Challenges Of Organizations Going Global Commerce Essay


The biggest challenge of an organization going global is not only to reach where customers are but also to take advantage of bright ideas wherever they spring up and implement them as soon as possible. Growth triggering opportunities often emerges in foreign subsidiaries because employee are closes to customer in these regions and even employees understand the process best for that region. The unit need to be interdependent & modes of control should be decentralized to make any organisation achieve its capability. If headquarters only issue orders and there is no formal or informal channels in place for communication to take place , the subsidiary might just get into stagnant growth mode. NCR's Automatic teller business took off only when the development team shifted activities from corporate headquarters in Dayton, Ohio, to Dundree, Scotland. Under the guidance of charismatic leader with scrappy persistence, NCR's Scottish Operation became the largest manufacturer of ATMs in the world and brought the moribund Dundee manufacturing center back from the brink of extinction.

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If the delegation of power in an organisation does not take place many innovative ideas are lost. Entrepreneurs in subsidiaries face typically the worst of scenarios. Let us have a look at the case of Mctaggart to illustrate it further. Mctaggart joined the Canadian arm of a diversified industrial company based out of North America. The company was known for decentralization of power and programs that encourage new initiatives. Those programs resulted in huge cost savings and also initiated a healthy culture in the organisation. The Canadian arm was much more integrated with the North American arm. Many strategic business units were created which managed different subsidiaries and all were headquartered in United States. McTaggart identified an opportunity to bid for massive government sponsored energy management project. Potential revenues ran in billion but the idea was lost completely because McTaggart couldn't gather enough support from ever changing Presidents in business units. Ultimately Mctaggart gave up on the company and went to venture on his own. So much time and money was lost in fighting internal resistance that company wasted time and money and one precious commodity and that is the initiative.

When we have a look at the case of Procter & Gamble and there launch of Pringle we see the traditional model was broken and the intellectual capital of the company in different parts of the world helped P&G launch Pringle in one year from the date of inception of idea. They launched a new line of Pringles potato crisps in 2004 with pictures, words, trivia, animal facts etc. In the old days this might have taken 2 years to launch a n idea like this. P&G applied a fundamentally new approach for innovation and were able to accelerate the launch and bring it to market in less than a year. The challenge was to get the printing part of the work done in an efficient manner. Under normal circumstances bulk of investment would have gone in developing a workable process. Instead they created a technology brief that defined there sets of problem and circulated it in their global network of individuals and institutions to discover in world if a already a readymade situation is available. It clicked and they find a solution using their network and the innovation has helped the North America Pringles business achieve double digit growth for the coming years.

Most of the companies which have evolved from the era of 1980s have done that by changing their R&D capabilities, bringing a product faster than competitor in the market. P&G has seen drop in bottom-line during the early 2000s due to lack of innovative products hitting in the market at a faster rate. The market cap eroded to its half and it was a wakeup call. The world's innovation landscape has changed over the years but in P&G it was still the same old thought process. P&G soon realised that increased innovations were happening in SME entrepreneurial companies. The advent presence of internet has created a collaborative world and also created mini R&D labs. The newly appointed CEO, A.G.Laffey challenged P&G to reinvent the company's innovation business model. Laffey made it Procter & Gamble's goal to acquire 50% of the companies innovation from outside. P&G helped create NineSigma, one of several firms connecting companies that have science and technology problems with companies, universities, government and private labs, and consultants that can develop solutions.

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An increasing number of companies are adopting a similar model. Most of these companies are technology intensive such as pharmaceuticals and electronics. They have abandoned the traditional approach to manage R&D and are establishing global R&D networks in a noteworthy new way. For e.g., Canon is now carrying out R&D in 8 dedicated facilities in 5 countries. In the past, most companies - even those with a considerable international presence in terms of sales and manufacturing-carried out the majority of their R&D activity in their home countries.

In an ongoing study on corporate strategy and the geographical strategy and the dispersion of R&D sites, the most successful companies which bought new sites for research and transferred them into innovation centre in less than a year. To inculcate this methodology in an organisation requires lot of managerial prudence. The idea for an organisation to differentiate is not only a challenging one but exhaustive one. An innovation beyond the restricted geography helps organisation to reduce costs to a very low level. The modes of control should shift from headquarters to different centres so that many more ideas get cultured in the organisation. The idea in the readings do not contradict with the framework that we discussed in this paper and are good support for the same.

