96 Long Range Planning, Vol. 19, No. 6, pp. 96 to 104, 1986 0024-6301/86 $3.00 + .

OO
Printed in Great Britain Pergamon Journals Ltd.

Going Global Global Strategies

vs National Strategies
James Leontiades

An increasing number of managers see globalization as a major direction. Honda, acknowledged as one of the
trend influencing their company’s future. But what exactly
leading global competitors in the automotive
does the term mean and what are its practical implications for
those firms on the threshold of going global? The author industry, has adopted a programme of ‘localization’.
tackles these questions and suggests that the main feature of This is the name the company uses to describe its
globalization will be that companies willseek a combination of recent efforts to establish research groups in Europe
co-ordinating mechanisms that will achieve the object with a and the United States for the specific purpose of
minimum of interference in the freedom of nationally based
increasing Honda’s ability to ‘develop products
operating units.
uniquely suited for these markets’.3 USI Logic has
recently announced that it is opening design centres
in West Germany, France, Sweden and Israel to
develop integrated circuits more closely tailored to
local requirements. The same thinking is behind the
One interpretation of globalization presents it as
announcement of plans by Data General to set up a
based on a convergence in world tastes and product
new facility in Cambridge, England for the purpose
preferences. Ted Levitt identifies technology as the
of adapting its products to the European market.
force which is driving the world toward a ‘converg-
ing commonality’, a homogenization of world
There are few areas more dominated by global
markets. The global firm is one which capitalizes on
competitors than large-scale engineering construc-
this trend, producing globally standardized pro-
tion for developing countries. Though major
ducts. In doing so it gains efficiencies of scale that
companies operate globally, the bridges, canals, etc.
enable it to undercut the prices of more nationally
which represent the final product can scarcely be
oriented competitors, including multinational com-
described as standardized. Even the most inter-
panies that adjust their products and practices to
national of the pharmaceutical firms still have to
individual national markets.’
differentiate their products to comply with require-
ments which may be linked to specific national
There is more than a grain of truth in the above
conditions such as a tropical climate and its
interpretation. The traditional view of international
associated illnesses, as well as other factors not
business as concerned with adaptation to ‘foreign’
susceptible to convergence.
market conditions has changed dramatically. Tech-
nology and the revolution in communications and
The distinction is more than a quibble over
travel are breaking down the very notion of
semantics. Understanding the nature of the changes
‘foreigness’ as people become familiar with customs
at work is crucial to understanding the forces behind
and products from many countries. Research has
globalization and what ‘going global’ entails. The
shown that many leading companies do now
common elements which run through the above
market internationally standardized products.2
examples and which characterize global companies
is firstly a management which sees strategy in global
But this is not the whole story. The pressures of
terms and acts accordingly. Secondly, the dimi-
international competition, more discriminating cus-
nished effectiveness of national boundaries in seg-
tomers and improved design and production tech-
menting the firms’ competitive sphere. At one time
nology are moving some firms in the opposite
it was possible to define an industry in national
terms. Cross-border competition was relatively
James Leontiades is Senior Lecturer in international Management at minor. Even the subsidiaries of foreign firms
Manchester Business School. focused on their particular national market, much
 Going Global-Global Strategies vs National Strategies 97

like any other competitor. Gradually, and in some airplane producers have formed into a single global
cases rapidly, this has changed. Industry in the sense industry. Only three major American firms and one
ofa group of firms competing against each other in a European consortium (producing the European
similar product/service category is changing from Airbus) remain as major producers of large pas-
national to regional and global. senger aircraft.

