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In my post two days ago, reviewing the article by Manuj and Mentzer (2008) titled Global Supply Chain Risk Management, I mentioned that they cited a paper by Ghoshal (1987) titled Global Strategy: An Organizing Framework as one of their references for listing risk management strategies. Today, I will take a closer look at that paper. The word “supply chain” doesn’t even appear once in Ghoshal’s paper, but why is this paper so interesting in a supply chain risk perspective?
The paper was written at the onset of globalization in 1987, when the buzzword of the day, “global strategy”, was still an emerging, but already very popular concept among managers of multinational corporations. One of the driving forces in any company is the desire to gaincompetitive advantage over its competitors. “Going global” is (or in 1987 still “was”) one of the means to achieve this. Today, it’s hard to imagine any corporation not being multinational in one way or the the other, or having at least some parts of its supply chain stretched around some parts of the globe. In his paper, Ghoshal provided a framework for selecting appropriate strategies when going global, and risk management was one of the strategies he looked at.
Competitive advantage – means and ends
In a multinational or global setting, competitive advantage can be gained from three sources (means): 1) Exploiting national differences in the countries the company is involved in, 2) Benefiting from economies of scale, and 3) Exploiting synergies from economies of scope, created by the diversification of its activities. The strategic task of managing globally is to use these three sources to achieve these three strategic objectives (ends): 1) Efficiency in current operations, 2) Risk management, and 3) Innovation, learning and adaptation. In the following I will deal with managing risks only.
A multinational corporation faces many risks, some of which are endemic to all firms, and others which are unique to organizations operating across national boundaries. Ghoshal (1987) divides the risk into four broad categories, the same four categories that 20 years later are picked up by Manuj and Mentzer (2008). Macroeconomic risks - random movements in the economic environment (wages, interest rates, exchange rates, commodity prices) Political risks - policy actions from national governments (legal and regulatory actions, nationalization, war) Competitive risks - uncertainty about competitors actions or development of competitive technology Resource risks - lack of human resources, technology or capital
It is the risks that cannot be diversified in a global environment that should be of most concern. and the strategic task is to consider these risks jointly in the context of particular strategic decisions. If you’re interested in political risk in particular. I suggest you read my review of the Gower Short Business Guide on Political Risk.One important issue with risks is that they change over time. .
If that is not possible. Twenty-four hours a day. the American market for determined goods such as consumer products or telecommunications is already overexploited). . sabotage attacks by the local population. you might find that the stock you hold is with a company located in a country that has become a victim of terrorism. Since it allows investors to place their capital in locations that may generate higher profits for them. Diversity • Diversity is the first and most important strategy in international investment.International Investment Strategies Putting your money in assets located outside of the United States is known as an international investment. A good international investment strategy plan requires a lot of time and is not as simple as applying all of the strategies mentioned above. In addition. Without conducting thorough research. theft or even occasional visits by the local mob or warlord. You must also understand the world of geopolitics and global economy and always keep yourself informed. You would not want to invest thousands of dollars in an unstable territory. this type of investment has generated a great deal of interest among investors. Proper Research The second most important point in international investment is to properly research the sociopolitical conditions of the region where you wish to invest. talk to others who have invested internationally. for example. it doesn't necessarily mean that everything will turn out well. it provides a new way to make money for all those investors who aren't willing to invest their money in markets with too many barriers (for example. If you can. you can know what is happening in cities and countries globally all with the click of your mouse. In reality. It's very important to remember that it is impossible for anyone to determine what will happen in the future. always makes sure to read and learn as much as you can before making an investment. seven days a week. Stay Updated • • • Staying informed and updated about what is happening around the world is another important strategy. There's no excuse for not knowing what's happening around the world with the presence of the Internet. Your plan to invest internationally can go up in flames if there is a coup against the government of the country you're invested in or if the government decides to nationalize determined resources. Even if you follow all three strategies. this is the most important strategy in any kind of investment because it would be too risky to put all of your money into one vehicle even if you are absolutely sure that it will work. Below are some important strategies in international investment.
