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Many companies believe that future expansion and growth lies in globalization.

With international trade figures reaching ?? billions, the above said belief seems to be true in general. But it does not hold true for each and every company. And if you go for globalisation without considering the pros and cons then you are very likely to be punished severely. So, in this article the writer gives simple test that can help you decide what makes strategic sense for your organization. Economic globalization is viewed by some as to provide global stability. Some others view it as a threat. But all feel that everyone should embrace it. Even smaller enterprises are under constant pressure from various factors to go for globalization. These factors mainly include the move taken by competitors, financial markets and media. The present article was written during the 2008 financial crisis. So the author says that the crisis is slowing down globalization but it will continue to exist and expand in the future. And this is what we see in the current situation when most enterprises are hunting for opportunities to go global. So given the urge to go global many companies forget to evaluate themselves and forget the mistakes committed by companies which went global and failed. The author then gives example of ABN Amro, AES and Daimler-Benz. ABN Amro, a Dutch financial services firm , acquired numerous banks all over the world but could not integrate them together to increase value as a global chain. AES, a U.S.– based energy firm that operates 124 generation plants in 29 countries on five continents, has struggled to show that it is worth more than the sum of its individual geographic units. The author here wants draw attention towards to the synergy effect of globalization. The total value of global company should be far greater than the sum of its individual units. So companies going global should always keep the synergy effect in mind. The third example given is of Daimler-Benz. It merged with Chrysler in 1998 in order to create a Welt AG – a world corporation – but never attained the power over markets and suppliers that this global position was supposed to deliver. When such strategic flaws occur, the results are catastrophic. Under present competitive situation, companies do not have enough time to learn from their mistakes and improve their strategy. So on failure the companies are forced to shut down their global operations without a second chance. Then the author gives the consequences of failure. ABN Amro was dismembered by the Royal Bank of Scotland, Fortis, and Banco Santander, largely along geographic lines. AES’s share price tumbled and some investment advisers are called for the firm to be split into three or more parts. The architect of the Daimler Chrysler deal, CEO Jürgen Schrempp, finally yielded to share-owner pressure and resigned, freeing up his successor to sell Chrysler to the private-equity giant Cerberus in 2007. Companies with ill-considered are likely to become targets for break-ups and over hauls. Even the best of management team can make mistakes in this competitive environment. No doubt the factors driving globalisation are powerful and the benefits are tremendous but what concerns the author is the assumptions which share regarding globalisation and the safety which such companies find in numbers. The author highlight several industries where this mind-set has been prevalent and a number of companies that have paid a high price for adopting it. According to the author, the ambition to go global started as early as the foundation of the British Empire. I feel that international trade started long before. The 'silk route' was major trade route which linked Asia to Europe. A lot of import and export was done through this route. There were some sea routes also through which international trade was done. The real internationalization started in the twentieth century after the industrial revolution. The number companies going global has increased since then and there has been many successes and failures along the path.

The pace of globalization picked up after the 1990's. Many countries liberalized their international policies and the economies opened up. Barriers to international trade were removed. Technological developments supported globalization and eased the way international business is being done. All these factors have urged the companies to go for internationalization as soon as possible. Foreign direct
investments are at record levels, cross-border partnerships and acquisitions are increasing, worldwide sourcing continues to increase, and the pursuit of customers in emerging economies grows ever more heated. Although such moves have benefited many companies, we’re beginning to see many failures also. Sometimes firms have failed because their global strategies were deeply misguided, other times because execution was more difficult than anticipated. Many of these failures could have been prevented and can be avoided in future if companies seriously addressed three seemingly simple questions given below.
1. Are there potential benefits for our company?:-

Companies should not follow the herd mentality while going for globalization. What may be good for others may not be good for you. Companies should assess the opportunity of going global and the potential benefits of going global. Many companies do not do cost benefit analysis. They assume that going global will certainly benefit them. These is a misconception which must be removed before deciding on whether to go global. The author gives example of UK-based roof tile maker Redland. It expanded aggressively around the world
beginning in the 1970s with the aim of leveraging its technical know-how beyond its home market. It sought opportunities in countries, such as the United States and Japan, where local building practices provided very little demand for concrete roof tiles. Although the company was fully able to transfer the relevant technology, there was no value in doing so in such markets. Redland didn’t assess the foreign markets properly. It was not able to create value for its foreign markets and hence didn’t create value for itself also. So before going for globalization make sure that there are potential benefits for both you and the customers.
2.Do we have the necessary management skills? Sometimes potential benefits will exist for your company, but

your company may not be in position to leverage on the potential benefits. You may not be able to take advantage of the benefits properly. The common advantages of globalization such as safety in numbers and economies of scale appear very lucrative. But it is extremely difficult to achieve them. Often companies lack the management skills required to unlock these potentials. The cites the example of industrial conglomerate BTR. BTR had developed a presence in many countries. However, each business unit was run as a largely autonomous entity, with stringent profit accountability and little encouragement to work with others. This approach made sense in a fragmented world, but as BTR’s customers globalized, they came to expect coordinated supply and support across borders. Although the opportunity was clear and BTR seemed well positioned to seize it, the company found it impossible to implement an approach so alien to its traditions. Even after a change of CEO and other senior staffers, the company culture blocked attempts at global integration, and the 1999 merger with Siebe was seen by many analysts as an admission that BTR simply could not make the changes needed.