Managing Globalization

Reading: Clegg et al. (2008), ch. 14

Learning outcomes

At the end of this session, students will be able to:

Discuss debates around globalization Identify the key strategic issues for managers

arising from globalization Apply analytical techniques for establishing decision making protocols in a global context Argue that globalization has both positive and negative consequences for individuals, organizations and societies

Session outline
Defining globalization Explaining globalization Consequences of globalization Managerial implications of globalization Managing responsibly and globalization

Considering globalization
Globalization is a term you will have encountered numerous times in your studies to date Taken for granted as an inevitable phenomenon Governments, business and communities have responded resistantly to it Some debate as to what it is, what it represents and what extent it is happening

Defining globalization

Definitions

Definitions:
y ... Worldwide integration in virtually every sphere achieved

principally through markets ... whereby the world beomes more interconnected and the fates of ... people ... and ... Organizations become intertwined. Clegg et al (2008: 580)
y ...the intensification of world-wide social relations which link

distant localities in such a way that local happenings are shaped by events occurring many miles away Huczynski & Buchanan (2001: 897)

The Global Village (McLuhan 1958)

y Question for discussion: why is this term particularly evocative??

The Shrinking World (Giddens 1990: 64)

Defining globalization (cont.)

Associated with proliferation of primarily US models of production, products and services (i.e. brands)
y See Ritzers (1993) damning McDonalization thesis y Frances resistance to English language and fast food

Multinational corporations
y Single ownership, operating in several counties

Mass communications (cheaper over time)

y Telephones y Internet y Transport

Access to resources and consumption opportunities

y Global branding / marketing y Containerisation and supply chains y Growing wealth in emerging markets (e.g. China)

Explaining globalization

Explaining globalization

Why has it happened / is it happening??

y Is it the inevitable course of history?? The determinist view y Or is it being driven by human agency and interests??

Capitalism ... Imperialism .... brotherly love??

Despite differences in opinion, most credible commentators agree that the factors are various and complex
y Chaos theory? Complexity theory? The perfect storm??

Also, its not a process that its easy to plot a beginning, middle and end to
y i.e. We cant say it started at 0843 GMT on 4th October 1979 or

anything y As a concept it is very indistinct, nebulous and open to interpretation

Key forces

Developments in communications
y Most obvious and visible factor to us Internet, email, phones, video, transport, supply chains y Digital revolution over last 25 years

Internationalisation of capitalism
y Predicted by Lenin in 1909! y As local/domestic markets mature and saturate, producers must look for

other markets to colonise; especially as developing markets emerge with millions of enthusiastic new consumers (e.g. Shanghai)
NB Most of Manchester United FCs supporters will never visit Old Trafford stadium: they live thousands of kilometres away! y The creation of trading blocs such as the WTO, NAFTA and the EU

Political / Ideological shifts (see Fukuyama, 1989)

y Fall of communism (early 1990s); even PR China is moving towards

market capitalism; end of Cold War

y Even established market economies have been deregulating and liberalising

further with the privatisation of state corporations and scaling back of welfare provision: see Neo-liberalism as a concept

Consequences of globalization

Caveat

In your studies in management (e.g. Marketing, strategy, finance) to date, you will have looked at globalization and its consequences extensively On the whole, these consequences will have been presented as benign and as presenting opportunities for markets and consumer freedom of choice However, the phenomenon deserves a further, more circumspect examination If the concept is open to debate and interpretation; so are its effects The critical student of management must factor this into their analyses in order to make more enlightened and productive judgements

Consequences for business

There can be little doubt that corporations have benefitted:

y Access to new markets for products y Access to new labour markets (more later) y Deregulation cuts through red tape and tariffs y Developing regions grateful for inward investment Governments often willing to grant corporations considerable license! y Opportunities for strategic alliances/ partnerships, mergers

acquisitions y Enhanced innovation and development opportunities y Able to play financial systems and tax regimes
E.g. exchange rates, registration of subsidiaries off-shore

