Internationalization And Globalization Strategy Business Essay Example

begins by defining globalization and global strategy, arguing that very few global companies exist in today's era. It also highlights the need for a significant amount of international business literature and theory to make decisions on regional versus global strategies.

Impression of Globalization and Global Strategy

Globalization refers to the concept of companies operating in multiple continents and countries worldwide in order to enhance their profitability, sustainability, global presence, and economies of scale (Blyton et al., 2001, p446).

Globalization offers a platform for both consumers and organizations to meet their global needs. Marquardt & A; Berger (2003, p286) identify Trade, Travel, Technology, and Television as the main drivers of globalization. These four developments are the outcome of human ingenuity and innovative inventions. They have not only facilitated but also encouraged the continuous exchange of ideas, information, and knowledge among individuals by breaking down distance barriers.

According to Bratton, Gold, and A (2007, p92), globalization is a worldwide process that involves political convergence, societal economies, and national opinions, with little importance placed on space, time, and government. This paragraph will now focus on three different perspectives on "global strategy". The first perspective asserts that global strategy is a unique and distinct form of Multinational Enterprise (MNE) strategy. Additionally, it emphasizes that globalization treats all countries equally (Levitt, 1983, p97).

The second viewpoint on global strategy, described as "International Strategic Management" (Bruton et al., 2004), is a broader concept than the first mention of "global strategy." The third viewpoint takes an even broader approach, considering global strategy to be the theory of how to become a successful competitor in all regions of the world (Peng, 2006). This

essay discusses various forms of global strategies adopted by companies, and then focuses on the theory and practice of regional strategy in response to Osegowitsch and Sammartino (2008). It argues that very few global companies exist today and emphasizes the need for sufficient international business literature and theory to analyze the strategies of regional versus global multinational enterprises (MNEs).

The Regional Strategy Theories, according to Rugman and Verbeke (2007), suggest that a company can be classified as global if its domestic sales account for less than 50% of total sales, with at least 20% of sales in both the NAFTA zone and Asia.

He contributes to it by presenting a study that supports this theory, which suggests that there are only nine planetary houses in Fortune Global 500 and that many houses are focused on their home region. Osegowitsch and Sammartino (OS) (2008) propose three criteria and observations for categorizing houses based on their geographical sales distribution. First, OS argue that immediately sorting statistical data is not appropriate. It should be acknowledged that as this field of research grows, any categorization method is subject to criticism, as it is not only the classification of Multinational Enterprises (MNEs) following specific regional strategy theories.

The main focus of OS is to establish and maintain a strong presence in the region. This can be achieved by dividing the sales output among the EU, NAFTA region, and Asia in a way that promotes lower thresholds. For example, instead of each regional sector having 33.3% sales, they should have 30% each. This strategy allows for a fair division and supports the company's goal of being considered global.

A company can be classified as global

if it has at least 20% of total sales in the two major regions, with no restrictions on maximum sales threshold in the home region (Rugman and Verbeke, 2007, p2). It is important to note that classifying a company as having a strong market position is not relevant if its threshold is below 20% of total sales.

To identify a weak position in the host region, OS conducted a simulation using a threshold value of 10% of net sales. Even for the smallest Fortune Global 500 companies, this would result in USD $1 billion. Unfortunately, this simulation did not demonstrate a strong position and cannot serve as the basis for strategic decision making within large organizations.

The main argument of OS is that using various thresholds is advantageous for measuring the sensitivity of a house's positions in the categorization system. However, the primary function should always be to assess the Future Global 500 and easily track companies whose thresholds are constantly shifting from one category to another. A tangible example of this is Nokia, which experienced a 4% decrease in sales in 2002. Although this change in sales pattern was a short-term setback in inter-regional growth, OS criticizes that it cannot be overlooked. The transition of Nokia from a global organization in 2001 to a position-based firm in 2002 was a remarkable business move.

The threshold of less than 20% results in the formation of more bi-regional companies, which are not truly global organizations. Additionally, OS emphasizes that sales fluctuations vary greatly across industries. According to OS, industry plays a significant role, and future research should compare regional and global strategies at industry-specific levels to identify differences. It

is widely known that many companies are not properly internationalized and their sizes differ across regions. However, certain multinational enterprises (MNEs) consistently compensate for weaknesses in different parts of the world. The important point to consider is that our analyses are not influenced by the varying sizes of industries across regions since MNEs can establish regional markets and develop underdeveloped markets further.

