"To what extent has globalization impacted upon the roles of those responsible for managing performance?"
A. INTRODUCTON
The world is undergoing tremendous changes and part of this change is the rise of state-of-the-art technology that changes how contemporary world carry out their tasks. Changes are occurring in the very nature of the business organization as it responds to the pressures and opportunities of the global marketplace.
Globalization of business has been one of the dominant characteristics of the past two decades. In the international business environment, many companies have become multinational players seeking business opportunities across countries. Globalization has become the cornerstone of a company’s overall business strategies. Globalization is no longer only a business option but also a part of effective corporate strategizing ( 2002).
The impacts of globalization on the business world are many, but the most important is competition. All of this competition is pushing multi-national companies into strategic responses. As global competition increases, many companies are forced to reevaluate their position in the global marketplace. For some companies this entails strengthening their domestic position against competing foreign products. Other firms respond by expanding their undertakings into foreign markets. For many, collaborative/cooperative agreements with other businesses are an effective alternative to the more traditional approaches ( 1993). In effect this would create a problem for those who are responsible for the management of companies. Management of companies, especially multi national companies, has to apply the appropriate strategies needed to respond to the opportunities and pressures created by the process of globalization of business.
B. MAIN BODY
B.1 GLOBALIZATION: INTEGRATION OF ECONOMIES WORLDWIDE
Globalization is universal and inescapable. It affects economic, political, social, cultural, technological, and environmental conditions. Increased integration of the world’s economies offers widespread opportunities for development of nations across the world. This enforces on countries, institutions, business organizations and individuals to conform to universal standards, rules, norms, expectations, and requirements.
Countries have embraced outward-oriented economic policies and have lowered barriers such as import tariffs and open themselves up to investment and trade with the rest of the world. This increases the integration of economies around the world, particularly through trade and financial flows. The formation of a universal market open to all countries around the world, on all continents, facilitates increased international trade in goods, services and foreign investment.
Some countries are becoming integrated into the global economy more rapidly than others. Most countries that have been able to globalize their economies are experiencing reduced poverty and faster economic growth. As living standards increase, it became possible to make progress on other issues such as social equality, environmental and labor standards and other economic issues.
The same goes true for businesses. International business is increasingly developing multi-national networks composed of alliances, affiliates, licensees, and other partnerships. The most rapidly changing route for large multi-national companies entering overseas market / international business is through a growing variety of joint ventures and strategic alliances (1993).
Multi-national companies have come to characterize global business, and to dominate industries and national economies. Multi-national companies evolve from domestic firms that go beyond simple exporting and importing activities to acquire foreign affiliates. The growth and prosperity of the company become interlinked with business linkages to foreign firms. As the business linkages deepen between the two companies, the need for broad coordination and cooperation emerges ( 1995).
Many companies increasingly understand the significance of a growing global marketplace. They realize that exporting and establishing overseas ventures are no longer the only choices they have in participating in international business. Cooperation, like in the form of an alliance, with businesses abroad is becoming significantly evident as an alternative response (1993). Alliances have become an important strategic option in international business ( 2002).
B.2 THE NEED FOR STRATEGIES
The presence of an emerging worldwide market underscores the necessity for firms to develop strategies that will enable them to compete successfully on a global scale. Although many strategies are available for companies to pursue -- cooperative contractual relationships, strategic alliances and joint ventures, and the establishment or acquisition of overseas production facilities -- the need for globally oriented companies to get their products into foreign markets is paramount (1993).
A strategic alliance means forming a long-term collaboration between at least two firms without one firm fully owning the other. A strategic alliance presents two distinct properties: long-term commitment and contribution to strategic performance of the partnering firm(s) ( 2002).
Strategic alliances are not a guaranteed formula for successfully competing in international business. Many companies believe that alliances are necessary to reduce the risks associated with operating in an uncertain and fast-changing global marketplace. Yet the nature of alliances is essentially one of a trade-off between risk-sharing and innovation. Risk-sharing may help ensure that a company obtains or maintains a competitive position in the short run, but innovation and the ability to adapt to changes in the world market are far more important in determining a company’s position in the long run ( 1993).
