Modern global businesses have to satisfy a myriad of conflicting demands coming from different directions. In a competitive world, firms use integrated controls to preserve corporate standards and strategies, which help attain economies of scale. They also make certain innovative decisions that help in sustaining the growth of the business and create competitive edge over the other firms in the industry. Some of these core decisions is on participating more actively in the local and global market, while bearing in mind that to operate efficiently and effectively on the global platform needs sensitivity to indigenous market situations, adaptability under varying circumstances, and responsiveness to new prospect. Multinational companies increasingly face intense competition globally. In these emerging situations, companies seek to implement strategies that will improve and sustain the growth of their business. Because of this, multinational companies are changing the way they structure their businesses, changing their modus operandi in order to conform to today's business environment. For today's business managers the need to understand this strategic motivation for change is of utmost importance. For they to be responsive, there must be concern not just for the now, but also for the company's unforeseen future. This entails planning, organizing, directing, and controlling resources and managing a diverse labour force in a way that will be beneficial to all structures of business internationally.
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Globacom Limited is a Nigerian multinational telecommunications company headquartered in Lagos, Nigeria, a privately owned company and one of Africa's fastest growing telecommunications company. Globacom is the market leading mobile service provider in Nigeria and operates in the neighbouring West African states (Globacom Limited). According to (Globacom Limited) it is reputed to be one of the fastest growing mobile service providers in the world, and aims to be the biggest and best mobile network in Africa. The telecommunication industry in Nigeria in particular and the world at large characterized by huge investments in technology and is exposed to rapid fluctuations in the market environment, such as consolidation of both telecom operators and network providers. The providers are competing for the limited number of customers, present on the global stage. Competitors can be either large multinational companies, such as Vodafone, or small regional companies, such as MTN, Zain etc. The global industry performance is largely dependent on continued growth in mobile and fixed communication in terms of both number of subscriptions and usage per subscriber. Moreover, the current merging of the telecom, data, and media industries changes the conditions in which the telecom operators do business. Consequently, the competitive environment is changing and novel strategies, addressing the new market conditions, are developed. Now in its bid to meet the organisational aims and objectives, the company wants to know the possibility of increasing its participation in the local and global market. Thus, this paper seeks to outline the key issues involved in localisation and globalisation, strategic decisions involved and implementation challenges with Globacom as reference.
To determine what needs to be done at the enterprise level, (Oboh) opined that the, economic, institutional, socio-cultural and political make-up of a business' environment, is a serious determinant of the success or failure of the business concern. The mode of doing business in any environment is a function of the quality of management in place. How innovative they are is another issue. To this extent, the profile of the human resources of the company is critical. The national and firm-specific factors that affect the performance and ability of a company to compete include, inter alia the following:
- The extent to which macro-economic policies are stable and predictable;
- The extent to which government policies are compatible with and foster competition;
- The efficiency of the financial services sector, especially the capital market. This is important as it defines the accessibility of companies to cheap source of finance;
- The state of infrastructure in terms of whether or not it can adequately support and serve the basic needs of businesses; this is an important factor in the sub-Saharan African Commonwealth Countries such as Nigeria.
- The scientific and technological capacity of the economy, together with
the state of basic and applied research; India and the South-East
members of the Commonwealth are doing well in this regard.
Always on Time
Marked to Standard
- The availability of a pool of well qualified and competent human
resources that the company can draw from; and
- The quality of management of the company, including the quality of
corporate governance policies and practices.
From the aforementioned factors, which are by no means exhaustive, one can immediately imagine the enormity of the challenges facing companies, especially in the less developed poor countries, as they strive to compete and stay afloat in the face of globalisation and international competitiveness. It is, perhaps, important to emphasize that in appreciation of the complexity of these issues, companies have come up with a variety of strategies for dealing with them. These strategies range from mergers and acquisitions designed to guarantee critical mass and the associated economies of scale, including the building of strategic alliances to reap the benefits of business cooperation.
