The End of Global Strategy

Only available on StudyMode
  • Download(s) : 126
  • Published : August 7, 2012
Open Document
Text Preview
end ofPergamon

PII:

European Management Journal Vol. 19, No. 4, pp. 333–343, 2001  2001 Elsevier Science Ltd. All rights reserved Printed in Great Britain S0263-2373(01)00035-4 0263-2373/01 $20.00 + 0.00

The End of Global Strategy
ALAN RUGMAN, Indiana University, and Templeton College, Oxford RICHARD HODGETTS, Florida International University Recent research suggests that globalization is a myth. Far from taking place in a single global market, most business activity by large firms takes place in regional blocks. There is no uniform spread of American market capitalism nor are global markets becoming homogenized. Government regulations and cultural differences divide the world into the triad blocks of North America, the European Union and Japan. Rival multinational enterprises from the triad compete for regional market share and so enhance economic efficiency. Only in a few sectors, such as consumer electronics, is a global strategy of economic integration viable. For most other manufacturing, such as automobiles, and for all services, strategies of national responsiveness are required, often coupled with integration strategies, as explained in the matrix framework of this article. Successful multinationals now design strategies on a regional basis; unsuccessful ones pursue global strategies.  2001 Elsevier Science Ltd. All rights reserved. Keywords: Globalization, Multinationals, Global strategy, Triad, Triad-regional strategy, National responsiveness 50 per cent of the annual revenues of companies such as Dow Chemical, Exxon, Hewlett Packard, IBM, Johnson and Johnson, Mobil, Motorola, Procter & Gamble, and Texaco.3 These are accurate statements — but they fail to explain that most of the sales of ‘global’ companies are made on a ‘triad-regional’ basis. For example, most MNEs that are headquartered in North America earn the bulk of their revenue within their home country or by selling to members of the triad: NAFTA, the European Union (EU), or Japan and a small group of Asian and Oceania nations.4 In fact, recent research shows that: 1. More than 85 per cent of all automobiles produced in North America are built in North American factories owned by General Motors, Ford, DaimlerChrysler, or European or Japanese MNEs; over 90 per cent of the cars produced in the EU are sold there; and more than 93 per cent of all cars registered in Japan are manufactured domestically. 2. In the specialty chemicals sector over 90 per cent of all paint is made and used regionally by triad based MNEs and the same is true for steel, heavy electrical equipment, energy, and transportation. 3. In the services sector, which now employs approximately 70 per cent of the workforce in North America, Western Europe, and Japan, these activities are all essentially local or regional.5 As a result, top managers now need to design triadbased regional strategies, not global ones. The real drivers of ‘globalization’ are the network managers of large multinational enterprises. But their business strategies are triad/regional and responsive to local consumers, rather than global and uniform. For example, the automobile and specialty chemicals business are triad-based, not global. There is no global car. Instead, over 90 per cent of all cars produced in Europe are sold in Europe. Regional production and large local sales also occur in North America and Japan. Another misunderstanding about globalization is the belief that MNEs are globally monolithic and excessively powerful in political terms. Research shows this 333

Common ‘Global’ Misunderstandings
Globalization has been defined in business schools as the production and distribution of products and services of a homogenous type and quality on a worldwide basis.1 Simply put — providing the same output to countries everywhere. And in recent years it has become increasingly common to hear business executives, industry analysts, and even university professors talk about the emergence of globalization...
tracking img