This may or may not lead to the use of international In some industries globalization has become so
product standardization as a competitive tool. The familiar that it is difficult to recall anything else. It
essential fact is the need for management to think would seem strange today to interpret the oil
globally if it is to make sense of its competition and industry in other than global terms.
market opportunities in a world where national and
geographic barriers are becoming ever less signifi- The oil ‘majors’ pump their raw material from
cant. This applies to all firms within such industries, Indonesia, Dubai, Alaska, the North Sea and other
i.e. even those companies which choose not to areas far removed from their main customers. Their
go global will be competing against companies competitive position is not to be found in any
whose strategy and resources cannot be interpreted individual location but is rather the product of their
nationally. global performance and resources. Competitive
advantage depends on their ability to co-ordinate
These changes in industry structure are not unfami- and manage their resources across national boundar-
liar, being closely analogous to the changes brought ies. Changes in supply and demand in any part of the
about during the latter part of the 19th century by world will effect world oil prices. Smaller national
the advent of the railroad and telegraph. For the first producers certainly exist but they too have to think
time companies appeared which were able to look globally. Planners attempting to interpret this
upon the entire country as their sphere of operation. industry on a country-by-country basis are in the
National companies enjoyed a number of competi- same position as the famous blind men of India who
tive advantages over more local firms including in tried to describe an elephant by each focusing on a
some cases lower unit costs through efficiencies of different portion of its anatomy.
national scale. However, there were also other
advantages associated with ‘going national’, such as
the ability to offer a nationwide service, a unified
Globalization Signals
national image, the economies and leverage of
nationwide marketing, promotion and distribution. One of the first steps for firms reviewing the
prospects of going global is to take a hard look at the
The rise of the national firm was associated with a conventional wisdom of what constitutes their
change in the structure of the industry. Even those industry (or industries) and, particularly, indications
firms which remained local had to redefine their that there are changes altering it in a more global
competitive position to take into account the new direction, If competition and customer opportuni-
national competitors. Measure of market share and ties are becoming global in scope, then a change in
performance were correspondingly reinterpreted in strategic direction may be virtually imposed on
national terms. National distribution channels were management. A number of clues or ‘signals’ of
formed. Prices in many product areas were quoted industry globalization are indicated in Figure 1.
nationally. The competitive advantages and expan- These include greater international price sensitivity.
sion of the new national firms brought with it a As in the oil industry, there is a tendency towards a
shake-out in the industry, sharply reducing the global price structure, sensitive to changes in supply
number of companies and leading to extensive and demand anywhere in the world. Also, the
amalgamations and mergers. pressures of international competition across
national boundaries brings about a restructuring of
Above all, the new national firms became the leaders competitive relationships within the industry,
of their respective industries. They comprised a new manifested a proliferation of inter-company
competitive league. Within their own industries, alliances, mergers and acquisitions. Not infre-
they typically accounted for the highest sales quently, customers take the initiative. A major
volume and market share. These attributes brought chemical company found that its own customers
with them associated influence and market power, were causing management considerable embarrass-
SO much so that the United States Sherman anti- ment by citing different prices and conditions
trust act was initiated in 1890, shortly after their quoted to them by the firms’ various operating units
appearance. Even those companies that did not go in different parts of the world. Eventually it dawned
‘national’ had to take into account the new power on management that they had a number of
and competitive realities. important global customers who expected uniform
treatment worldwide.
Much the same thing is now happening at the global
level though its impact will vary from one industry Another indication of such changes is the greater
to another. The civil aircraft companies, once reliance on global performance measures and com-
comprised of several national clusters of airframe petitive comparisons. For example, national
 98 Long Range Planning Vol. 19 December 1986

Figure 1. Signals of industry globalization focused strategies. Figure 2 depicts four generic
strategies for firms engaged in competition in the
International Price Sensitivity
more global industries. Though lacking the detail of
Industry Shake-out (Triggered by Foreign fully-fledged strategies, they can provide a useful
Competition) reference framework for choosing between the
major strategic options. The basic distinction here is
Increased Foreign Competition
between those strategies with a global geographic
Alliances, Mergers and Acquisitions with scope, and strategies limited to a particular national
Foreign Companies environment. The horizontal axis makes the distinc-
tion on the basis of market share objectives.
Deteriorating Position of Firms Sheltering
Strategies aimed toward a high market share will
Behind National Entry Barriers
differ fundamentally from those aimed at a small
Customer Demands for a Global Service and share of the market.
Presence
International Supply Sourcing Market Share Objective

