A recent television advertisement depicts workers standing around their personal data arrays bemoaning the messages they are receiving from other team members. They are bewildered and dismayed that the messages ask for their global business strategy. Looking among one another, they query if they even have a global business strategy. We almost have to conclude, they have none.
Of course, the ad is selling a communications product not business strategy. Yet, how did these professionals find themselves in this predicament? Were they aware that international business requires adaptations? Going global is a process that begins with leader vision and foresight and may take years to successfully accomplish. Leaders who actively scan the horizon for new opportunities also see the challenges the opportunities present. They see barriers, not as hindrances, but brief pauses in their forward movement. Like performing a force field analysis for change, leaders examine barriers for ways to minimize negative forces and maximize positive forces.
The focus of this discussion is on adaptations organizations will face when going global. Adaptations suggest the company and its leaders have to become aware of potential barriers developing a navigation strategy to overcome them. Additionally, interpersonal relations among workers on a global plane will mean a different socio-technical climate.
Among businesses in the United States, small and medium operations may operate within the boundaries of a single state. They have to obey state laws governing the way they do business. On a higher level, some companies operate as interstate businesses. They have to adapt to laws of multiple states and obey federal interstate commerce laws. As muddled as those laws may be, operating within the company’s home nation is far less difficult than adapting to global demands.
Addressing adaptations U.S. organizations face upon going global begin much earlier than in college business schools. Elementary and secondary schools still teach a traditional curriculum of reading, ‘riting, and ‘rithmatic in much the same way as twenty years ago (Andrzejewski & Alessio, 1999). Therefore, the first adaptation hurdle to overcome is traditional education that remains mostly ethnocentric and nationalistic.
Conversely, the European Union wrestles with a new sense of supranationalism. Supranationals are cross-national or subnational citizens that do not claim “political identity and cultural membership” (Bridge & Watson, 2002). The business leader taking an organization global now has a hurdle that forces thinking beyond nation one and nation two toward a recognition of people living in one or another country but not feeling or being a part of the national culture.
The European Union grants citizenship rights to any national of the EU regardless what country they currently reside. However, granting of citizenship rights to foreign nationals is a complex issue and each member country decides on citizenship processes. According to Bridge and Watson, European cities have concentrations of foreign nationals from as low as about 14 percent in Paris to as high as 32 percent in Amsterdam.
Adaptation to global business, therefore, is not as simple as merging the culture and business practices of multiple countries. Adaptation is a learning process according to McCall and Hollenbeck (2002). The learning process goes beyond business, they say. International business is business; however, in cultural contexts, adapting to the culture is a harder lesson to learn without experiencing it as an expatriate.
Barriers to Adaptation
U.S. business has a long way to go to overcome barriers to adaptation. McCall and Hollenbeck (2002) provide a view of barriers in the form of lessons learned by international executives versus U.S. executives. Among international executives responding to overcoming the barrier of culture, they responded learning another language was the number one skill followed by learning about a specific culture and how to live in that culture. No U.S. executive felt these skills were necessary (Table 4-1, pg. 95). In addition, McCall and Hollenbeck’s research suggested that international executives are more aware of running a business while U.S. counterparts are concerned about technical knowledge. In leading and managing others, international executives want to learn to keep people motivated and committed while U.S. executives are concerned about directing and motivating followed by management values.
However, U.S. business ranks second among 59 nations rated on eight economic criteria for global competitiveness (Rosen, 2000). From this statistic, the U.S. business is open and financially secure, has the technology, labor force, and infrastructure appealing to international business.
Another barrier to successful global leadership, addressed above, is education and developmental experiences (McCall & Hollenbeck, 2000). Leaders cited education and developmental experiences third among 18 experience categories. However, global leaders cited it more often than U.S. domestic leaders. McCall and Hollenbeck discovered that more than one-third of developmental and educational competencies they rated came from high school, college, and graduate school learning. Senge (1990) took a step toward organizational learning in The Fifth Discipline and McCall and Hollenbeck take it further explaining that organizational learning must be active, have a global perspective, have high expectations, and reflect the global nature and cultures of the organization.
