CM Challenges

8/7/2019 CM Challenges

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THE CHALLENGES OF IMPLEMENTING A GLOBAL STRATEGY

Every organization must undertake an audit to understand how they can leverage the global market

to add value. Once they understand their customers needs, what all major competitors are doing,

and the tangible and intangible assets they already have within the organization, a strategy for

developing a Global Organization can be created.

Although there are numerous advantages and benefits of going global such as greater market access,

economies of scale, brand recognition, potentially higher profits, diversifying risks by operating in

many markets; firms must take into account the serious challenges and resistance that they may

face in implementing their strategy to go global.

The Challenge: Developing Global Leader s

Global leaders have to develop two sets of skills, strategic hard skills and leadership behaviour. This

combination of hard and soft skills is often very difficult to find in one person. That is why teams

should be formed around every major strategic initiative, and a balance should be struck.

Strategic hard skills include:

y Understanding the needs of customers.y Understanding how competitors, whether traditional rivals, newly formed companies, or

emerging substitutes, can challenge your organization.

y Understand how to review current strategic activities, looking for opportunities and threatsand comparing these with inside the organizations strengths and weaknesses.

y Understanding how to review new potential markets that can be developed profitably, howto engage with them, and go to market in them.

y Understand alternative sources of tangible and intangible supply and how to adapt theorganizations supply chain to capitalize on value added identified.

y Understand how to build a global organization and the global communications structures.Leadership Behavioural Skills must include:

Intellectual capital

y Knowledge of a range of appropriate and relevant global industries.y To have global value networks, to understand different social, political, economic, and

technological environments and the working of people from diverse cultures.y Understanding how to build a Global Organization, remembering the rule of unswerving

flexibility as there is never one right answer, and the answer will change as more is known

and understood.

y Being able to cope with cognitive complexity, as a one size fits all model can never work.y Being open to cultural intelligence, and understanding the nuances of cultural and custom

differences that exist even within parts of a country or region.


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Psychological capital

y A strong psychological profile that will value difference, welcome change, accept team think,be curious, be open, give and accept leadership, and build an empowered learning

organization

y Display a positive attitude to cultural diversity, and without prejudice, value all differencesy Be transparent in all strategic endeavours with all of the team that comprise the global

workforce and network.

y Is passionate about the execution of the strategy and capable of generating excitementaround the journey to the completion of the vision.

y Will be cosmopolitan and be comfortable in a range of societies.Social capital

y Have the ability to connect to and work with people from other parts of the world.y Have the skill to generate positive energy in people from other parts of the world, lead them

and excite them.

y Have the ability to build mutually trusting relationships with people from other parts of theworld.

The Jack Welch of the future cannot be me. I spent my entire career in the United States. The next

head of General Electric will be someone who spent time in Bombay, in Hong Kong, in Buenos Aires.

We have to send our best and brightest overseas and make sure they have the training that will allow

them to be the global leaders who will make GE flourish in the future.

Jack Welch

Having a global leader with a global mindset is a challenge which needs to be overcome not only in

order to implement a global strategy and win but also in order to play in the global arena.

The Challenge: Managing Differences

When it comes to global strategy, most business leaders and academics make two assumptions: first,

that the central challenge is to strike the right balance between economies of scale and

responsiveness to local conditions, and second, that the more emphasis companies place on scale

economies in their worldwide operations, the more global their strategies will be.

These assumptions are problematic. The main goal of any global strategy must be to manage the

large differences that arise at borders, whether those borders are defined geographically or

otherwise.

Instead of simply adjusting to or overcoming the differences companies encounter at the borders of

their various markets, they need to find large opportunities for value creation in exploiting these

diverse markets.


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To overcome the above problem AAA triangle framework can be used. The three As stand for the

three distinct types of global strategy.Adaptation seeks to boost revenues and market share by

maximizing a firms local relevance. Many companies use this strategy as they start expanding

beyond their home markets.Aggregation attempts to deliver economies of scale by creating

regional or sometimes global operations; it involves standardizing the product or service offering

and grouping together the development and production processes.Arbitrage is the exploitation ofdifferences between national or regional markets, often by locating separate parts of the supply

chain in different places.

The Challenge: Change, Complexity, Competition and Conscience

The development of international strategies entails attention to other details that seldom, if ever,

come into play in the domestic market. These challenges stem from cultural, geographic, and

political differences. Consequently, while a company only has to develop a strategy taking into

account known governmental regulations, one language (generally), and one currency in a domestic

market, it must consider and plan for different levels and kinds of governmental regulation, multiple

currencies, and several languages in the global market.

Change

Rapid change pervades all aspects of operations in global markets as well as the context in which

they take place. Not only are the rates of technological evolution, knowledge obsolescence and the

intensity of competition increasing at an alarming pace in many industries, but unforeseen events

are dramatically changing the political and economic context in which markets develop and

strategies are formulated.

Technological change renders product development, production processes, and experience rapidly

obsolete and contributes to escalating investment costs as well as heightened competitive

pressures.