In collaborations and alliances there may well be factors that remain hidden. Not all technologies are disclosed to the partners and some knowledge will remain confidential. For example, Coca Cola has many franchise bottlers whose job is to process and bottle the condensed Coca-Cola syrup, but the recipe for which is never disclosed. The bottlers understand this and make a profit by working at the lower end of the value chain (2001).
B.2.1 Driver of Alliances
Competition between business organizations put pressure on the company to produce products of excellent quality at a competitive price which won’t bring about a negative return of investments. Sometimes, the lack of resources, manpower and capital and the high demands for a product would influence business organizations to employ strategic collaboration. As stated, two obvious examples of this would be increasing adoption of global products standards in IT industry and homogenization of consumer demand through the world.
Globalization in effect raises the expenses needed to run a company into staggering amounts. Sometimes, the company won’t be able to cope up with such financial demands and thus would rather collaborate with other companies than suffer loses or worse be closed.
The motivations for strategic alliances are complex and varied. The major external forces behind international strategic alliance formation are often interrelated and may stem from varying causes. The key identifiable current factors seem to be the globalization of markets and technologies, the shortening of product life cycles, and the consequent need for enterprises large enough to take advantage of scale and scope economies, and to be able to access adequate resources and competencies. Other factors exist in specific situations (1998).
A motive behind the conclusion of strategic alliances is the need for speed in reaching the market or the need to compete in all major markets. In the economic world of the 1990s, first-mover advantages are becoming dominant, and often the conclusion of an alliance between a technologically strong company with new products, and a company with strong market access is the only way to take advantage of an opportunity in time.
Alliances are the fastest means of achieving market goals to meet an opportunity, if the partners each have strong resources and competencies, but alone insufficient to achieve critical mass.
A second reflects the continued importance of national boundaries: government preferences for 'local' firms in industries such as aerospace where an alliance with a national or regional firm may be a necessary requisite of sales to either the military or a national airline.
The most important motivation for alliance formation, however, is the increasing cost, risk, and complexity of technology. The high cost of technological development has encouraged companies to collaborate to share both the costs and the risks of this activity. The need to limit financial risk is a further factor advancing alliance formation as opposed to merger/acquisition or organic development. Even the world's largest and most international companies can no longer 'bet the company' on the next generation of semiconductors or jumbo jets; in many industries the cost of a competitive R&D budget has risen to the point where it is no longer possible to 'go it alone' (1999).
In other cases, collaboration may take the form of interaction between assemblers and component suppliers - a common situation in the automotive and electronic appliance sectors.
B.2.2 Objectives
Performance measure for strategic alliances is whether gains are achieved as a result of the collaborative/alliance venture. The companies exist to create value for stakeholders. Following the same logic, alliances should also be established to create value for their stakeholders. An alliance can only be justified when the value created by the alliance exceeds the value that can be created by the companies alone. The combined effort of working together of two or more business organizations should produce a result that is greater than the sum of each company’s individual effects or capabilities. Otherwise, there is no need for an alliance. That is, in an alliance context, synergy exists when the alliance partners produce greater value together for their given constituents (for example, shareholders) than those partners produce individually. From a synergistic point view, strategic alliances create joint economies of scope between two or more firms. By creating synergy across multiple functions or multiple businesses between partner firms, strategic alliances are supposed to facilitate competitive advantage ( 2002).
One of the considerations in choosing whether to cooperate with other companies, and the form of that cooperation, is the level of transaction costs. In the absence of common interests and mutual trust, an alliance needs to provide each partner with adequate incentives not to take advantage of the other and with systems to monitor their respective contributions. There is a need to balance and reconcile cooperation and competition between partners (1998).
B.2.3 Advantages
Cooperation and alliances have become commonplace for a number of reasons to the benefit of the multi-national companies. For one, cooperative strategies can enhance market power.
Corporations form business relationships with others for a wide variety of reasons, largely because the partner has some asset or can perform some function which the firm needs in order to pursue its own strategic objectives (1994).
Alliances can tend to create a sheltered, secure and stable environment because of the members' monopolistic position. Alliances should increase the opportunity for initial mutual learning. Not only should current knowledge be passed on but each partner should acquire and generate new knowledge as the environment and technology changes ( 2001).
