Think Global, Act Local” Mandate: Evaluation and Synthesis
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Serbian Serbian Journal of Management 1 (1) (2006) 21 - 28 Journal of Management www.sjm.tf.bor.ac.yu REASSESSING THE “THINK GLOBAL, ACT LOCAL” MANDATE: EVALUATION AND SYNTHESIS John Parnell* School of Business Administration, University of North Carolina - Pembroke Pembroke, NC 28372, USA (Received 09 January 2006; accepted 28 February 2006) Abstract There is no simple formula for developing and implementing successful business strategies across national borders. A popular approach to this challenge is to “think global, act local.” Some argue, however, that maximum consistency across global markets is critical, citing examples such as Coca- Cola, whose emphasis on quality, brand recognition, and a small world theme has been successful in a number of global markets. Although there is wisdom in both views, this paper argues that the two are not necessarily mutually exclusive, and that firms should adopt a perspective that adopts and bal- ances both perspectives simultaneously. Keywords: Globalization, localization, emerging economies, think global, act local. 1. INTRODUCTION field, and there is evidence to suggest that it is well grounded in theory and practice. A popular approach to global strategy, or Although this oft-repeated advice appears any international endeavor for that matter, is to be intuitively appealing, its application is to “think global, act local.” Specifically, a bit more complex, now more than ever. business leaders are urged to incorporate a Specifically, while few scholars and execu- global perspective on their organizations, tives would question the idea that firms while tailoring their actions to the local envi- should “think globally,” the interpretation, ronments in which they operate. This view wisdom and action associated with the sec- has been widely accepted by most in the ond part of the advice—“act locally”—is not * Corresponding author: [email protected] 22 J. Parnell/ SJM 1 (1) (2006) 21-28 always clear [16,28]. The following discus- cycle of products whose domestic markets sion revisits the concepts of globalization may be declining, as U.S. cigarette manufac- and localization and offers an integrated per- turers did in the 1990s. Establishing facilities spective for synthesizing the two. abroad can also help a firm benefit from comparative advantage, the difference in 2. THINKING GLOBAL resources among nations that provide cost advantages for the production of some but What does it mean to “think global?” not all goods in a given country. For exam- Even today, scholars continue to debate the ple, athletic shoes tend to be produced most meaning of the term. Globalization can be efficiently in parts of Asia where rubber is viewed an intensification of world con- plentiful and labor is less costly. A global ori- sciousness where mass communication has entation can also lessen risk because demand the potential to break down national borders and competitive factors tend to vary among to better satisfy the needs of consumers, mar- nations. There are a number of factors to kets, and organizations [16,27]. It is the consider, including the similarity of cus- process that pertains to changes in economic tomer needs abroad to those in the firm’s and political spheres that bring the world domestic market, differences in production together [12]. The key is that it does not and distribution costs, and regulatory and occur in a vacuum; As Kefalas [16] put it, tariff concerns. technology makes globalization feasible, A global orientation brings about three while political and economic liberalization key advantages for firms adopting a global make it happen. While few contest the legit- perspective, the first of which centers around imacy of the globalization phenomenon, the economic concerns. The multinational cor- extent to which it has occured is widely poration (MNC)—contrasted with a firm debated [14,17]. operating only in domestic markets—can For clarification, it is appropriate to dis- increase production levels, thereby fostering tinguish between thought and action. A firm standardization and economies of scale whose managers “think” at the global level [9,36]. When a firm produces more, it may may “act” at either the global level or at the also enjoy greater efficiencies in marketing local level. “Thinking global”—a global ori- and distribution, a phenomenon known as entation, mindset, or philosophy—suggests economies of (global) scope. The importance that a firm actively considers opportunities of scope economies relative to scale for engagement beyond the borders of its economies has increased in recent years [13]. host country. “Acting” refers to how a firm The second advantage of globalization is approaches the implementation of activities related to cultural change. Global media and beyond its borders. The notion of “thinking” the pervasiveness of the Internet have creat- is addressed in this section, whereas “action” ed a global consumer culture, one