2) A broad range of strategic alliances exists. They vary widely in terms of the level of interaction and type. Joint ventures have moved from being a way to enter foreign markets of peripheral interest to become a part of mainstream of corporate activity. The popularity of alliances has continued despite their reputation for being difficult to manage. Failures exist and are usually well publicized. Firms wanting to strengthen their existing business will most likely be looking for partners among their current competitors, while those wanting to enter new geographic markets will be looking for overseas firms in related businesses with good local market knowledge. Although often treated as a single category of business activity, international joint ventures are remarkably diverse. The markets are shifting and competition is ever increasing, if a company wants to expand its market and acquire skills before the competition does that, they need to collaborate. Collaboration is the need of the hour for many organisations. Motives might be different while one collaborates but the objective should remain the same.

While early surveys suggested that as many as half the companies are not happy with their alliances, but there is enough reason to believe that some of the earlier concerns can now be ameliorated. This is because there is far greater data and experience to be drawn upon against these problems. These relevant and similar acquisition and the experience gained from it surely helps organisation to improve upon its intellectual capital. Collaboration between competitors is in fashion, General motors' & Toyota assemble automobiles, Siemens and Philips develop semi conductors, Canon supplies photocopiers to Kodak, France's Thomson and Japan's JVC manufacture videocase settle recorders. A strategic alliance can strengthen both companies against outsider even if it weakens one. International collaboration takes companies operations to a new level and if the companies are willing to learn then they will acquire capabilities at a faster pace.

Very small, entrepreneurial firms are more likely to participate in a network than an equity Joint venture in order to strengthen their business through economies of scale. Shared research and developmental efforts are increasingly common. The rationale for such programs is that participating firms can save both time and money by collaborating. Hundreds of multinational companies programme is still not joint ventures. Typically, scientists from the participating companies agree on the research objectives and the most likely avenues of exploration to achieve those objectives. Meetings are held quarterly to share results and approaches taken and when ultimately when the success in research is achieved the firms share the new technique and technology.

Firms considering entering a joint venture should satisfy themselves that there is not a simpler way, such as non equity alliance, to get what they need. They should also be carefully consider the time period for which they are likely to need help. Joint ventures have been labelled as permanent solution to temporary problems by firms that entered a venture to get help on some aspect of their business; then, when they no longer needed the help, they were still stuck with the joint venture. The contradiction to all the discussion that we had till now is a perspective of a Japanese CEO. He says "when it is necessary to collaborate, I go to my employees and say, 'this is bad, I wish we had these skills ourselves. Collaboration is the second best. But I feel worse if after four years we do not know how to do what our partner knows how to do.' We must digest their skills." This statement gives us perspective that Joint ventures are out of necessity and these are more out of need then out of wish.

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The era of competition is ever involving and if in this race you want to be ahead of your competitor and win the race , then the way out is collaborate. Earlier entering into new market was the only reason of making joint ventures, but now the scenarios are changing. Joint ventures need close and continuing attention, particularly in their early months. In addition to establishing a healthy working relationship between the parents and the venture general manager, managers should be on the lookout for the impact that cultural differences may be having on the venture and for the emergence of unforeseen inequities. International joint ventures, like any types of international activity, require that managers of different national cultures work together. This requires selection of capable people in key roles.

The dynamics of the business around the world is shifting and globalization requires the product to reach every possible corner so that the organisation makes maximum of the impact. International joint ventures are increasingly important part of the strategy of many firms. They are however, sometimes difficult to design and manage well, in part because some organizations do not treat them as true joint ventures. The fact that some ventures are performing below their management's expectations should not be an excuse for firms to avoid such ventures. In many industries, the winners are going to be the companies that most learn to manage international ventures effectively. The losers will be the managers who throw up their hands and say that joint ventures are too difficult, so we had better go it alone. The objective behind such ventures is to achieve a pillar which neither of these companies could achieve on their own. Joint ventures have moved from being a way to enter foreign markets of peripheral interest to become a part of the mainstream of corporate activity. The idea is to collaborate and compete with the competitors. Merck, for example, has joint ventures with Johnson & Johnson, Sanofi Aventis and so forth. Even firms that have traditionally operated independently around the world are now looking into joint ventures.

3) The concentration of EMI's technical, financial, and managerial resources in the United Kingdom made it unresponsive to the varied and changing needs of international markets. As worldwide demand built up, delivery lead times for the scanner stretched out more than 12 months. Despite the protests of EMI's U.S. managers that these delays were opening opportunities for competitive entry, headquarters continued to fill orders on the basis of when they were received rather than on how strategically important they were. Corporate management would not allow local sourcing or duplicate manufacturing of the components that were the bottlenecks causing delays. The management didn't took the insight very seriously and the orders kept piling over the years.