Increased use of Global Performance Measures High Low

measures of market share tend to lose much of their

meaning and can be misleading.4 Rolls Royce, the
British jet engine manufacturer, dominates its own Global ;I

national market but accounts for only 6 per cent of

global market share. The latter measurement is
today a much better indicator of its relative market
power and competitive standing.
National High National Niche
An interesting example of globalization is observ- National Share Strategy Strategy
able today in financial securities. Not very long ago
the purchase of bonds and equities was almost
entirely the province of national brokerage firms
operating within their home territories. The revolu- Source: J. Leontiades, Multinational Corporate Strategy
tion in telecommunications has changed all that. ( Lexington Books, 1985).
Both customers and securities suppliers have
become aware of the wider opportunities of dealing Figure 2. Four generic international competitive
globally. Brokerage firms prepared to take advan- strategies
tage of international opportunities for dealing in
multiple national markets are able to tap sources of
demand and supply not available locally. They are Global High Share Strategies
also able to put together securities portfolios with
Global high share strategies are associated with the
risk/return characteristics not obtainable on a purely
giants of the industry. Firms such as IBM, SKF,
national basis. All very real advantages which owe
Dow Chemical, Citycorp and Sony. Their
little or nothing to convergence in market tastes,
approach reflects a global interpretation of their
product standardization or economies of scale.
industry. Pricing, promotion, product and the other
Consequently, the securities industry and securities
elements of their marketing programme are geared
markets are expanding geographically. Prices are
toward high volume segments of the market
fixed and monitored globally, only the physical
identified globally. Design and research expendi-
location is altered to accommodate changes in time
tures are high in absolute terms but often low by
zone. The pressures of competition, particularly
industry standards as a percentage of sales. IBM’s
from the more global brokerage houses is putting
R & D expenditures are running at over $2bn
pressure on the smaller national competitors, many
annually but they account for only about 6 per cent
of them resorting to alliances or the subject of
of the firms global sales volume, well below the
mergers and acquisition moves. Greater emphasis is
industry average.
also being placed on global comparisons and
measures of performance.
The essence of global strategies is the worldwide co-
ordination of company resources behind global
objectives. The wider scope of worldwide oper-
Generic Strategies ations opens up several areas of potential competi-
Globalization of the industry does not mean that all tive advantage. The most familiar of these is the
firms within it will or should hasten to adopt global access to lower unit costs through the higher
strategies. There will always be companies which, efficiencies of scale sometimes associated with
though they now have to interpret their industry on worldwide production volumes. However, effi-
a global basis will be better off pursuing nationally ciencies of global scale and volume are by no means
 Going Global-Global
universally applicable to all products or services nor
are they the only competitive advantage opened up.
Others include
Providing a Global Service
A major incentive for the recent global expansion of
banks, insurance companies and advertising firms
has been the advantage of providing their customers
with a global service. For example, banks with a co-
ordinated global network of branches are able to
service the subsidiaries of multinational company
clients in their various foreign locations. Moreover,
they are able to provide specifically global services
such as global cash management which are beyond
the reach of purely local banks or even multinational
banks operating on a country by country basis with
little or no international co-ordination.
International Sourcing
A better source of supply was among the earliest
motives for companies moving abroad. Initially,
this expansion focused on raw materials and the
extractive industries. More recently the establish-
ment of off-shore production and purchasing has
given many companies new sources of skilled and
unskilled labour.
Experience Transfer
For the firm operating in multiple national environ-
ments, ideas and experience developed in one part of
the world may provide it with a strategic advantage
in another. The more sophisticated companies are
able to stimulate the cross fertilization of ‘best
practice’ and new developments throughout their
international network.
International Corporate huge
A well-known name and favourable worldwide
reputation is a valuable asset, not only in marketing
the firms products but in negotiations with govern-
ment. It has also helped firms to gain access to
financial markets and funds in various parts of the
world at favourable rates thereby lowering capital
costs.
Global Resource Focus
The firm that is able to co-ordinate its resources
behind a global strategy is in a position to bring its
full weight to bear on specific competitors and/or
opportunities. It is able to draw on its worldwide
resources to sustain products and marketing efforts
that entail negative returns in some countries in the
interest of strategic long-term objectives.
International Portfolio
A wider geographic spread opens up opportunities
for improving the risk/return characteristics of the
firm’s business portfolio. Insurance companies with
major risk exposure in one country, e.g. hurricane
and flood in the United States, can balance this
against similar insurance in other parts of the world.
This integrated approach to global competitive
Strategies vs National Strategies 99
advantage also entails considerable risk in that a
stoppage in one part of the system may effect the
entire network. The recent metalworkers strike in
West Germany stopped much of General Motors
production for all of Western Europe when its
plants in other countries were not able to get the
required components. To counter such stoppages,
globally integrated companies build in a certain
degree of redundancy or fat in the system as well as
resorting to multiple sourcing of vital components
and services.
Global Niche Strategies
Relatively few firms will have the resources to
pursue global high share strategies. Most companies
going global, including many quite small firms, will
attempt to gain one or more of the above global
competitive advantages through specialization. In
so doing they also avoid head-on competition with
companies pursuing global high share strategies.
Global specialization is most often by product
though it may also be based on technology, stage of
life cycle, market segment, production stage, etc.
Wartsila, the Finnish shipbuilding firm provides a