Some problems:
y Enhanced competition, market volatility, complexity, risk y Unwelcome scrutiny of corporate social responsibility (CSR)

Consequences for States

Governments have been mixed in their responses, either:

y (a) embracing globalization (e.g. UK, Dubai, India, Brazil), breaking

down barriers to trade and financial transactions .. Or ... y (b) resisting it, seeking to protect domestic trade and jobs

Most governments are in a dilemma

y On the one had they need their countrys economy to perform

competitively (investment, trade, growth, sustainable public expenditure) y On the other, their voters will be upset if they lose their jobs in factories which relocate to cheaper, less well regulated locations!
E.g. The European / American auto industry (or whats left of it!).

Governments in developing democracies are wary of balancing need for investment and for population not to be exploited! (e.g. Venezuela, India)
y Autocracies (e.g. PR China) dont care so much!

To what extent should states try to hold back the tide of globalization? Should they try?? Discuss ...

Consequences for workers

For workers in developed countries, it creates problems:

y Jobs which were taken for granted (e.g. manufacturing) have been y y y y

disappearing in their millions, moving to China etc. Labour markets must adjust to service and knowledge jobs Innovation, new skills and attitudes required Greater insecurity More emphasis on doing jobs that cant be replicated elsewhere
E.g. R&D, personal services, tourism and hospitality

For workers in developing countries, it creates opportunities

y Chances for better paid work y Greater choice y Growth of middle classes (e.g. Mumbai, Shanghai) y BUT .... millions of workers still in poverty, badly exploited

Consequences for communities and citizens

Potentially, greater access to information and products gives greater freedoms and opportunities
y Does not always work this way in reality!

As corporations become more powerful, struggles may emerge with the communities on which their activities impact
y E.g. Pollution, labour markets

This raises many ethical issues for managers!

y ... More later!

Managerial implications of globalization

Managerial implications

Competition
y You must be constantly on your toes, to innovate, to experiment and

to quickly take advantage of opportunities

Culture
y You must be aware of other ways of thinking and seeing y Important in employment and marketing terms

Consumers and workers in different contexts respond to different imperatives (see Hofstede, 1980) What works in one place wont necessarily work in another!!

Intelligence
y Accurate data and the ability to analyse crucial

Must identify opportunities and threats

Stakeholders
y Need to negotiate diverse and often competing demands from

multiple interest groups

Key skills for globalization

Flexibility Communication Inter-cultural awareness

Management development?
y MBA (US-style) becoming standard

Delivered in virtually every country

y Does the standard US model have all the

answers???

Managing responsibly and globalization

Winners and losers

Despite tremendous economic growth in the last three decades, stark inequalities remain Many commentators (e.g. Klein, 2001; cited in Clegg et al. (2008; 586) blame globalization for this Others claim that without globalization, things would be much worse and that the developing countries are merely coming through a necessary historical stage from which they will emerge in time to prosperity

y What do you think????

Either way, there are definite winners and losers To what extent should managers spend time worrying about the losers??

World Bank Poverty levels

Ethics and CSR

Contemporary management thought stresses the importance of ethical behaviour (explored in more detail in a later session) Also, Green, Fair-trade and ethical marketing can make good business sense

y Is this cynical??

Globalization: some critical points

There has undoubtedly been an enhanced internationalisation of commerce and popular culture in the last three decades Is it anything new??

y British Empire? (1600s-1960s)

In an era of assimilation and convergence, why do nationalist identities remain??

y Sometimes violently expressed (e.g. Tamil Tigers) y Sometimes peaceful (e.g. Scotland) y Counter ideologies (e.g. Radical Islam)

The Old Rich World (i.e. USA, Europe) still the richest and most powerful regions

Summary
A variety of environmental forces have made the world more interconnected This has provided opportunities and threats The contemporary manager cannot afford to be insular and parochial An ethical mindset will lead to a more sustainable model of commercial operations