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1. The paradoxes of globalization vs. localisation and profitability vs. responsibility
In today’s continuously changing world, globalization is what every business, organization, and nation should seek and welcome as a positive change. However, many people are unaware of the main focus and meaning of globalization, especially in comparison to localization. A large number of people believe that globalization is just another common word used to refer to changes and differences that cannot be explained. Therefore, many different activities or changes are improperly labelled to be a part of or caused by globalization.
Localization is the process of adapting a product or service to a particular language, culture, and desired local preferences. Ideally, a product or service is developed so that localization is relatively easy to achieve – for example, by creating technical illustrations for manuals in which the text can easily be changed to another language. The process of first enabling a product to be localized and then localizing it for different national audiences is sometimes known as globalization. In localizing a product, in addition to language translation, such details as time zones, money, national holidays, local color sensitivities, product or service names, gender roles, and geographic examples must all be considered. A successfully localized service or product is one that appears to have been developed within the local culture.
Globalization is also a term that refers to the process of global integration of the economies of nations by allowing the unrestricted flow of goods, services, investments and currencies between countries. The process of globalization has both positive and negative impacts on life at the individual and nationals levels. Globalization and localization are almost opposite concepts but can coexist.
Globalization can briefly be defined as ‘something’ that affects and changes the traditional arrangements. It is a term that directly implies change and therefore is a continuous process over a long period of time as compared to quickly changing into a wanted or desirable end business system. Globalization, focusing on a narrower scale, refers to sequences that occur in one’s mind or behaviour that lead to processes that evolve as people or organizations pursue their daily tasks in a hopeful attempt to accomplish their specific goals.
Both globalization and localization have many costs and benefits, although not always considered when making decisions that significantly affect a group or country’s outcome. Two main benefits of globalization include it being a good way for a company to make more money and also initiate more openness between countries on the economic level. Moreover, other positive aspects of globalization include the increase in productivity and improvement in standards of living. On the other hand, the benefits of localization are more beneficial to a single state/country because it involves and allows a country to have its own specific national style of economic practices that reflect upon the country’s distinctiveness.
The costs of globalization mainly comprise of giving up a country’s distinction of its politics, culture, economy where as costs of localization involve less trade and international investment. Although many people view a decrease in a country’s involvement with trade and investment as a benefit, in the long run it is a cost because it denies the country the ability to communicate with other countries and to increase its technology and status (by importing and learning about other countries products). An increase in trade would also allow a country to advertise its products and abilities and export items to different countries with high odds of making a profit. Another cost of localization is its evolution from the pressures that lead organizations to narrow their horizons and participate in dissimilar forms of behaviour not always accepted and approved by globally integrated countries. The costs of globalization are not weighed as heavily as those costs of localization because time will override many of the unavoidable problems. Therefore, globalization cannot be stopped and as the political and cultural changes occur, organizations with strong economic performances will survive, succeed and replace those less productive.
From an economic point of view, globalization focuses on the expansion of production and trade whereas localization focuses on more narrow and specific activities of consumers and producers. These two dynamics operate in all human activity from cultural and social to economic and political activities. From the social and cultural aspect, globalization attempts to extend its ideas and practices beyond its original and present setting whereas localization discourages new ideas, norms and practices.
In addition, these two sets of dynamics are linked in a way that it seems every change in globalization causes a change in localization and vice versa. Today’s world affairs and processes are greatly affected by the tensions between the different aspects and characteristics of globalization versus localization.
In my opinion, the benefits of globalization discussed in this paper are far more important than its costs or the costs and benefits of localization. Although, localization and globalization will continue co-existing, globalization will continue to increasingly dominate over time because most countries are generally leading to and becoming more accepting of the idea of globalization. The benefits gained by globalization are the most important to people’s lives because it aides in the learning process of people expanding their horizons and understanding the benefits to countries, organizations, and groups working together. Although losing some part of one’s national identity can be a disadvantage at times, the advantages of being able to work together and help each other in a globally integrated world are much more.
It is widely known that for a business to be successful it needs to provide a good or service that is desired by the public and also to obtain a profit in providing said well or service. Now while these are the most important components to a successful business, they are not the only ones. The social responsibilities of a business include the following: environmental protection and preservation, employee safety and morale, product safety for the consumer. The financial manager must keep these three social responsibilities in mind when making any and all decisions.
The purpose organizations should serve has been a puzzle for strategists over years. There are two perspectives from which this paradox could be viewed: shareholder value—profitability oriented and stakeholder value—focused on responsibility. According to the shareholder value perspective, each company is established to serve the purposes of their owners. In other words, an organization should focus on increase of its stock value through the implementation of profitable business strategies. Even though it might be in the interests of shareholders to treat stakeholders well, there is no moral obligation to do so.
