The forces that drive businesses to compete on a global stage
Tuesday 30 December 1997
Globalisation was on everyone's lips as business in a range of sectors sought to explain away their need to merge, acquire or restructure - usually with the loss of several thousand jobs, even though the era of "downsizing" was supposedly over.
Price Waterhouse - which, incidentally, is one of the four accountancy and management consultancy firms planning mega-mergers, has put globalisation at the top of its list of "eight trends driving companies into 1998 and into the new millennium".
Scott Hartz, global leader of the firm's management consulting practice, said: "Globalisation is the single biggest force driving corporate change. It affects organisational structure, technology, communications, product development, service delivery, people and training. Global 500 companies need to transform their organisations into global enterprises to compete successfully in the future."
As such language suggests, this is not a trend to be welcomed by the fainthearted. Though much is made of the benefits for the customer or client of being able to obtain goods or services from anywhere in the world at the touch of a phone button and the flash of a credit card, the ramifications for the businesses seeking to meet these ever-more- demanding consumers are huge.
Not surprisingly, more than one senior partner of an accountancy firm has harked back to a golden age of less frenzied days, when clients could be told without fear of reprisals that their problem would be dealt with as soon as the appropriate people became free.
The pressure to compete on an international stage is also apparent in the increasing use of the term "world class". No longer is it enough - except perhaps for the moment in such comparatively regulated countries as France and Spain - for a company, for example, to be the best widget maker in Britain. If its customers can buy better widgets from overseas that is a completely worthless claim.
As Douglas Lamont, a Chicago-based consultant and academic on international business, points out in his recent book Salmon Day, globalisation is - in the current parlance - a "zero-sum game". Some organisations will win and some will lose and there is no option of simply muddling through.
It is partly because of the likely extreme outcomes - for example, Barclays' decision to sell off much of BZW immediately led to the assumption that the rest of Britain's investment banking business was doomed - that globalisation is widely seen as anything but a benign force.
Certainly, those involved in running government and in watching it have long been fearful of what they see as a threat to the nation state. Much of this has to do with the sheer size of companies such as Ford, General Motors, Sony, Unilever and Shell. As Rosabeth Moss Kanter, another US management thinker, points out in her book World Class, such organisations tend to be seen as "imperial corporations" that control the flow of money, goods and information across the world.
This is the thinking that goes along with the idea of large companies having larger annual revenues than the gross domestic products of many developing countries. And while Ms Moss Kanter regards it as probably "far fetched" to say that international corporations replace governments, she accepts that "their ability to operate effectively in more than one place gives them immense bargaining power in negotiations with governments". She then quotes Percy Barnevik, the creator of Asea Brown Boveri, the Zurich-based engineer that has garnered shelves full of excellence awards without ever making much impact on the collective mind, as saying that his power to influence government was limited when he was merely head of Asea. But "today I can tell the Swedish authorities that they must create a more competitive environment for R&D or our research there will decline".
But it need not be all negative. The old slogan of "What's good for General Motors is good for America" signals the sort of approach that the Blair government seems to be buying into by seeking to forge as many partnerships as possible with the business community. Since business has such great power it might as well be harnessed for the greater good, it is implied.
Not that it is size alone that is driving the globalisation of business. For a start, many of the companies that are at the head of the globalisation bandwagon are smaller in terms of numbers of people employed than they were 10 or 20 years ago. Second, the development that is pushing the globalisation of business is new technology, in particular, the Internet.
While it might have been possible for some time for large organisations to use their economic power to buy what they want from wherever they want, such desires have been purely wishful thinking for the man or woman in the street until comparatively recently. Now, though, an ordinary consumer equipped with a personal computer and a modem can buy a book that until recently would only have been available in the United States or can bypass travel agents and book a room in a beachhouse on a Far Eastern island.
In short, the Internet is a great leveller. Just as it enables consumers to start enjoying the same sort of access to goods and services that has long been available to corporations, so it enables a just-founded company to have the same sort of global marketing reach as a well-established organisation employing thousands of people all over the globe.
The downside to this, of course, is that right from the start the little guy finds himself competing with the big boys. And the result is that - for all but a few exceptions - business success is set to be even more fleeting than in the past. Companies will be able to enjoy huge expansion in sales on the strength of dominating a technology or a niche of the market while constantly at risk from newcomers like themselves.
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