The Concept OF Globalisation and Localisation
Globalisation is a term that denotes the process of strengthening political, economic, social and cultural relations across the world. Different authors and scholars have tried to define or explain globalisation. (Ohabunwa, 1999), understands globalisation as a development which is analytically reforming interactions among different countries by eliminating bottlenecks in the areas of communication, commerce, culture. According to (Ohiorhenuan, 1998), globalisation is the widening and deepening relations of national economies into a worldwide market for goods and services, especially capital. While (David, 2009) sees globalisation as international way of doing business using strategic decisions based on global profitability rather than local considerations. Generally, globalisation is the integrated and co-ordinated approach by which industries evolve from multi-national to global competitive structures through trade, financial transactions, and exchange of information, ideas, technology, and the movement of people. Localisation on the other hand is the opposite of globalisation. Localisation entails that multinational companies recognises national economic issues and are locally responsive in meeting local demands.
Another proponent of global convergence perspective, Michael Porter (1980), also
argued for the form an international integration angle in his article 'The competitive
advantage of nations'. Porter stands for the global convergence perspective by
agreeing with that the world is becoming greatly integrated. Despite of that, Porter's
position still varies from Theodore's. The difference is that his international
integration perspective actually encourages international diversity, while Theodore
concludes an international standardization from his international similarity
perspective (De wit & Meyer, 2004: p 556). Porter deems that the characteristic of the
home nation plays an important role of shaping a company's capacity. Thus the firms
should also position themselves to make the full use of the advantages in their
national environment. To put it in another way, it's up to the company to seize the
opportunity of competitive advantage existing in its home nation. In a word, porter
regard that the competitive advantage of a company is depended by a combination of
both its national circumstance and its strategy of harnessing it.
l Global adaptive perspective
Comparing to Porter's relatively natural position above the paradox of localization
and globalization, Susan Douglas and Yoram Wind (1987) demonstrate a quite
opposite point of view from Theodore in their article 'The Myth of Globalization '.
They consider that the global convergence perspective is 'somewhat polemic' and
only effective on limited particular business circumstances (De wit & Meyer, 2004: p
According to Douglas and Wind, the underlying assumptions of the global
standardization philosophy are quite doubtful. Firstly, there is lack of evidence about
homogenization of global customer taste. Even within one country, there are
considerable diversities in customer behaviors. Secondly, lowprice
strategy was proved to be an inferior strategy in most cases which is lowprofit
and vulnerable. Differentiation is more profitable and can avoid overcompetition
in the industry. The price sensitivity of customers is actually as high as expected as the advocate of global standardization strategy. Besides, in most cases, even standardized product can be priced differently within and between countries. As a result, a universal customer preference for low price at acceptable quality is not the case. Thirdly, economy of scale of product and marketing is a reason for global convergence, but not plausible enough. With the development of flexible factory automation make the scale economy be acquired at a much lower output, which has been proven by many modern manufacturing companies. In addition, the cost in the production process is not the only cost in the final product. R&D, distribution channels, marketing and aftersale service sometimes matters more than the production. They also regard the standardization philosophy is mainly product driven, which is neglect the other aspect of the marketing mix (Douglas & Wind, 1987:pp. 1929).
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As the presumptions of global perspective are implausible, a local adaptation perspective should also be considered.
According to that same article, they demonstrate that there are different factors facing
MNCs to make a choice between global convergence and local adaptation. 'Factors
such as economies of scale in production, purchasing, faster accumulation of learning
from operating worldwide, decrease in transportation and distribution cost, reduced
cost in product adaptation, and the emergence of a global market segments have
encouraged the competition on a global scale. However, barriers such as
governmental and institutional constraint, tariff barriers and duties, transportation cost,
differences in customer demand, and so on, call for nationalistic or 'protected niche'
strategies'. From their point of view, 'The adoption of a global perspective should not
be viewed as a synonymous with a strategy of global product and brands', some
regional products and brand and some national product and brand are also needed to
constitute a hybrid strategy which is more flexible and effective. The companies
should learn to not only take advantage of the benefits of standardization and potential
synergies form an international scale, but also harnessing the international diversity
by adaptation to specific country characteristics (Douglas & Wind, 1987: pp. 1929).
l Bartlett and Ghoshal's position
CHEN Jun &JIAO Zhiqiang 16/05/2008
Comparing to others mentioned above, Bartlett and Ghoshal (1989) don't have a clear
stance with regard to the dilemma of localization and globalization. They study the
MNCs strategy from a different third angle. According to their article Transnational
Management, MNCs are facing different pressures such as local responsiveness,
optimizing learning as well as efficiency. The traditional multinational companies
which are organized in a countrybycountry
basis are obsolete, international
companies need to operate across borders, to deal with and benefit from international
integration and similarity. However, this is just one of the issues that MNCs need to
deal with. Optimizing learning, efficiency and responsiveness simultaneously is the
challenge facing each multinational company. Optimizing learning means learning
and transferring competence between head companies and local subsidiaries
worldwide. In order to achieve worldwide efficiency 'global business management' is
also very important. They believe that as the extent of globalization is different from
place to place, there is no one best organizational response to globalization, every
organization should balance those factors dynamically and find their own strategy.