On the other hand, stakeholder value proponents argue that a company purpose should be seen as an agreement among shareholders, employees, banks, customers, suppliers, governments and community and an entity should orient on the interests and values of its stakeholders. Stakeholders’ value perspective assumes that an organization should serve the interests of all parties that can be influenced by its activities or are somehow involved into the company operations. Even though all stakeholders are interested in the company profitability, there are also other business areas on which stakeholders place high value such as quality is demanded by customers; job security, occupational safety, good working conditions are required by employees; prompt payments, shared risk taking, secure demand are preferred by suppliers. Therefore, maximizing shareholders’ value to the detriment of the other stakeholders’ interests would be unjust. That is the emphasis that major shareholders place on stock price appreciation and dividends must be balanced against the legitimate demands of other parties.
The choice of the major company purpose—the reason for which an organization exists is the essential one because it defines what will be the company mission i.e. the business philosophy that should guide strategic choices i.e. who should ensure that the strategies pursued are in accordance with the mission. If the company purpose is clearly specified, it will give direction to the strategy process and influence the strategy content. Moreover, the values share by an organization’s members may have an impact on strategic choices and thus the company mission.
2. Grupo Elektra analysis
For analyzing the performance of Grupo Elektra one of the helpful techniques is to scan the internal and external environment of the company with application of the SWOT analysis at different stages of its development in a chronological order. Environmental factors internal to the company can be classified as strengths (S) and weaknesses (W), and those external to the firm are opportunities (O) and threats (T). The following is the SWOT analysis for Grupo Elektra.
Internal environmental factors:
- Grupo Elektra was the first Mexican manufacturer of TV sets that allowed introducing a new product at the market.
- Ricardo Salinas, Elektra’s new CEO, employed a group of talented and competent professional managers. As a result the company had a competitive advantage in future business development based on the excellent management team that allowed achieving quality levels with greater efficiency, while other competitors was based on the trial and error approach.
- The company profits were properly divided: for distribution to employees, for commercial reinvestment and the product/service development. This rational division of profits allowed further continuous development of the company accompanied with employees motivated to put much effort into there work.
- In 1995, the company had extended its service range (domestic wire transfer, extended warranty program, photo products and processing services, as well as saving accounts) that strengthened its position at the market.
- The distribution network was increased to more than 500 stores all over Mexico that made Elektra’s products more available to customers.
- With four different chains (Elektra, Bodega de Remates, Salinas y Rocha and The One) Grupo Elektra covered 87% of the Mexican population it means that the company was monopolistic.
- The business plan for the international expansion is made by Filiberto Jimenez in order to attack the main competitor La Curacao. The plan successfully worked and in 2001 La Curacao went bankrupt that allowed Elektra redouble company’s position at the Latin America market.
- Elektra offered 20% lower prices than it closest competitor La Curacao that gave a possibility to deserve the customer’s loyalty.
- The major factor in Elektra’s success was the partnership with TV Azteca. The channel did not advertise any of Elektra’s competitors that allow company to create unique image and to be very effective with advertising efforts.
- Elektra had a huge media budget of $27 million per year and it was the largest advertiser in Mexico, in terms of airtime.
- The strategy followed by Elektra requires careful analyses before any merger or acquisition is made and any acquisition should result in the additional value to the whole company.
- The strong side of the Grupo Elektra management is a well prepared and experienced management team and motivating techniques applied to employees, people are allowed with freedom to express themselves.
- In the management of the company there is only one person, Alvaro Rodriguez, who makes final decisions. This limited decision power may lead to difficulties in further management of Elektra.
- The company has a problem with the production of cloth for the clothing chain The One. The production capacity was not enough, so there were the shortage of stock level, colors and sizes of cloths.
- The company is not concentrated on one kind of business, there are many business directions and not all of them are enough qualified.
- In El Salvador and the Dominican Republic the existed Elektra’s business model didn’t work.
- The main source of company’s income is financial services, such as credits. The Elektra tries to attract more and more people to live on a credit and to pay quite high interest rates.
External environmental factors:
- Offering Elektra’s services internationally provided the opportunities to compete at the worldwide market.
- In year 2001 Grupo Elektra was already a well recognized in many countries.
Evaluation of management and suggested solutions
As SWOT analyses demonstrates strengths prevail over weaknesses in Elektra case that explains continuous prosperity and success of the company in the market. However, certain weaknesses still present and are better to be eliminated.
First of all, the management is performed by a group of well prepared managers while the final decision is always made only by one person, while others are not informed what principles and criteria are followed in making decisions. It is a risky strategy since biases the success of the company toward the decision of Alvaro. Moreover, it will be rather difficult in the future to replace Alvaro Rodriguez with anyone who will be equally active, smart and so well informed about the business of the company. More people should participate in the decision making process in order to avoid subjectivity and provide necessary support to the next CEO if something happens to Alvaro Rodriguez.
From one side, the Elektra system perpetuates such type of culture where lower-income groups owe their lives or earnings to a central figure – in this case Elektra owner Ricardo Salinas Pliego. For example, Elektra employs 4,000 “investigators” so every potential credit client can be visited at home before a credit sale is approved. From another point of view, the Elektra gives the chance of purchasing new things immediately and it makes people’s life better.
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