It would be wrong to conclude from the Vicks that a global trend can be understood by applying it locally. The world does not function in that rationale way. A global organization got to innovate locally and then scale it up globally if they want to sustain the competitive advantage.

Tap Your Subsidiaries for Global Reach This article makes the argument that empowering local teams direct and control a portion of a firms strategy will led to positive results relative to the typical HQ-subsidiary model. Management motivation is cited as a key factor in the need to find creative ways to enroll national subsidiaries in the decision making process so that plans are executed in the most efficient and effective manner to maximize profitability. The authors introduce the Roles for National Subsidiary; framework for evaluating the role a subsidiary. These are subsidiaries that you want to support from HQ. Philips in Japan, Ericsson in the United States and Matushita in Germany are black holes. In each of these important markets, strong local presence is essential for maintaining the company's global position. And in each case the local company hardly makes a dent. The black hole is not an acceptable strategic position. Unlike the other roles we have described, the objective is not to manage one's way out of it. But building a significant local presence in a national environment that is large, sophisticated, and competitive is extremely difficult, expensive and time consuming.

The limitations of the symmetrical, hierarchical mode of operation have become increasingly clear to MNC executives, and in many of the companies it can be found that managers experimenting with alternate ways of managing their worldwide operations. In EMI case we could see that company lacked-

The ability to sense changes in market needs and industry structure occurring away from home.

The resources to analyze data and develop strategic responses to competitive challenges that were emerging worldwide.

The managerial initiative, motivations and capability in its overseas operations to respond imaginatively and fast changing operating environment.

Any company needs a strong, unifying sense of directions. But that need is particularly strong in an organization in which tasks are differentiated and responsibilities dispersed. Without it, the decentralized management process will quickly degenerate into strategic anarchy. The dynamic shift in business strategy over the last two decades has bought in completely new perspective of strategy. Hardly there is any time for companies to play catch up role. Detecting a new development after it has occurred is useless, for there is no time to play catch up. One needs to know of developments as they emerge and for that one must be a player, not a spectator. Multinational companies often build cumbersome and expensive infrastructures deigned to control their widespread operations and to coordinate the diverse and often conflicting demands they make. An international company enjoys a big advantage over a national one; it is exposed to a wider and and more diverse range of environmental stimuli. The broader range of customer preferences, the wider spectrum of competitive behaviour, the more serious array of government demands and the more diverse source of learning for the company. Hence it becomes very important that companies are always on alert to sense the changes that take place in the industry

Often the most effective means of giving strategy access and influence to national units is to create entirely new channels and forums. This approach permits roles, responsibilities, and relationships to be defined and developed with far less constraint than through modification of existing communication patterns or through shifting of responsibility boundaries.

The dynamics in business strategy are shifting and sooner than latter it will be a more competitive scenario where a penny saved will be two penny earned. National companies must not be regarded as just pipelines but recognized as source of information and expertise that can build competitive advantage. The best way to exploit this resource is not through centralized direction and control but through a cooperative effort and dispersed capabilities.

4) There are two scenarios that can take place in the future of the world. One of them is that the economy will keep collapsing, business houses will keep going bankrupt, difference between rich and poor keeps on increasing leading to criminal activities, civil wars etc. On the brighter side there will be high output economy and the world will flourish. The divide between the rich and the poor will decrease and the economy will prosper all around. How will this happen considering the markets are getting saturated all over the world. Its time we go to the bottom and dig gold.

There is a growing debate and paradox on global capitalism in the markets all over the world. Firms have demonstrated a method to create wealth all around the world, but this benefit never reaches the people of the world who are living in poverty. This number is round 4 Billion and is the number is constantly growing. If we cannot remedy this disconnect the worlds prosperity and security will be under deep concern

The simulating development and business at the bottom of the economy in the economic pyramid is the only solution for economic prosperity. $2000 is the income of around 65% of the population per year and this number is not decreasing. It has become stagnant or increased over the period of last 20 years. The preconceptions of the business leaders need to change now. They have misconception that high volume and less of margin businesses in the bottom part of the economy will not give them the required bottom-line or the top line. This misconception needs to change so that the world can develop at a faster and an equal pace.