useful example. While the larger shipbuilders of
Europe and Japan compete for the high volume
business in dry cargo ships and oil tankers, Wartsila
has successfully established a worldwide reputation
as a specialist in luxury cruise ships and ice breakers.
Its smaller size enables it to react quickly and
specifically to customer needs in a product area
which has, by virtue of being global, attained a
considerable size, while remaining too specialized
and small to attract the main efforts of the largest
firms.
The electronics firm, Ferranti, was one of the first to
develop a global niche based on its technology for
producing gate array integrated circuits. BMW has
successfully defended a global segment of the
motorcycle market against much larger Japanese
competitors. Schlumberger has grown through the
development on a global basis of a variety of
specialized services to the oil and computer indus-
tries. The Cookson Group company has established
itself in a number of global niches connected with
technological materials. Its management claims
world leadership in zircon opacifiers for the tile
industry, antimony oxide for flame retardants and
electronic solders.
National High Share Strategies
These aim at a high national market share through
the use of nationally based competitive advantage.
Marketing and production programmes are geared
to achieving high volume and low cost relative to
other national competitors. However, such firms
often remain vulnerable to the even greater econo-
mies of scale and volume that characterize global
 100 Long Range Planning Vol. 19 December
strategies. Increasingly their success will depend on
countering such global competition through mak-
ing maximum use of national entry barriers. The
term ‘barriers’ here refers to anything which
obstructs the freedom to transfer and co-ordinate
resources across national borders. Besides the more
usual restrictions in the form of tariffs and quotas
such barriers may take the form of government
subsidies and other preferential treatment for
national competitors, both domestic and foreign
owned. Transportation and communication im-
pediments as well as institutional and taste differ-
ences between countries are also potential barriers.
None of these are insurmountable but used judi-
ciously, they can be effective in providing a defence
for nationally oriented companies against more
global competitors.
National Niche Strategies
National niche strategies capitalize on the advan-
tages of specialization on a national scale to fence off
their market from both national and global com-
petitors. The size of their target market is such that it
is below the threshold size considered attractive to
larger companies. Firms pursuing national niche
strategies also make use of the national entry barriers
referred to above, particularly government support
of all types, wherever practicable, as a defence
against global competition. Examples of firms
pursuing national niche strategies are to be found in
firms specializing in products associated with
uniquely national taste preferences. For example,
food, clothing as well as certain very small-scale
handicraft industries, certain newspapers and other
publications.
Strategic Change
For most companies, going global requires a change
in strategic orientation. For example, American
Express began as a national freight company. It
began its global expansion by developing a niche in
specialized financial services based on its travellers
cheques. Building on this foundation, it has imple-
mented a series of global niche strategies in credit
cards, travel agencies and investment banking.
Since technology and other factors in an inter-
national competitive environment are constantly
changing, a firm pursuing a particular generic
strategy successfully at one point of time may
subsequently find that it is no longer suitable.
During the late 197Os, Chrysler found that it was no
longer able to keep up with the resource and other
requirements of a global high share strategy in the
automobile industry. It divested its foreign produc-
tion facilities in England, France and Spain. The
company’s decision to concentrate its resources
within the North American market contributed to
its famous turnaround and revival in the 1980s.
1986
Because many industry trends are moving in a
direction favouring a more global approach, much
of the pressure for change falls on companies with a
national strategic orientation, particularly the larger
national companies in product areas most attractive
to global competitors.
ICL, the British computer firm was at one time able
to base its competitive stance on a national high
share strategy. Direct government assistance and
preferential treatment in large scale government
computer contracts provided a vital barrier against
global competitors, particularly IBM, that gra-
dually diminished. The accelerating pace of techno-
logical change was also instrumental. ICL found it
difficult to upgrade its entire range of products.
Near bankruptcy in 1980 brought about a sharp
change in strategy. As IBM encroached deep into its
national market, ICL formed a series of alliances
with Fujitsu, Mite1 and other computer firms which
provided the basis of a global niche strategy, more
specialized in the small end of the computer product
line.
AT & T is striving to turn itself into a global
company by pursuing a number of global niches,
with the help of alliances with foreign companies.
Geopolitical Aspects
Going global does not mean that the firm’s global
strategy applies to literally every country. Choices
will have to be made. Some national markets and
geographic areas will be found immediately critical
to the firms global strategy and objectives while
others, at least for the time being, will be considered
peripheral. As indicated in Figure 3, the impact of
global strategies within any given industry will be
felt first in those countries with the lowest national
barriers and the largest markets. These are the global
demand centres of the industry. Securing a position
of strength in these areas is essential in establishing a
global competitive position. For example, Japan,
the United States and the European Community
account for over 75 per cent of total world demand
for integrated circuits. Restrictions to cross-border
movement and co-ordination are also relatively low
between these areas. These comprise the core
geographic areas of an emerging global industry and
it is here that competitors most clearly implement
the cross-border co-ordination and global objec-
tives associated with global strategies. Where
national barriers, of the type discussed above, are
high and market demand low (India and most Latin
American countries, in the case of integrated
circuits), the same companies may choose to focus
their strategy about particular national markets, or
to stay out altogether.
The primacy ofJapan, North America and Western
Europe in any global strategy is also the message
expressed by Kenichi Ohmae in his book Triad

