen as a federation of national companies (Taylor, 1991). The case
of ABB highlights some of the implications of globalization on management. The
interplay of structure and dynamics can be recognized as creating the core of
organizations themselves – actors create, develop and manifest themselves in and
through enactment. Conducting global business involves several contradictions – e.g.
global versus local, big versus small, decentralized versus centralized, flexible versus
strong – that a company has to tackle in order to work effectively and productively
(Taylor 1991).
Along one dimension a global company is a kind of distributed global network
meaning that executives around the world make decisions on product strategy and
performance without regard for national borders. Along a second dimension, it is a
collection of traditionally organized national companies, each serving its home market
as effectively as possible. ABB’s global matrix holds the two dimensions together,
allows them to optimize their businesses globally and maximize performance in every
company (Taylor, 1991). The matrix is led by business area leaders who co-ordinate
the efforts of business area managers, country managers and presidents of local
companies (Taylor, 1991). The business operations are organized by independent
companies with their own president, budget and balance sheet. The presidents of the
individual companies are relatively autonomous and free to conduct business within
their company as best they can. This relative independence from the group motivates
the national companies to higher performances, thus optimizing group results. Also, the
companies are able to focus better on their core competencies in their home markets
(Taylor, 1991). Business area managers optimize the group strategy and performance
independent of national borders while allowing local companies to drive execution.
Individual companies are kept small in size for the purpose of allowing flexible
operations for responding to customer needs more efficiently (Taylor, 1991). Managing
change is crucial in order to tackle the shift from local to global and in order to solve
post-acquisition problems associated with integrating the several acquired traditional
companies into the global ABB group. To make the individual companies profitable,
ABB has developed a business and managerial reform philosophy, which has four core
principles (Taylor,1991):
1. Immediately reorganize operations into profit centers with well-defined
budgets, strict performance targets, and clear lines of authority and accountability in
order to motivate management.
2. Identify a core group of change agents from local management, give small
teams responsibility for championing high priority programs, and closely monitor
results.
3. Transfer expertise from around the world to support the change process,
without interfering with it or running it directly.
4. Keep standards high and demand quick results.
Case Automotive Industry in Latin America
Different corporations have tackled the problems that arise with their
ever-globalizing operating environment in different ways. New governmental policies,
the macroeconomic stabilization process, the trade and financial liberalization, the
deregulation of the economy, wide-ranging privatization programs, loosening of the
regulatory frameworks applicable to private investment and regional integration
movements have drastically altered the business environment, making investment in
the region more attractive (ECLAC, 1998). Additionally, the globalization process has
modified the structure of the world market, the nature of competition, the technological
demands and the international rules and standards for trade and investment. This new
situation forced global operating companies in the region to rethink their strategies.
Some decided to withdraw from the market and to supply their market through exports
(ECLAC, 1998). Other companies streamlined or restructured their operations in order
to defend or increase their market share. New investments were made in the light of
new national, subregional (NAFTA and Mercosur) or international environment
(ECLAC,1998). The manufacturing sector in Latin America has pursued two different
strategies (ECLAC, 1998):
1. efficiency oriented plans consisting of internationally integrated production
systems, and/or
2. plans to get access to national and subregional markets.
Ford is one of the main players that applied the first strategy very intensively in
Mexico. To protect itself from Asian competitors, especially in the U.S. market, Ford
made considerable direct investments in Mexico, established plants that were capable
of manufacturing competitive engines and vehicles for export on the world market
(ECLAC, 1998). With its partner Mazda, Ford was able to apply international
technology and organizational systems in these plants and increased competitiveness
on the North American markets even against its Asian threats. The combination of a
changing global competitive situation, a new governmental subregional policy, and a
rethought business strategy produced extraordinary results for the company (ECLAC,
1998). Fiat’s basic strategy in dealing with the Asian challenge was to defend and gain
new market share in Brazil. Fiat invested heavily and focused its operations by
choosing to produce only two models, tailored for the Brazilian market, to meet the
special market conditions (ECLAC, 1998). In order to do this efficiently and
productively, they invested substantially into restructuring and modernizing their
operations. The hereby-gained economies of scale in conjunction with Brazil’s
government supporting policy of manufacturing small car models enabled Fiat to
penetrate the Brazilian compact car market. With those two models Fiat achieved an
average production volume far above what it had obtained previously when it was
bringing out six different models. After the success achieved with the compact car in
Brazil and in order to correct its weak exports efforts, Fiat started to place more faith in
the potential of Mercosur. Fiat resumed its operations in Argentina because of the
favorable outlook of Mercosur and good bilateral agreements. Fiat invested in both
countries hereby managing modernization and expansion of its production facilities,
even laying the foundation for a subregional integrated production system (ECLAC,
1998).