Given the controversy over globalization, many MNC managers are concerned that entering BOP markets would be perceived as exploiting the poor. But when a microfinance institution such as Grameen Bank charges 50 percent effective annual interest, is it exploiting or helping the poor? The alternatives for many poor borrowers would be something like give me 100 % interest or don't get a loan at all. If a large financial firm such as Citigroup were to leverage its reach and size and charge 20 percent per year interest (twice the rate it charges to its upper middle income clients), would it be exploiting or helping the poor? We believe firms that build the capability to provide services and compete in poor communities can generate an acceptable return on investment-and help the poor dramatically reduce their costs and improve their standard of living. Furthermore, the issue is quality and not just the cost the quality of water, the range and fairness of financial services, the variety and quality of food. The formal economy that now tries serving the poor communities is an unorganized system that is full of inefficiencies and intermediaries or middlemen who exploit those inefficiencies. Creating real markets among the poor-with adequate information, competition, and choice-can change the situation. Allowing the benefits of organization, logistics, information technology, and scale to bear upon the problem can lead to a "win-win" solution. If we can remove the inefficiencies of the unorganized sector, we will find an attractive market-for consumers and for firms. The capabilities and opportunities at the bottom of the pyramid are huge and the companies are evolving new business model to reach down there and turn it into a golden chance. The companies in the coming year will come up with new tie up to make their reach felt. Companies with great distribution capabilities will do it in the best possible manner. The unequal distribution will deter any chances that come up at this level and urban markets are become exhaust.

The possibility at the bottom of the pyramid is huge and the world is growing at an ever increasing speed to capture this opportunity. The individual's income at this level of economy is very low but if we can have a look at the volume present with a hawk eye, companies will be able to visualise the power that can erupt if this opportunities are utilised. The power shift in the world will take the organizations to the next level and it is only this that can help the world prosper for the coming century. The preconceptions of the business leaders need to change now. They have misconception that high volume and less of margin businesses in the bottom part of the economy will not give them the required bottom-line or the top line. This misconception needs to change so that the world can develop at a faster and an equal pace. Creating real markets among the poor-with adequate information, competition, and choice-can change the situation. Allowing the benefits of organization, logistics, information technology, and scale to bear upon the problem can lead to a "win-win" solution. If we can remove the inefficiencies of the unorganized sector, we will find an attractive market-for consumers and for firms. The world need to rise to this demarcation and grow to this uncatared world.

5) Organizations can be regarded as system which manages people. They range from complex networks dependent on computer to simple hierarchies along traditional lines.

If a company is looking to merge regional and global strategies it needs to adopt certain measures into its organisation. These measures are indexed below-

Taking profit accountability for individual lines of business

Coordinating all functions affecting these lines

Developing a strategic plan and financial budgets in cooperation with the functions and regions

Working with the functions and regions to implement the strategic plan

Contributing to the design, creation and maintenance of global strategy, marketing and financial information system

Contributing to performance evaluations for functional and regional managers

Travelling frequently

Another way of centralizing global authority is to have global heads of individual business units.

In the mid 1990s, Coca cola eliminated the concept of domestic and international divisions and instead organized six international units that form the company's global geographic regions. The move was first for any major multinational. It also sent a message to investor that rather than investing in an international portfolio to diversify risk, why you don't just invest in Coca Cola.

A critical issue in designing an organizational structure is whether to adopt a decentralized or a centralized model. A company's size, geographic dispersion, complexity, industry of business offerings are the critical factor in determining the best model for the industry

This model generally consists of two key elements:

• A central compliance office at the executive level headed by a chief compliance officer or designated senior manager who maintains a close and at times confidential-relationship with the board of directors. This central office oversees training and related communication for all compliance functions.

• The business units, whose leaders ensure effective GRC activities and controls are in place and that employees know and adhere to policies and regulations. These leaders also can play a large role in ensuring that their suppliers and external partners conform to the organization's compliance policies and guidelines.

A decentralized compliance function gives companies a measure of customization so that each business unit can meet the demands of its markets, locations, and industries. It consists of the following components:

• Chief compliance officers within individual business units who report and gather compliance information to improve the workflow situation of the organization........................

A less direct approach to globalization than changing the organization structure is to assign a specific country the lead role in developing a product and to see to that products spread into other countries and to its adaptation. Thus come the responsibilities are diverted from the other countries to the country acting as a strategic leader. One of the most effective ways of using this approach is to assign strategic leadership responsibility for different products to a number of different products to a number of different countries. In that way, each country has to cooperate with the others, and none is singled out. Assigning lead roles to subsidiaries helps to compensate them for the way in global strategy and utilise that beautiful world named globalization.

The requirements of the organization will keep shifting and organization structure will keep coming up which will adapt as per the shift. If an organization is to survive in a globalized economy this is very necessary. These changes are necessary for the organization to survive in 21st century. If you don't decentralize now you will never get any other chance to make any kind of amendments because you will lose all the intellectual capabilities.