The rapid pace of change is further complicated by its increasingly discontinuous nature. Today,

established models for predicting change no longer work in many instances due to the discontinuity

of change. At one time, market trends and growth in a developing country could be predicted on the

basis of trends in more advanced countries ten years earlier.

As customers become more mobile and are exposed to new ideas and patterns of behaviour through

the new global media, the diffusion of new products and innovation takes place more rapidly. Rather

than first being adopted by opinion leaders and then trickling down to other members of society,

innovations are now spreading horizontally across countries and societies. No sooner does a new

trend or fashion emerge in one country than it spreads rapidly to another. Not only are globalmarketers agents of change in introducing new and innovative products and services to other

countries, but in addition, they must respond to the rapid pace at which societies are changing and

market trends evolving.

While the pace of change is accelerating, pushed by the engine of technology and global

communication, it is becoming increasingly uncertain and unpredictable-occurring in unexpected

ways from unexpected sources. A new economic order thus appears to be emerging, characterized


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by new players and new and more diverse patterns of trade. Yet, all these changing patterns appear

fraught with uncertainty, as a surge in one direction is countered by a pull in another. A new

instability has crept into world markets, threatening at any moment to tilt the precarious balance of

economic forces. Moves toward world economic growth, regional integration or the empowerment

of Third World nations, can without warning be thwarted by pressures to retreat behind the bulwark

of economic nationalism.

Complexity

A second challenge arises from the increasing complexity of managing international operations.

Technological advances, on the one hand, enable management to direct, coordinate, and control

operations on a much broader and diverse geographic scale and scope than previously possible. Yet

at the same time, such advances add further complexity, as management has to master the tools

and skills required to handle the burgeoning international infrastructure.

As the geographic scope and scale of operations extends further and further, management is faced

with the task of directing and controlling diverse and far-flung activities at various stages in the value

chain, often in widely divergent environmental contexts. Additional layers of organization begin to

creep into the corporate infrastructure and further complicate the global management task.

With trends toward regional market integration, management systems are established to direct and

coordinate market operations within a region, and to provide an intermediate link between

corporate headquarters and local management. At the same time, organizational links between

functions in each stage of the value chain are added at a global level to ensure the transfer of ideas,

information and experience across geographic areas and to exploit potential synergies worldwide.

Complexity in the global environment is a product of contextual factors such as technological

advances, diverse social and economic change, and political upheavals. More directly, for the firm

complexity is intensified by the scope of its operations in global markets, at different levels of thevalue chain and how they are arrayed across markets, the inter-linkages and interdependencies

between markets, and the increased blurring of product market boundaries, both functionally and

geographically.

Competition

Increasing intensity of competition in global markets constitutes yet another challenge facing

companies at all stages of involvement in international markets. As markets open up, and become

more integrated, the pace of change accelerates, technology shrinks distances between markets and

reduces the scale advantages of large firms, new sources of competition emerge, and competitive

pressures mount at all levels of the organization.

As more and more firms venture into global markets, competition proliferates, posing new threats

and dangers to be reckoned with. In addition to facing competition from well-established

multinationals and from domestic firms entrenched in their respective product or service markets,

firms face growing competition from firms in newly industrializing countries and previously

protected markets in the Third World, as well as emerging global networks or coalitions of

organizations of diverse national origins.


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Firms from newly industrializing nations such a Taiwan, Singapore, Korea and Hong Kong are

increasingly taking the initiative in competing in global markets, rather than acting as low-cost

suppliers to firms in the Industrial Triad. The threat of competition from companies in countries such

as India, China, Malaysia, and Brazil is also on the rise, as their own domestic markets are opening up

to foreign competition, stimulating greater awareness of international market opportunities and of

the need to be internationally competitive. Companies which previously focused on protecteddomestic markets are entering into markets in other countries, creating new sources of competition,

often targeted to price-sensitive market segments.

Conscience

The fourth challenge relates to the firm's moral and social responsibilities in the global marketplace.

Companies have become increasingly aware of the need to take measures to limit destruction of the

environment. Such measures need to cover all aspects of the firm's activities from R&D and

production to marketing and service, as well as its operations in all parts of the world. Production

should be engineered so as to conserve resources and limit toxic waste. Products should be designed

to be free of environmentally harmful substances, such as phosphates and fluorocarbons. Use of

recyclable packaging and refillable containers also helps reduce environmental pollution.

An area of social responsibility of particular relevance in international markets is concern with

customer education and general well-being. This is often an important issue in marketing in Third

World countries, where disadvantaged or poorly educated consumers are less able to judge the

merits of a product or service or understand how to use it. Attention to the potential of promotional

material or product information to mislead customers is important.

Product safety standards should also meet the most exacting international standards, even in

countries where no such regulation exists. This is especially critical in the case of products such as

pharmaceuticals, where substantial health risks are present. Firms must take the responsibility to

provide accurate information to the industry and regulatory bodies, and to educate consumers and

distributors to ensure appropriate usage.

Intense competition, rapid change, and increased complexity in the global marketing environment

make it more difficult, but all the more imperative that a firm act in a socially responsible manner.

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