General Motors implemented an interesting strategy in Chile as it specialized in
a single model and continued to use the same manufacturing methods for more than
twenty years (ECLAC, 1998). In addition, the key parts of this car (engine and chassis)
were imported. Although its operations had been profitable GM received subsidies from
the Chilean government for years and is now in the dilemma that it has to rethink its
strategy because the government decided to cut these subsidies. The options for GM
are to close the plant and relocate the operations to Santiago de Chile, shut down its
production operations and import the models for the local market, export to Argentina
and Brazil on preferential terms due to Chile’s associate membership in Mercosur or to
upgrade the operation and develop a new project geared to Mercosur (ECLAC, 1998).
The ongoing trade liberalization process threatens to lower import barriers,
which is why GM must move quickly in Venezuela in order to be ready when Venezuela
joins Mercosur and trade barriers are eliminated. At the moment GM’s plant is
competitive only because vehicle imports are subject to 35% tariff (ECLAC, 1998). The
probable GM strategy is to reduce the numbers of models produced and to invest
heavily. To sum up GM’s situation: Latin America’s automotive industry is concentrated
in the large markets like Argentina, Brazil and Mexico. Smaller operations have a focus
on one model that is highly demanded in the domestic market or can be exported to
other Latin American markets (ECLAC, 1998). Latin America was and still is a region
with future growth potential for the automotive industry. However, regional differences
exist thus national and subregional policy goals differ and start from different premises,
which forces the individual companies to develop market tailored strategies depending
on the country or region they operate in. Trade agreements like NAFTA and Mercosur,
which can be seen as early advocates in the trend towards a truly global operating
environment, ease operations across traditional barriers thus increasing competition
and making both national economies and the world economy work more efficiently and
productively.
Conclusion
The implications of globalization are potentially revolutionary, leading to
significant and wide ranging chances in every sphere of life and creating new
challenges for organizations of all types. Even though a firm does not see itself as
global, it interacts in a global world. Thus enterprises should understand that all their
activities are part of an all-affecting globalization process. When a firm pursues a
global strategy this involves more flexible arrangements that allow other organizations
to benefit from global opportunities, too. As we have seen, structures change as their
underlying causal forces change. Thus if it were possible to understand the forces
underlying structures, future happenings could become more predictable. Further, if it
were possible to manage these forces, the present could be managed. And because
the future has its roots in both history and present, by managing the present we could
at least partly manage the future. Corporations have to deal with problems arising from
the complexity, everlasting change and uncertainties of the global operating
environments in which they are embedded. For doing this, they should try to be open
minded in order to gain an awareness of the changes which are taking place and
affecting them in multiple ways. Once corporations are open minded and aware, they
can start a learning process which generates tools for the analyzing and further
understanding of their business environments. Hence open mindedness and
awareness provides corporations with additional practical insights and conceptual
eyeglasses for the tackling of their business environments. An understanding of
different operating realities, again, is needed for making the right decisions. In other
words, a global actor has to be flexible and tough, creative and open-minded, with fresh
ideas and visions in order to be able to tackle the problems arising from the complexity,
change and uncertainties of its operating environments. However, one should not
forget the basics of doing business which means world competitiveness arises from
corporate assets and corporate processes . This involves taking into account issues
like corporate infrastructure, financing, technology, people, quality, speed,
customization, customer service, market share, growth, profitability, etc. (Hansen,
1999).
In summary, adopting a global strategy may lead to ruthless ways of thinking and
acting. This may include unpopular decisions as far as downsizing operations are
concerned, because employees often do not understand that they are a company’s
investment and thus have to generate return on investment for justifying their existence.
Likewise, political considerations may also have to be taken into account. As
globaliza
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