The preference of companies to stick to what they do best, or their core competencies, means they must let others outside the organization, often abroad, help them with everything else. In this way, the best practice can be called upon irrespective of source in all aspects of the company's market offering. By bringing together different companies with unique skills and capabilities, alliances can create powerful learning opportunities. As alliances become more common, exploiting the learning potential of alliances will become more important ( 2004).
Overall, alliances and collaborations enable companies to leverage the assets, skills and experiences of their partners for the purpose of enhancing competitive advantage (2003).
B.2.4 Disadvantages
Business alliances are anything but easy. They require extreme clarity in regard to objectives, strategies, policies, relationships, and people (1993).
In a strategic alliance, both companies share some risk in the investments they have made, financially or otherwise, in the common activity (1993). The problems associated with joint ventures and their high failure rate implies that great attention needs to be paid to the effective planning, negotiation, and management of such deals. While effective management of the joint venture process will never guarantee success, it will considerably reduce the likelihood of failure (1996).
The following are potential pitfalls/drawbacks of strategic alliances according to leading authors in the field: coordination costs, erosion of competitive position, creation of an adverse bargaining position, mutual dependency, uncertainty regarding outcomes, division of authority and decision-making power, top management time and effort, risks, imbalance in benefits, imbalance in commitment and motivation, difficulties in achieving an agreement, communication problems, conflict between partners, retaliation from governments and competition, resource generation and redistribution, adjustments to environmental changes, developing new business to meet emerging growth opportunities, delaying with internal conflict, competitive compromise, dependency spiral and distrust and conflict ( 1996).
An alliance can expose the partners to the temptation to steal each others' secret and run, so long as the alliance is of indeterminate length, the penalties for defection are high, and reputations matter (1998).
B.3 CRITICAL MANAGEMENT PROCESS FOR STRATEGIC ALLIANCE / PARTNERSHIPS
Any logically reasonable person wouldn’t buy a thing if he thinks it is not worth the money. No one would buy an expensive car if one is not assured of its quality. No one would jump from a 50 foot bridge unless one has already perceived the risks. People would normally do some research and weigh the pros and cons, especially if it is something very important. The same goes in a strategic alliance. The management has the responsibility of checking if what they are about to do would be beneficial for their company.
The selection of a partner is the first crucial step in collaboration. The more the management can learn about their potential partner, the greater the chance of making the right decision about a long-term relationship. Management should ask questions about goals, ambitions and values. There is a need for the management to listen for where they might complement each other and create a future together.
Communication is the next step. The ability to communicate is very essential in the management process. This is not only communication between the management and the workforce but also communication between the company and the consumers. After all, it is from the demands of the consumers where the company would take its cue.
Lastly, there should be effective management control. Communication, support and organization are factors affecting management. Plans should be carried out in consensus with both the management and the workforce. This way, a smooth course of activities could be expected.
If there is a decline in quality, this could be attributed to several factors including the lack of proper training of workers, lack of effective communication among the management staff themselves and with the workers, and of course lack of effective and quality management. Therefore, be it an alliance between two companies or not, there are risks being faced by business organizations.
B.4 CULTURE
One of the results of increased globalization and readily available technology and global communication on the global labor market is that education and skills are increasingly available from almost everywhere, making potential employees available from all racial, ethnic, and nationality origins. This has the impact of dramatically increasing the level of diversity with which global business and organizations must cope.
In addition, employees for the global firm will come from groups that in the past and in many countries were not participating in the labor pool: young and old, male and female, disabled, married and single, any type of religious affiliation or none, etc (2004).
B.4.1 Cross Cultural Teams
Multinational and cross-border teams are increasingly used and empowered to perform critical organizational projects and problem-solving activities. In addition, multinational teams can, themselves, be a major tool in the development of cross-cultural competencies ( 2004). But with the differences in culture, would the team members be able to come up with a common viewpoint? Wouldn’t it result instead to arguments that arise from the differing viewpoints?
Team members who work across functional and national boundaries must learn to collaborate virtually with colleagues and customers who may have very different cultural backgrounds, experiences and leadership styles. The monocultural team is already a thing of the past. Companies and organizations worldwide consist of a culturally diverse staff. The staff works in multi-cultural teams either in the same office or across borders. Issues can and do arise in areas such as approach to management, expectations, decision making, planning, conflict resolution and communication styles.