Generally speaking, with regards to the dilemma of localization and globalization,
there are different opinions. However, Douglas's position is becoming more and more
accepted by both the academia and decisionmakers
of MNCs. There is a consensus that MNCs should not just focus on one side of the coin, but try to make an optimized balance between localization and globalization. MNCs should deal with the dilemma differently according to different strategic contexts. In the following paragraphs, we will discuss the barriers for standardization as well as the way of interpreting a new business environment more effectively.
With this perspective in mind, (Meyer & B.D.Wit, 2004) opined that managers in the international departments of multinational companies, should then be permitted to be responsive to particular local conditions. Arguing a case for localisation, (Chen Jun, 2008), stated that companies localise their operations because of the various differences and political obstacles between different local markets, and that the cost of neglecting or disregarding 'local uniqueness' in preference to that of global setting is too high. The choice of increased participation in the local and international market has its advantages and disadvantages. The advantages of global are cost-based, maximizing economies of scale and reducing repetition of processes and materials, thereby realizing efficiency. The advantages of localization are on the other hand are revenue-based, promoting variation to reach all customer positions and customer satisfaction (Buckley & Ghauri, 2004).
Reasons for going global:
Different multinational companies decide to go global for different reasons. For most of them, the major reason is to recoup heavy research and development investment over various markets.
For a firm to participate in local and global environment, some underlying internally and externally issues have to be analysed, rationalised and dealt with according the situation on ground. Meyer highlighted some paradoxes that exist and are instrumental to final strategic decisions by multinational companies.
Paradox of Competition and Co-operation
This is a situation where a company has to decide on whether to view other companies in the industry as competitors or to cooperate with them. (Meyer & B.D.Wit, 2004), suggested that some companies follow the traditional view of modern economics, seeing themselves as independent entities in stiff and hostile competition with other companies in the same industry. In this instance, co-operation is unthinkable and seen as weakness, or alternatively as a sceptical way of misleading other competitors in the market, e.g. where two companies collude with the intension of destroying a third competitor. The other perspective is one where some companies see collaboration and partnership as the major way of doing business. According to (University Of Sunderland, 2004), many companies follow this perspective for various reasons. Some as a matter of preference others are forced into using this perspective by the industry in which they belong, while others yet follow both perspectives simultaneously depending on the economic and market environment in an international context. For example, though Globacom is in an extremely competitive environment with MTN Nigeria in many locations within the African continent, they have also seen to cooperate with themselves in other enterprises elsewhere, especially where there as immense benefits to both parties.
Paradox of Profitability and Responsibility
The dichotomy pushes the companies into understanding their purpose in business. Different businesses have different visions and mission as seen in their various statements. According to (Meyer & B.D.Wit, 2004), some of their motives is to maximise profit for the owners (a shareholder value approach), or to meet the requirements of the general populace (a stakeholders values approach). In deciding on increased participation in the market, Globacom will have to decide which is more germane to its core values.
The paradox of globalization and localization
Multinational companies are facing the paradox of globalization and localization in breaking into each emerging market. Generally, there are various ways on how multinational companies organise its global activities: The first according to (Chen Jun, 2008) is global convergence perspective, which lays emphasis on taking advantage of their corporate resources and attaining global interactions, while the other is international diversity perspective, which lays focuses on adapting to local difficulties. According to (Tallman & Yipp, 2001), the three basic strategic issues involved in multinational companies operating globally are geographic spread, localisation and global integration. The question here lies in whether companies should consider the global market in its entirety or recognise the local market structure as its main stream of business.
From the discussion, companies that decide to globalise, or use global strategies will have some beneficial consequences such as gaining new customers for their products and services, other advantages are:
According to (Yip, Mintzberg, & Quinn, 1991), companies can reduce costs by pooling production or other activities for multiple countries. They further opined that other methods such as exploiting lowers factor cost i.e. moving manufacturing activities to countries with low costs, moving production between countries to take advantage of lowest costs at a particular time, also reduces costs.