Size of National Market
Large Average
Note: World countries classified by size of national
market and national barriers in a given Industry.
Source: J. Leontiades, Multinational Corporate
(Lexington Books, 1985).
Figure 3. A conceptual view of the distribution of
global and national competitive strategies in an
industry
Power. There are, however, important exceptions.
In animal feed and veterinary products Australia and
New Zealand may fall within the upper left-hand
corner of Figure 3. Similarly, India is a global
demand centre for a number of fertilizers and birth-
control products. In the future, we may expect that
China will also qualify in the same way in a number
of product areas.
For most products and marketable services it is still
true that global competitive contests will be decided
in the major industrial countries. This fact points to
an inbuilt advantage for firms indigenous to these
territories. This home country advantage is particu-
larly relevant for Japanese and American companies.
The larger scope of these markets provides them
with an initial edge in terms of market potential.
Perhaps even more important is the fact that the
very size of their domestic market contributes
toward the early development of an organization
structure and, above all, a mental attitude geared
toward large-scale operations.
Most European firms, though they have the
advantage of an industrial home base, are hampered
by prior tradition and association with ex-colonial
territories that are far removed from the global
demand centres. Some of these firms have res-
ponded to the new environment by resort to an
essentially defensive posture based on national high
share and national niche strategies. They risk
becoming much smaller in relative terms. Their
absolute size and profits may even increase but they
will be seen to be little league competitors as
Going Global-Global Strategies vs National Strategies 101
compared to global companies. Small fish in a much
larger pond.
Small I
The implications of globalization can be particularly
severe for firms from developing countries. Such
companies often find that they need to establish
operations in the advanced industrial countries in
order to develop the global efficiencies of scale and
other competitive advantages. But without such
advantages securing a foothold against the estab-
lished competitors in these countries who have gone
\
global earlier is difficult. Though not impossible, as
\ some firms from the newly industrialized countries
are demonstrating. The Hyundai automobile com-
L
pany of South Korea is targeting a global niche in
lower-priced passenger cars. Tatung, the Taiwanese
computer firm is rapidly developing a similar niche
in microcomputers.
Change Areas in Multinationals
Strategy
The main challenge of going global turns about
managerial attitudes and responsibilities. This
requires going beyond the abstractions which treat
companies as monolithic entities with a strategy and
a company point of view. The fact of course is that
companies are complex creatures encompassing
many points of view and multiple strategies. This is
nowhere better illustrated than within the multi-
national enterprise, particularly between manage-
ment at international headquarters and that in the
firm’s various foreign subsidiaries. Going global
requires that some part of the organization takes the
widest possible view of the firm’s threats and
opportunities. This is generally the headquarter’s
role. At the same time it makes sense for manage-
ment within the foreign subsidiary to have its
thinking and strategy focused more narrowly, e.g.
on a particular national foreign environment. In
other words, it is not only possible but typical that
management at one level is pursuing a global
strategy and at another a national strategy, the latter
making maximum use of national barriers against
other foreign competitors, adapting policies and
activities to the local national environment, etc.
Some conflict of interest between various parts of
the organization is not only natural but within limits
desirable. However, it is also clearly possible that the
different views of the world entertained within the
firm may generate attitudes and perceptions that are
so fundamentally at odds with each other that they
undermine efforts to become global.’ The old style
multinational addressed this aspect of doing business
abroad through the simple expedient of allowing its
foreign subsidiaries virtual autonomy, so much so
that its ‘global strategy’ was largely the sum of
distinct and separate national strategies. The parent
firm was in effect an international holding com-
pany. It was the classic example of simplification and
conflict avoidance through decentralization.
102 Long Range Planning Vol. 19 December 1986