Consideration should be given to split orders across distribution centers and the issues surrounding it. support French and German for Switzerland). Second. there can be more than one language support needed for any geography (i.10 Key Strategies and Considerations for Multi-Country eCommerce Rollouts Multi-country or global eCommerce rollouts have become a buzz word among most retailers and consumer brands. as done for ASOS. taxes and shipping charges are handled differently in each region. Lebara.) An MVNO (mobile virtual network operator). Cultural differences – Each region has different browsing and purchasing behavior. there are some languages that occupy more space than others (i. where the distribution centers (DC) will be located. This not only means technology support.e. 3. so you should factor that as part of the pricing strategy. Currency and pricing – This is the most important factor to consider. 4. will a retailer take a hit on the margin – or worst case vary the price of the product daily based on exchange rates (unlikely). Operations – This includes considerations for fulfillment systems (i. where as PCI compliancy is needed in most other . careful consideration should be given to inventory synchronizations and call center operations. I often get asked what the key considerations are for a global eCommerce platform rollout. Thus. Complexity increases due to two factors: First.e. 2. an equally important factor. “trousers” in the UK becomes “pants” in the US and “pants” in the UK means underpants). from a Web design perspective.e. To expand internationally. based on my experience on rolling out these platforms for large telecommunications companies (telcos) and retailers: 1. i.e. which helps in discovering this behavior. special considerations should be given to internal search due to unavailability of the translated data locally as most of the products are not that matured.e. Selling in multiple geographies means the platform needs to support local currencies. W3C accessibility and cookie laws are more prominent in UK and Europe. Language – eCommerce platforms should be able to target each region with its own local language. if present. Legal and compliancy – Each region is unique in its legal and compliancy laws. although both English. The following are 10 aspects that you need to think about. The content can be translated in a traditional way by an agency like SDL. such as do you need regional or global customer care and how will they access internal systems. or in a more dynamic way by plugging in a reverse proxy like MotionPoint. 5. While considering dynamic translation options. the same language can have different variations in different countries (i. has done this beautifully by creating localization aspects in its page templates. This should include careful planning on country specific functionalities including things like gift cards. Some initial research followed by usability testing is by far the most popular method. Additionally. retailers turn to the online channel as the easiest way to achieve brand penetration. French and German use more characters for the same expression as compared to English. but pricing a product becomes equally important. which provides the data to the eCommerce platform for storage as implemented by many retailers for future international rollouts. Also. and inventory management – consider if each region will have different stock pots or share one global stock). You must also consider price parity with the local stores.
bank transfers are common in Europe and Asia. Testing – Last. content and merchandising – Having the right skills both. local payment methods are very important.e. Few retailers have handled these issues very wisely with their use of effective catalog hierarchies and smart relationships between catalogs. Companies like CyberSource. 9. 10.g. Payment and fraud – Each geography has different kinds of payment methods. Global Collect and DataCash do master in these capabilities. Catalog design – Consider the way you structure your catalog. 6. technically (i. As per Forrester. checks are still popular in some parts of Europe. in France. 8. device finger printing. more and more retailers are going to embark on this Journey in the not-to-distant future. Depending on the decision. ability to understand different languages for merchandising) is key. Is your company ready? What other roadblocks have you encountered that you’d like to share in your globalization journey? . is testing. caching strategy and the likes should be decided. This should be planned far enough in advance for the creation of data sets.geographies. This includes global telephone. effective fraud management is essential. address verification. globally or local version in each region). 3D secure and more. Infrastructure and hosting – Suitable consideration should be given to where both the merchandising business tools and the end user commerce platform should reside (i. usage of business tools) and multilingual (i. then retailers will find it very difficult to succeed in this rather unnerving adventure.e. This includes designing master and country-specific catalogs. Thus. Even simple things like promotions can vary by country (e. content delivery networks (CDN). Bill Me later and ClickandBuy are also gaining global traction. People.e. where as cash-on-demand remains prominent in China. and if these aspects are not considered as part of the guiding principles or in the design strategies. Similarly. 7. but certainly not the least. data migration plan and distribution of users across multiple regions In summary. you cannot perform business in a negative margin outside of sales periods). Paypal. which are a nightmare for support teams. From a platform point of view. this means having the ability to manage content for different sites and to set up granular roles and responsibilities per site. as well as strategies to avoid massive synchronization issues. On the other hand.