Rosen (2000) offers a view of the socio-technical environment starting with people. People are workers, supplies, and customers. Global leaders who understand relationships hire people who are flexible and work well on teams.
Hoffman (2007) wrote of networks that global workers have. One statistic he related is that among ten thousand workers, they likely have as many as fifty million interpersonal connections globally. Among these connections, some workers prefer what Rosen (2000) termed the “human touch in sharing knowledge” (pg. 132), while other connections across the globe by telephone, email, or other instant message communication process. Sarnoff’s Law (Smith and Skelley, 2006) states “the value of the network grows with the number of actors.”
The successful global leader recognizes the value of interactions within the socio-technical environment, recognizes that contemporary global operations do no exist within traditional office settings, and recognizes the power of global interactions to produce a network of knowledge and information sharing.
Global Market Adaptation
Smith and Skelley (2006) suggest to global leaders that their organizations have to evolve matching the pace of change and pace of innovation. Today, collaboration and networking make business competitive. Contemporary business no longer relies on suppliers and customers from small geographic areas. Truly global organizations have supply chain networks around the world. Customers exist for products not yet created.
Smith and Skelley, like Davis (1996) share that envisioning the future as though it is a present state helps business prepare for global markets. An example of global market adaptation is the Apple iPod, a global phenomenon. Another law shared by Smith and Skelley is Metcalfe’s Law. This law explains network synergy such that the value of combining networks is greater that the value of the two networks measured separately.
An interesting counter to Smith and Skelley comes from the Internet Center for Management and Business Administration, Inc. (2007). While they support innovation and collaboration, they also support the concept of extending the life cycle of products. Developed countries clamber for the newest and most technologically advanced product available. However, global business expanding into lesser-developed nations cannot put the latest greatest products into consumers’ hands when the country’s infrastructure does not support the technology. The result is continued profit from older technology over a longer period. Under-developed nations have time to catch up while developed nations continue seeking new technology.
Think Global – Acting Global
Black et al (1999) see business moving from thought to action on the global stage. Business is about profit; hence, business is about discovering market opportunities. Black et al tell global leaders to seek riskless “opportunities involving cost and quality differences in production inputs” (pg. 151). Beyond this, global leaders must seek new markets for their finished good and services while minimizing redundancies and maximizing efficiencies.
Managing inputs globally means, in part, seeking the most cost efficient high quality production sites. Labor costs in Germany, according to Black et al, is about $31.76 per hour while In the United Kingdom the same production costs are about $14.63.
Finding new markets requires global leaders to view the world in terms of gross national product. The U.S. accounts for about 25 percent of the world’s GNP and no other country exceeds that amount. Finding untapped global markets takes careful research; however, that research can result in increased revenues.
Finally, increasing efficiencies begins with reducing redundancies. Cost efficient production eliminates multiple locations for manufacturing. Reducing redundancies increases economy of scale for business. Additionally, business can exploit its size and negotiate lower prices from outside vendors.
Adaptation to global markets recognizes barriers. How an organization and its leaders approach the barriers is critical to its global expansion. Forward thinking leaders utilize the barriers to their advantage. Rather than accepting want can’t be done, these leaders maximize what can be done.
One aspect of adaptation that global business recognizes is the need to change how students learn business in school. One adaptation in this area exists in many colleges and universities. Rather than having large full time faculties, universities turn to professionals working in business fields to serve as adjuncts. Further, there is a shift away from traditional pedagogy to andragogy, from lecture/exam content-centered to problem-centered/experience-based learning.
Business leaders in a global arena recognize the value of people and the power of people and the network webs they share. Adapting to these interpersonal networks of like-minded workers adds knowledge and information to business. These networks help business explore potential for global expansion into new markets, provide for economy of scale, and leads to global branding.
A final analysis of global adaptation tells leaders to have a sense of adventure, do not stop learning, and do not stop changing. Examine the globe as a market place; learn the position the organization holds in that market place, and work to become a transnational leader rather than an expatriate manager.
Think back to the opening scene of workers trying to determine if they have a global business strategy. In that circle of workers, there is chaos and confusion. Yet, it is chaos and confusion that leaders face on the road to globalization. Getting there from here is a matter of adaptation to changing scenery and maybe discovering the grass really is greener on the other side.