The last argument states that preferring a regional scheme over a planetary scheme would be irrelevant. Regional schemes are implemented when it becomes difficult or impossible to efficiently follow conventional planetary schemes or when they fail to accurately map. It should be noted that planetary schemes cannot be evaluated in isolation, keeping in mind the importance of heterogeneous geographic space beyond national borders for most, if not all, companies. Moving forward, this section of the essay will address the criticism made by OS regarding the role of regional strategy in international business theory. According to Rugman and Verbeke (2007, p3), the regional strategy is based on three simple but important empirical observations that require the extension and enhancement of international business theory. Firstly, only a small number of multinational enterprises (MNEs) have a balanced geographic sales distribution across the global market, although it contributes to risk diversification at the downstream end of the value chain.

OS shows that a balanced and structured distribution of gross revenues geographically could increase credibility among clients of the company's products and services. With the exception of resource-based industries, the EU, NAFTA, and Asia represent a preliminary but not definitive approach to determining the global distribution of an MNE's internet sales. Additionally, these three regions have become significant due to

their association with the world's largest MNEs and numerous innovations across various industries. They also reflect the global demand for knowledge-intensive goods and services. However, it is unfortunate that only a few MNEs in the Fortune Global 500 perform well in all three regions of the triad. It is often observed that a strong presence in one region is not necessarily matched by an equally strong presence in the remaining two regions of the triad.

According to Ghemawat and Ghadar (2006), categorization tools are no longer applicable because only a small percentage, potentially less than 5%, of international houses can be considered truly global. The authors also point out that different houses dominate specific regions of the world. Additionally, many multinational enterprises (MNEs) adopt a regional strategy by incorporating regional characteristics into their organizational structure, such as geographic divisions and separate divisions for different regions. This is mainly driven by the concept of regional diversity, which necessitates unique management approaches. In this context, the differences in institutional and economic distance within a region are not only smaller but also notably distinct from those between regions.

Managing operations and work systems in the EU differ significantly from those in the NAFTA region or an Asian environment. These differences are more pronounced when smaller units within a work unit are considered. Fratianni (2006) highlights that these variations in work systems underscore the importance of regional level in the business strategy and structure of multinational enterprises (MNEs). Today, large companies such as Toyota and General Electric (GE) incorporate regional elements into their business and operational strategies. They are often mistakenly labeled as global organizations due to their worldwide global operations

and manufacturing, despite lacking balanced geographic distribution (Ghemawat, 2005, p102). Additionally, it is important to note that over 50% of a company's sales typically come from a specific geographical area. This region serves as the focal point for most of the company's tangible and intangible assets. While having over 50% sales in the home region may not be significant enough in the EU and North America currently, it is gaining momentum in Asia due to decreasing intra-regional distance resulting from reduced investment barriers and trade.

The text suggests that competition among industries is stronger at the regional level rather than the national level. It proposes developing a categorization tool to collect sales data from both the home region and the rest of the region, instead of solely focusing on sales within either region. This suggestion is particularly relevant for multinational enterprises (MNEs) based in Asia and EU. These observations emphasize the need for a broader international business theory. The specific classification approaches used to measure MNEs' market performance in their home regions versus other regions are not crucial to these observations. It has always been observed that MNEs are significantly more powerful in their home regions compared to other regions within the triad.

These top multinational enterprise houses have designed their organizational structures around the regional component and a changing market place in each region increases the demand for a regional approach rather than a global strategy approach. This paragraph aims to identify the three main factors for expanding mainstream international business theory (Rugman and Verbeke, 2007, p3). First, it is observed that the impact of country borders does not provide a strong basis for distinguishing between

non-location advantage (or internationally deployable/exploitable) and location advantage. In today's era of increased regionalization, it is very easy for some companies to operate and utilize their strengths across national borders. Furthermore, indicators for internationally movable foreign strategic assets (FSAs) such as firms' level of research and development (R&D) do not play a significant role in explaining intra-regional expansion occurring within a country region, given the minimal distance gap between the country and the rest of the region. As a result of efficient trans-European transportation and logistics networks enabling fast response and just-in-time strategies covering the entire continent, the importance of geographic distance has diminished within the European Union.

The EU integration process itself has resulted in a decrease in Institutional distance. Additionally, Economic distance has become irrelevant due to various reasons such as the development of new services and products at the European level, the ability to shop across borders through online searches, the efforts of companies to achieve efficiency on a European scale, and the increased importance of the EU as a geographic space for determining a company's behavior, structure, and importance. Furthermore, there has been a decrease in the significance of traditional measures of cultural distance, particularly in business-to-business interactions, as it is now easier to access labor in Europe and English has become widely used.

In contrast to the past, conventional location-bound FSAs only allowed for company expansion within national borders, but now they can be easily upgraded and deployed beyond national boundaries and into other regional states. In addition, it is necessary to consider that non-location-bound FSAs such as technological knowledge or brand can be easily utilized nationwide. However, it is still

important to acknowledge that in high distance environments, it is necessary to complement existing FSA packages with an additional package, indicating that distance still plays an important role.