Excess capacity and economic risks can be absorbed through foreign operations (David, 2009)
There will be increased competitive leverage as companies will act as checks and balances on each other.
With joint venture programs, companies will learn the culture, technology, and business practises of the host nation.
Global savings distributed more efficiently as countries higher productive capacity for capital e.g. UK, can borrow from countries with excess fund.
(David, 2009), also stated that economies of scale can be achieved as 'large scale production and better efficiency allow higher sales volume and lower price offerings.'
However, the decision to globalise has some inherent drawbacks. Some of the potential drawbacks in starting, continuing, and expanding businesses across ones' border as highlighted by some authors include:
Seizure of foreign operations by nationalists as stated by (David, 2009), is one of the disadvantages. The economic changes fashioned by globalisation have brought about business displacements and job losses in many countries, changed the commodity composition of trade and led to distortions in local consumption patterns, thereby bringing about relative price changes that local consumers find difficult to adapt. Globalisation has also led to a situation where financial disturbances emanating from one country quickly spreads like wildfire to other countries with destabilizing consequences. (Obadan, 2004).
In order to achieve an objective, aim or goal, every business must have a strategy. There is no common or single definition of strategy as it relates to and can be applied to many contrasting fields such as marketing ,economics, investment, military, gaming, and as well as corporate global environment. Strategy can however be generalised to mean a plan of action, thought out in advance, aimed at achieving a particular objective, with particular reference to gaining competitive advantage for an business over other businesses in the same industry. (Barney & Hesterly, 2010) , defines strategy as a theory by a firm on how to gain competitive advantages.
(Mintzberg, 1988), proposed five definitions of strategy
Plan - A conscious thought out course of action, a guide made in advance before implementation.
Ploy - made with the intentions of outsmarting other competitors.
Pattern i.e. a consistent and accurate behaviour resulting from the plan. This can be realised, unrealised and emergent strategies.
As a position i.e. the way, a company positions itself in the market in terms of locating particular product brands at particular markets.
Perspective i.e. the fundamental way of doing things in the business and way the managers of the company perceive the world from the company's point of view.
(Lewis, 1999), added a sixth definition, by defining strategy as 'a process of sensing, analysing, choosing and acting.'
Porter's Five Forces
According to Michael Porter (1985), for a firm to seek for a favourable competitive placing in any industry, it will have to find out how attractive the industry is. To be able to analyse any industry's attractiveness, either domestically or internationally, there are five competitive forces: the threat of new entrants, the bargaining power of suppliers, the bargaining power of consumer, the threat of substitutes and the intensity of rivalry competitors. The five forces is the focal determinant of the industry profitability, as they have tremendous influence on price, costs and profits of the product. (De wit & Meyer, 2004: p.259)
The threat of new entrants: In the telecommunication industry, the threat of new entrant is relatively low as the stringent barriers high initial cost of start-up and fixed cost associated with the business is extremely high. This works to the advantage of Globacom and others in the industry.
Bargaining power of suppliers: There is a myriad of telecommunication companies worldwide but there limited number of telecommunication equipment suppliers in the industry. Here, Globacom is disadvantaged as there are limited alternatives.
Bargaining power of consumers: bargaining power is high in this industry because of presence of many competitors. In Nigeria alone there are about ten telecommunication companies fighting for the same customers. Globacom is only at the moment differentiated in price and customer loyalty.
Threat of substitutes: in the telecoms industry, threat of substitution is high as all the telecoms companies sell virtually the same product and or services. Globacom should determine the extent of customer switchover and try make customer satisfaction a priority. However, other companies in the industry may decide to go into price war, which reduces the profit margin of the companies involved.
Degree of rivalry: the telecoms industry is a highly competitive as each company is trying to outdo the other in other to increase their subscriber base. Here as stated before, Globacom should have customer satisfaction as its watchword.
Globacom has used this model as a strategy. Since growth is of core importance to the company, it has shown this by rolling out different services such as Glo mobile, Glo gateway, Glo 1, and Glo broad access, across West African sub-region (Globacom Limited). Globacom is using the strength of large customer base and name to keep itself in the forefront of the telecoms industry.