American management literature, both popular and scholarly, is rife with advice that managers should increase workforce diversity to enhance work group effectiveness. Researchers have examined the impact of diversity in identity group memberships, such as race and sex; organizational group memberships, such as hierarchical position or organizational; and individual characteristics, such as idiosyncratic attitudes, values, and preferences. Although certain types of diversity appear to be beneficial, studies focused on race and gender have demonstrated both positive and negative outcomes, suggesting that certain conditions may moderate these outcomes (2001).
B.4.2 Human Resource Management implications of recruitment, selection, and training
The organization does not practice a discriminatory style in hiring and other work related concerns. The workforce is composed of a very diverse population. There is no discrimination against race, sex, gender or any other factors. These factors are not considered to define the competency of an employee to do the job.
Many members of the organization - both white and of color, pride themselves on being blind to cultural differences. Progress in diversity is measured by how well a work group or team achieves its recruitment and retention goals.
As organizations expand their global business, there is a growing need to develop the cultural competency of today's managers and employees. Today's leaders and managers must be aware that every member of the team will come to the workplace carrying his own cultural baggage, which has been developed over time, based on his cultural orientation and reward or punishment systems. The proposal of recruitment of a senior member to be included in the team is a strategy to further ensure that discrimination will not be practiced and each member regardless of his or her race, age, etc will be fairly treated. Given the experience of a senior member, there would not be any doubt that he or she can handle such a task and all the responsibilities that come with it. The recruitment of a senior member in a cross-cultural team based in a Middle Eastern country will provide a leader for the team who will guide them.
In order to create cultural synergy among diverse team members, the senior member must be someone who is able to first recognize his own basic cultural bias and how it differs from that of the people he is dealing with and also with the people he will deal with. He or she must show admiration and respect for other cultures. Only when this happens can cultural synergy exist; one plus one will be greater than two.
Importance is stressed on the senior member learning how to not be afraid of the differences, learning about conflict, and learning to be willing to go toward it and trying to talk about hard things. It is important that the senior member recognizes that people from different cultural backgrounds might bring different sets of experiences and skills to work did not dictate a cultural-identity-based division of labor among the team members and the entire work staff.
People's failure to use their own or to seek others' cross-cultural knowledge threatened to compromise the working team’s effectiveness and can cause disappointment. Therefore the senior member must be very well aware of this.
The senior member has to train team members in improving their intercultural skills and increasing their companies' global activities. He or she should also pioneer in the development of effective systems to be used in analyzing foreign cultures and creating strategies to bring contrasting cultures into mutually beneficial relationships.
He or she should have the ability to inspire and mobilize entire cross-cultural employee teams to work together to survive in hard times and excel in good times. The senior member should demonstrate a unique ability to combine cultural sensitivity and good business sense to develop insightful strategies and motivate team members to implement those strategies.
A culturally diverse workforce as a moral imperative to ensure justice and the fair treatment of all members of society focuses diversification efforts on providing equal opportunities in hiring and promotion, suppressing prejudicial attitudes, and eliminating discrimination. A culturally diverse work group, therefore, is meant to be evidence of just and fair treatment of employees.
C. CONCLUSION
Globalization restructured societies and economies, and with it also is the restructuring of how business is done. Business organizations have to formulate a plan in overcoming the obstacles presented by the rapid changes brought about by globalization. With globalization, business organizations become more closely linked with each other. They become more susceptible to danger. Businesses everywhere are becoming less hierarchical; product life cycles are becoming shorter; abundances are arising where there were scarcities; borders seem to be no barriers to the movement of ideas and technologies; and new markets and competitors are emerging from unexpected sources.
Therefore, creation of a strategic alliance with an established partner would be beneficial for business organizations. An alliance is often better even if in the longer run a takeover is an option, since an alliance is of course easier than a takeover. It is vital to design collaboration, at the start, with a view to options for later adjustments, and options for exit.
Furthermore, with the advent of globalization, there is the increasing incidence of cross cultural teams within one organization. Thus it is important for the management to take into consideration the differences that might arise given the environment created by the collection of people with diverse backgrounds and ethnicities.
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