According to Ghemawat (2005, p104), there are various ways to differentiate between low and high distance environments in a triad context. One key differentiation is between place parts and host parts. It is clear that the extension and range of mainstream international theory support the concept of the triad part as the best way to distinguish between low-distance environments (the home-triad part) and high-distance environments (the two host-triad parts). In high-distance environments, significant investments are needed to complement existing FSA packages and enable profitable development in the host part environment. However, there is a trade-off: expanding the high-distance environment may not be as successful and profitable as expanding the low distance environment. This is even if macro-level parameters suggest that the high-distance environment has strong location advantages. As stated by Nachum and Wymbs (2007, p240), FSAs and location advantages in global cities are interdependent.High-distance packages have various risk factors associated with them. The merging of existing FSA packages with newly developed or accessed resources in a high-distance environment can result in operational difficulties, lower sales, and dissatisfaction. This is evident in the withdrawal of major multinational enterprises (MNEs) from high-distance contexts, such as Wal-Mart's exit from Germany and Korea.

Thirdly, there is a theoretical distinction between two types of FSAs: location edge and non-location edge. These assumptions revolve around the easy and profitable development of FSAs, such as trade names or proprietary technological knowledge, across borders. It is crucial to adapt the basic concepts of these two types of

FSAs to the reality of regionalization. Specifically, the extent of FSAs is determined by various factors, including distance as well as geographic, institutional, economic, and cultural elements. The classification of an FSA as either location-bound or non-location edge depends on the decline in value over distance.

Regarding the characteristics of FSAs and the liability of inter-regional differences, it has been noted that international business is more influenced by geographic boundaries other than traditional state boundaries in our previous study. Now, after examining the concepts and theories of regional strategy, we aim to determine the extent to which Procter & Gamble can be classified as a global company based on its business and operational strategies.

The Case of Procter & Gamble

Procter & Gamble Co., one of the foremost consumer goods manufacturers in the world, known for brands like Tide, Pantene, and Ariel, was founded in 1837 as a small candle and soap company.

The house currently operates in 180 states, employing over 138,000 individuals. According to A.G. Lafley, the Chairman of the Board and CEO of P & G, the company has a rich history spanning over 171 years and has consistently been motivated by creativity and innovation. Furthermore, enhancing sales and achieving long-term success have always been the corporation's strategic objectives. The corporation also recognizes that these goals can be accomplished by continuously acknowledging changing consumer demands, fostering innovation, establishing strong brands, and understanding market requirements.

Relying solely on internal activities such as acquisitions, internal R, and selective inventions has proven to be inefficient and inadequate in achieving the company's goal of reaching a $4 billion revenue within a single year. It is evident that the model of creating

our own inventions, coupled with global research facilities and the recruitment and retention of top talent nationwide, was successful until the year 2000. However, achieving high levels of top line growth has become a significant challenge for the organization. To address this challenge, P&A&G implemented a new innovation technique in the year 2000 called the Develop and Connect model. This model emphasizes the importance of seeking new ideas and information externally and incorporating them internally to enhance internal capabilities and maximize their potential. By leveraging external resources such as people, products, and properties, and utilizing their R&D labs, purchasing power, market capabilities, and production methods, the company aims to capitalize on improved manufacturing processes and cost-effective products.

The primary objective of this system is to identify the top 10 preferences and demands of the consumer. Additionally, ensuring complete customer satisfaction with the manufactured products is crucial in order to ultimately drive up sales and profits. Moving forward, the scheme also recognizes similar products or related technologies that already exist in the market and hold a strong position. Lastly, it involves analyzing the impact of technological acquisition in one country on other countries. Networking forms the foundation of this approach.

The P&A;G group has partnerships with networking companies like InnoCentive and Ninesigma. They also work with suppliers and entrepreneurs worldwide. Their role is to find solutions to internal problems by utilizing external resources. This infrastructure has allowed P&A;G to reduce their investment in technology and achieve consistent growth and sustainability. Huston, L.

According to Sakkab (2000, p.3), the adoption of the Connect and Develop model has led to a significant increase in R&D production by 60% and a

doubling of the innovation advancement rate. The Procter & Gamble company demonstrates how organizations can maximize profitability by implementing new and innovative approaches. Their examples showcase how shifting to new and advanced methods of utilizing information and technology can help maximize profit margins. The Procter & Gamble company has developed a supporting infrastructure that fosters innovation, combining human capital, ideas, and technology on a global scale.

Decision

This essay has identified several strategies that can help companies establish strong global positions, such as having a threshold of 20% and implementing measures to differentiate regional strategy from global strategy. The main objective of demonstrating that a company cannot be solely categorized as global based on statistical information has been successfully justified.