where dis- is deferred to the following section. tinct localized preferences for particular Firms shift from a domestic mindset to a goods and services have been replaced by global mindset for numerous reasons. higher quality and cheaper offerings bearing Pursuing global markets can reduce per-unit global brands [24]. This shift has enabled production costs by increasing volume. A firms to address the needs of customers in global strategy can extend the product life different markets with common products, J. Parnell/ SJM 1 (1) (2006) 21-28 23 services, and marketing approaches. Because at an unprecedented rate. Many American consumers are more familiar with the prod- franchises can be seen throughout the most ucts and services available in other countries, developed parts of the nation [29]. they are likely to be more open to uniform At present, China remains a mix of the offerings, as opposed to those tailored to the traditional lifestyle based on tenets of social- specific needs of a given locale. ism and its own form of a neo-Western eco- Third, a globalization perspective can also nomic development. Nowhere is this friction foster growth outside of a firm’s host coun- seen best than on the roads of the capital, try. Given the intense competition in most Beijing, where crowds of bicycles attempt to markets in the developed world, organiza- negotiate traffic with buses and a rapidly tions seeking to grow must remain abreast of increasing number of personal automobiles. opportunities that may exist, especially in Western-style traffic reports have even emerging economies. “Thinking global” become pervasive in a country where the enables a firm to seek out and recognize and world’s largest automakers are fighting for a pursue such opportunities with greater effec- stake in what many experts believe will be a tiveness [9,20]. consumer automobile growth phase of mam- Consider the cases of two emerging moth proportions [7,18]. Now more than economies, India and China. India has ever, large Chinese cities are resembling enjoyed considerable growth in recent years. their counterparts in other parts of the world. A number of firms in the United States and Western manufacturers such as Eastman Europe have outsourced jobs in technical Kodak, Proctor & Gamble, Group Danone of areas to India where trained workers are France, and Siemens AG of Germany have available at considerably lower wages. already established a strong presence in Economic liberalization in the country has China. A number of Western restaurants and invited additional foreign investment as well. retailers have also begun to expand aggres- India’s Tata Motors has helped overcome the sively into China, including U.S.-based country’s reputation for poor production McDonald’s, Popeye’s Chicken, and Wal- quality by exporting an estimated 20,000 Mart [6]. It would be an overstatement to CityRovers to the United Kingdom annually suggest that emerging economies offer only since 2004 [15,33,35]. India’s development advantages for entering firms, especially in has created an environment conducive to the long run. For example, after sales of cars entry by global firms from other parts of Asia in China skyrocketed in the late 1990s and and the rest of the world. early 2000s, the automobile industry there India, however, has received only a small began to experience many of the problems fraction of the level of foreign investment common to producers in other parts of the made in China, which boasts the world’s world: excess capacity, intense price compe- largest population and has been tabbed as a tition, and declining profits. Nonetheless, the world economic power within the next few attractiveness of involvement in such mar- decades. China’s entrance into the World kets remains high, as Daimler-Chrysler and Trade Organization, declining import tariffs, Honda plan to build inexpensive cars in and increasing consumer incomes suggest a China and export them to the U.S. and other bright economic future for the nation, and Western countries in the late 2000s [3]. Western companies are expanding into China Consider the case of GM. In 2005, the 24 J. Parnell/ SJM 1 (1) (2006) 21-28 carmaker produced a record number of vehi- are too costly for the firm. Even differences cles in China—about 665,000—accounting in the availability of ingredients or prefer- for 25 percent of the firm’s global profit. ences for styles or flavors associated with the During the same year, however, GM’s mar- firm can create roadblocks [2]. Hence, “act- ket share in the United States declined by 10 ing local” is all that is required for organiza- percent as Asian rivals led by Toyota tions whose strategies suggest that managers increased their collective share from 34.5 to “think local.” For a firm operating across 36.5 percent [4]. Hence, the growth borders, localization suggests that strategies prospects available abroad can be critical to reflect a strong effort to tailor firm activities a firm struggling to maintain competitive- to the specific needs of each location.