Porter's Generic Strategy
Multinational companies are able to achieve competitive advantage, mainly through differentiating their products and services through low costs. Companies can broaden their market scope or they can focus on a refined target in the market. According to (Porter,1989), strategies allow companies to gain competiive advantage via three bases : cost leadership, differentiation and focus.
It is imperative for companies to use the cost leadership strategy if they try to become low cost producers in their industry. Globacom pricing strategy is considered to be among the best in the industry in the sub-region. The other telecoms companies are trying hard to meet the price standard set by Globacom and this makes it easier for them to locate to other countries. N Nigeria, they have the lowest price tariff coupled with other added services. Globacom is also one of fastest growing companies in the industry it showed tremendous growth through sale of 600,000 sim cards in its' first ten days of operation in republic of Benin (Cellular-News, 2008), and planned to capture 30% of the 11 million subscribers within a short period of its' commencing business in Ghana (Oruame, 2008). Differentiation as used by many firms cannot be transformed in the telecoms industry as virtually all the product and services are similar in nature. However, the per-second billing method for calls, has been used by Globacom to differentiate its' product and services. Globacom on the other hand is not pursuing the focus strategy as it is directing its' effort in a particular section of the industry.
Companies pursuing the strategic generic model, have to make a choice between cost leadership and differentiation and avoid the stuck in the middle syndrome, which results in poor financial performance (Porter, 1980). Globacom does not pursue either low cost strategies or differentiation. It merges both techniques as its' strategy.
The Ansoff Growth matrix:
(Lewis, 1999), in citing Ansoff (1965), opined that the tool is used in detecting options available to firms wanting to widen their competitive edge, as it helps these businesses decides the strategy they will use in their product and market growth. Some of these options include:
Market penetration: This focuses on increasing market share of existing products into existing markets. The objectives of this option are to maintain or increase the market stake of current products through combining competitive pricing strategies, advertising, and sales promotion, ensure supremacy of growth markets, increase usage by existing customers
Market development: This is a growth strategy where companies want to sell its existing products into new markets through new geographical areas, new product sizes or packages, or new distribution channels.
Product development: this is the growth strategy where a business creates new products for augmenting existing products in existing markets.
Diversification: This is the growth strategy where businesses introduce new products into new markets. However, for a business to implement a diversification strategy, therefore, it must have a knowledgeable idea of its gains and accompanying risk.
Globacom as a company uses this strategy extensively as seen in the number of countries it had moved into within a short span of time, the number of products it had introduced into these markets and the rate of diversification. However, it needs to monitor the trend in customers, demands in other to be responsive to them.
Product life cycle
Most products pass through for basic phases i.e. introduction, growth, maturity and decline. From a strategic point of view, knowledge of the product's life cycle helps a company to manage the introduction of a new product. (Barney & Hesterly, 2010), speaking from an international perspective, opines that that the product life cycle of a product or service can be at different stages of its life cycle in different countries. Consequently, the resources developed by a firm during a particular stage in the life cycle of the product in the home market can be applied to the same stage of another product in the international market (Barney & Hesterly, 2010). The PLC of a product consists of introduction, growth and maturity, and companies use this to analysis and assess how they believe their product will perform through its PLC and the marketing strategies and marketing mix implemented at each stage. (Lewis, 1999), warned that firms that do not pursue strategies appropriate to the life cycle stage of their product, might lose competitive advantage. Globacom is increasingly expanding its range of products to retain its competitiveness in the market and hence important that they invest make sure their customers demand are satisfied.
STRATEGIC DECISIONS IN GLOBALISATION AND LOCALISATION
Every strategic model is an instrument used for gathering strategic information from the international perspective and a process for perceiving a number of different futures for any organisation. Undeniably, globalization for the telecommunication industry is a persistent trend. The international low cost of both material and labour, the low price of the resources, and the most advanced technological expertise are all required for increasing competitiveness in the industry. Furthermore, for these firms to be able to manage the intricacies involved in globalization entails including new tools, structures and strategic models added to the ones already in use as the knowledge and application of strategic models is a prerequisite for the survival of any business in its industry. Globacom should adhere strictly to the laws of the relevant strategies and integrate them into the corporate business model to ensure and sustain its leadership role in the telecoms industry.
Managers have to decide how to customise their product offerings,
marketing policies, human resource practices and business strategies to
deal with national differences in culture, language, business practices,
and government regulations. In addition, managers have to decide how
best to deal with the threat posed by efficient foreign competitors
entering their home marketplace.