This worked well enough when national barriers
insulated industry in one country from its competi-
tors in others. Today, the diminished effectiveness of
such barriers make this fragmented country-by-
country approach appear suboptimal. Globalization
requires that management find a new balance
between responsibility and control at the local
operating unit level and the wider perspective of
international headquarters which has responsibility
for global strategy. The task is complicated by the
enormous pressure on all companies to reduce
overhead costs and give maximum responsibility to
operating units in direct contact with customers.
Many firms have organized themselves into strate-
gic business units (SBUs) specifically for this
purpose. The question facing managers here is how
to retain the benefits of the SBU structure and
decentralization while adopting a global strategic
approach that looks beyond national boundaries.
All too often, the answer to this has relied
extenstively on organization change. Formal organ-
ization reporting relationships were altered shifting
authority away from the local level. Such changes
do indeed provide management with powerful
tools. But in this context it has often proved
counter-productive.6 In a fast changing environ-
ment where one reorganization follows on the heels
of another the cumulative result can be one of
disorientation and frustration. Multinational firms
are particularly susceptible. The natural penchant of
their national subsidiaries is to develop national
subcultures which provide a fertile source of friction
relative to headquarters efforts to co-ordinate their
activities.
In moving toward globalization, such companies
have found that changing and improving co-
ordination internationally requires a variety of
methods and mechanisms. Moreover, observation
suggests that it may well be the combination of such
mechanisms that brings about the desired result
rather than any individual technique considered in
isolation,
Figure 4 sets out two quite different profiles of
various co-ordinating mechanisms. Within purely
national firms these are employed on a company-
wide basis fostering the development of company-
wide attitudes and values and generally facilitating
co-ordination between the various parts. In multi-

Coordination Mechanism Low Coordination Profile High Coordination Profile

Strategic Planning System Limited to Capital Budgeting Comprehensive System for
and Portfolio Strategy Developing Regional/Global
Strategic Plans

International Policies Cover only Financial Policies Set Standards and

Reporting and Procedures Procedures in Various
Functions and Activities

Management Reward System Based on National Company Has Reference to International

Performance Only as well as National
Performance of Firm

Management Career Paths Nationally Limited International Rotation and

Job Opportunities

Information System International Information Information on Firms’

Provided to National Units International Activities and
Only on a “Need-to-Know Plans Made Available to
Basis” National Units as a Matter
of Routine

Management Recruitment Nationally Based Provides for Recruitment and

Promotion Across National
Boundaries

Management Training Develops National Develops International

Management Skills Management Skills

Other Coordination Executive Visits Executive Visits

Mechanisms International Meetings
International Project Teams
Competence Centers
Overlapping Membership in
Boards of Directors

Source: Adapted from J. Leontiades, Multinational Corporate Strategy, (Lexington Books, 1985).

