Why You Shouldn’t Go Globa

Group 8
Even as companies are being told that the future lies in globalization, some are
severely punished for their international moves.
A simple test can help you decide what makes strategic sense for your organization.
Introduction

Globalization promises substantial advantages like new growth and scale. For some
companies, it’s paid off handsomely. But global mania has also blinded many firms to
a hard truth: global strategies are devilishly tough to execute.
THREE INDUSTRIES WITH PARTICULAR
GLOBALIZATION CHALLENGES

• Deregulated Industries - Stateowned industries (telecommunications, utilities) have globalized and

increased competition in home markets

• Service Industries – (retailing, banking, insurance) scale economics and growth beyond home markets
threatened by foreign rivals.

• Manufacturing Industries – (automobile and communications equipment makers) – mergers and

consolidation in order to survive.
Royal Ahold’s Downfall
Dutch supermarket operator Royal Ahold - An accounting scandal that led to the resignation of its CEO and its
CFO in 2003. Due to International expansion in the 1970s – Europe, Asia, Latin America and USA.

• Cultural differences

• Frequent need to source fresh food locally.

• Different information systems coexist across the company, sometimes even within country.

• Lack of integrated systems and processes

• Dissatisfied minority share owners

• Over Diversification of geographic locations

Think before moving Global
1. Could the move generate substantial benefits? e.
g. Redland, a UK manufacturer of concrete roof
tiles, expanded around the world to leverage its
technical know-how beyond its home market
2. Do we have the capabilities (for example,
experience in postmerger integration) needed to
achieve those benefits? e. g. company BenQ’s
acquisition of Siemens’s mobiledevices business
failed because BenQ lacked integration skills.
3. Will the benefits outweigh the costs (such as the
complexity that comes with coordinating far-
flung international operations)?
Conclusion

• Not all globalization strategies are flawed.

• Before moving globalization, need to conduct a self assessment.
• Ensure efforts make strategic sense to avoid disastrous consequences.