Figure 4. Co-ordinating mechanisms for multinational companies

 Going Global-Global
national companies the scope of these same mecha-
nisms is often limited by geographic and other
constraints. The left-hand side of Figure 4, under
‘low co-ordination profile’ shows a nation-centred
interpretation of various co-ordinating mechanisms
at the disposal of management. For example,
strategic planning proceeds largely on a country by
country basis, career paths of managers are nation-
ally limited, which means that few if any of the
firm’s managers in any given country may expect to
work in other parts of the firm’s international
network. Similarly, the firm’s information systems
are such that management in each national operat-
ing unit receives information related only to its
immediate national situation and only seldom
acquires information about the firm’s operations in
other countries.
The ‘high co-ordination profile’ on the right side of
Figure 4 depicts a quite different configuration, one
calculated to break down and prevent the formation
of national sub-cultures. Strategic planning at the
national level is part of a wider planning process
which links the various operating units with
regional-global strategy and planning at inter-
national headquarters. Career paths, the manage-
ment reward system, management recruitment and
training, etc. are regional and/or global in scope.
The aim is to develop the type and combination of
co-ordinative mechanisms which provide the
required degree of global co-ordination with the
minimum of intrusion into matters best left to local
unit managers.
Summary and Conclusions
For the company ‘going global’, the key initial task
is revising managements perceptual map of com-
petitors and markets. Over the years many com-
panies have developed a fragmented view of their
threats and opportunities. Percept@ of competi-
tion and markets has been compartmentalized along
national lines. This has been further reinforced by
the tendency to decentralize the multinational firms
operations, into nationally based strategic business
units. The rise of global industries is changing all
that. The industrial environment (as a system of
interdependent markets and companies) has out-
grown national boundaries, forcing management to
take a much broader view of the world. The
initiative for this must come from international
headquarters., the only part of the organization with
both the necessary geographic scope of information
and authority. Areas for top management consider-
ation and action include the following,
Corporate Intelligence and
Information Gathering
The collection and interpretation of market and
competitor information should be one of the first
Strategies vs National Strategies 103
areas to be globalized. Market share figures should
be calculated on a global basis along with national
and regional estimates. Interpretation of markets
and customer groupings, i.e. segmentation of
markets, should no longer be assumed to invariably
follow national boundaries. One European consult-
ing firm finds that religious demarcations, even
when they cut across national boundaries are more
useful for certain products. Agribusiness firms will
find soil and climatic conditions relevant. Banks,
advertising companies and others dealing with
global customers are finding that the new environ-
ment calls for a reinterpretation on what constitutes
a ‘key account customer’. In many cases customers
themselves are bringing pressure to bear. Most
important of all, intelligence and analysis must go
global to interpret competitive strategies. Even
domestic companies realize that they cannot make
sense of the strategies of the more international firms
by looking at their operations in a single country.
Comprehensive data gathering on an international
scale is more difficult than the country-by-country
approach. In many industries, data on market share
and other characteristics is not published on a global
or international basis; it is much more difficult to get
market share figures on a global basis. But it is
surprising just how much of this information can be
produced once the commitment is made. My own
experience indicates that once someone is made
clearly responsible for such information, much of it
can be obtained.
Strategic Choice
The restructuring of industries along global lines is
changing corporate strategies. Almost invariable the
change starts as a response to external pressures, such
as customers demanding uniform worldwide treat-
ment, the need for internationally uniform stan-
dards of quality, and safety or competitive pressure
from already established global competitors under-
mining prices and encroaching on established
customer loyalties.
Those national firms which have in the past enjoyed
positions of leadership within their home country
national markets face perhaps the hardest choice of
all. Going global will involve them in a fundamental
shift of market-competitive positioning and stra-
tegy. Some, a very few, will have the resources and
products to pursue global high share strategies (as in
Figure 2). For most others the practical result of
global industries will be a form of specialization.
Some firms will opt for a global niche built around
global specialization. Others will specialize geo-
graphically by focusing on particular national
environments. Whatever the decision, it should be
made consciously as part of an explicit strategy
positioning the firm in a global context.
Change toward a global industry structure will
104 Long Range Planning Vol. 19 December
greatly increase the resources required to keep up
with wider market opportunities and competitive
threats. This is already evident in the widespread
movement toward the formation of international
joint ventures, acquisitions, mergers and collabora-
tive agreements. Even within the largest firms, top
management will have to actively seek and identify
such alliances in order to complement existing
operations. The race to locate suitable partners is
well underway.
Economies of Global Scale and Scope
Competition within global industries is often
characterized by a struggle to achieve global-scale
economies. This does not necessarily mean identical
products for all countries. Increasing use of com-
puter-controlled processes will make for greater
production variability in the final product with little
or no sacrifice of scale economies. However, this
implies a standardized core product design which
anticipates product variations tailored for specific
segments and territories.
Within multinational firms, economies associated
with the firms geographic scope will also be
important, such as the ability to provide a world-
wide service for global customers or the ability to
transfer company experience from one part of the
world to another.
Calculation of Costs and Pay-Offs
Any major change of the type implied in company
globalization will entail certain costs. Even though
these may not be susceptible to precise quantifica-
tion, management should attempt to spell out just
what costs are likely to be involved and what it
hopes to achieve. The exercise is helpful, if only to
avoid unpleasant surprises. But in the final analysis,
many of the real costs and returns will be difficult to
quantify. Ambiguity on this point is no doubt one
of the major obstacles which has prevented many
firms from going global. Estimates of return on
investment are more readily measurable with
projects such as the construction of a new plant or
development of a new product. Going global has to
do with overall changes in the firm’s competitive
posture and market appeal extending across many
countries and impacting on most of the companies
operations in varying degrees. As with all really
strategic decisions, the feel and intuition of top
management will be the deciding factor.
Organization Structure
Potentially the greatest cost of going global is
friction and antagonism within the organization. In
multinational companies, co-ordination of
resources and personnel on a global scale requires an
assumption of responsibility at headquarters which
1986
may infringe on the authority of managers in
foreign-based subsidiaries. It is an illusion to ignore
this aspect or to assume that a dialogue between the
various levels of management will arrive at a
painless solution, even though this may indeed
appear within reach in preliminary discussions.
Going global will require a new balance between
managers at different hierarchical levels and geo-
graphic locations. This should be introduced gra-
dually. Too often there has been a tendency to rely
solely on changes in the organization structure as the
magic formula that would achieve the necessary
reorientation. On the assumption that the key to
changing the organization’s orientation and struc-
ture lies with a change in the formal reporting
relationships (i.e. the organization chart) companies
have embarked on a series of reorganizations which
have proved costly and demoralizing.
No one tool is sufficient for the task. As indicated in
Figure 4 there are a wide number of co-ordinating
mechanisms. The mix of these, and not just one or
two in isolation should be considered together with
changes in the organization structure.
This does not mean that nationally based units of the
firm, i.e. its foreign subsidiaries, will not continue to
exercise independent decision making in major areas
within their sphere of operations. Probably the main
feature of going global for most companies will be
to arrive at the combination of co-ordinating
mechanisms that achieves global integration with a
minimum of interference in the discretion and
freedom of nationally-based operating units.
Finally, the fact that many industries are becoming
global does not mean that all firms therein will
similarly change in that direction. Ample scope will
remain for firms which base their strategies on
particular national industry situations. However,
these are now likely to fall into the ‘little league’
category. The major competitors will increasingly
consist of firms which are able to co-ordinate their
worldwide resources behind global objectives.
References
(1) T. Levitt, The Marketing Imagination, The Free Press, New York,
pp. 20-49 (1983).
(2) R. 2. Sorenson and U. E. Wiechmann, How multinationals view
marketing standardization, Harvard Business Review, May-June
(1975).
(3) Honda Motor Co. Ltd., 1985 Annual Report, p. 6.
(4) J. Leontiades, Market share and corporate strategy in inter-
national industries, The Journal of Business Strategy, Summer
(1984).
(5) G. Hofstede, Alienation at the top, Organizational Dynamics.
pp. 44-60, Winter (1976).
(5) C. A. Bartlett, Multinational structural change: evolution versus
reorganization, in The Management of Headquarters-Subsidiary
Relationships in Multinational Corporations, edited by L. Otter-
beck, Gower, p. 128 (1981).