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Charles Baden-Fuller Editorial
Globalisation is everywhere evident, but is everywhere evident.
In this issue, we examine five dimensions of globalisation and how it is influencing
businesses and executive decisions. In the opening piece, Arie Lewin and Carine
Peeters look at the offshoring of administrative and technical work. India
is currently the prime offshoring location and IT the most important dimension,
and the trend looks to be continuing. The authors examine why companies have
been experiencing better than expected results and why they must innovate
in the ways of off-shoring if the benefits are to continue.
George Yip, Alan Rugman and Alina Kudina examine the globalisation
of British companies. They argue that international competitiveness should
not be measured by profitability alone, but also by global market share and
international revenues. Many British firms are doing well by their measures,
but in the service industry of finance they are lagging. The challenge is
great, and the authors examine how British firms generally and those in the
service sectors in particular can improve their positions.
Gina Beim and Moren Lévesque's paper naturally follows
in sequence. They examine where companies should choose to invest. Their paper
not only provides a useful model for making these decisions, but also provides
data to help the busy manager, and a robust testing of the validity of their
methods.
Jie Wu and Nitin Pangarkar ask: what should companies in
local markets do when invaded by multinational firms? Following on from previous
work published in this journal, they explore the validity of four different
responses: Dodge, Contender, Defender and Extender. They examine when each
response is appropriate and identify the risks and action points that are
relevant to managers.
Finally, Olivier Boiral revisits our pages to discuss the
challenge of Global Warming. He explores whether companies should have a proactive
strategy to this issue, and if so how it is best adopted. He shows that some
of the most proactive firms have been involved in the Energy Sector, and that
there is no paradox here. Companies that contribute to Global Warming can
also be seen to undertake positive actions to reduce their influence.
Arie Y. Lewin and Carine Peeters Offshoring Administrative
and Technical Work: Business Hype or the Onset of
Fundamental Strategic and Organisational Transformations?ayl3@duke.edu
The increasing competitiveness of today’s business
environment puts pressure on companies to cut costs. Many have sought to do
so by outsourcing business processes to other countries that can provide low-cost
but high-skilled workers who can do the job for a fraction of the price in
the companies’ home territory. But what are the experiences of these
companies, and do the results match the expectations they held when they first
ventured on their offshore strategy? This paper reports on the findings of
the Offshoring Research Network, a collaboration between the Center for International
Business Education and Research (CIBER) at Duke University and Booz Allen
Hamilton to study the offshoring of administrative and technical work to low-cost
countries. Based on ORN’s first biannual survey, which received responses
from 90 US companies with a variety of experience in offshoring, outsourcing
abroad follows a fairly defined pattern: companies are likely to experiment
with outsourcing IT functions, and then as they gain experience and confidence,
will push other functions such as finance and accounting overseas as well.
Even surprisingly
core processes, such as R&D, can be sent offshore. The authors note that
while the cost savings achieved usually exceed expectations, the entire process
of offshoring is often instigated through random experiments from the bottom-up
level and surprisingly few corporate-wide offshoring strategies as yet exist.
They suggest that offshoring, which itself
is being driven by advances in communication technologies, may actually only
constitute the tip of an iceberg that is changing the shape of traditional
business models.
George S. Yip, Alan M. Rugman & Alina Kudina International
Success of British Companies gyip@london.edu
British companies have achieved mixed success overseas. For
some, such as BP, some 83 per cent of revenues come from overseas operations
while for others, such as the giant retailer Tesco, overseas earnings account
for just 20 per cent of the total. This paper examines the international success
of British companies in a matrix combining global market share and international
revenues. The authors identify those industry segments in which British companies
are most successful internationally and investigate whether these are attractive
industries in terms of profitability and growth. They find that the industries
with the largest global market shares for British companies are Mining, Casinos
(and Gaming), Oil Companies (Major), Distillers & Brewers and Water Utilities.
The industries with the highest international revenues are Precious Metals,
Pharmaceuticals, Industrial (Diversified), Oil Companies (Secondary), and
Mining. Virtually all of the largest British firms average over a 10 per cent
global market share but the second measure, the extent of internationalisation,
is found to be ambiguous. The manufacturing (product-based) firms tried to
be highly internationalised, as they compete globally, but the largest British
services firms (financials, retailers)
tend to have low internationalisation, and therefore appear to benefit from
a still somewhat regulated home market. In addition, British companies have
done a good job of building up global market shares in higher growth industries.
The paper provides recommendations for managers as to how British companies
with different combinations of global
market share and extent of internationalisation can improve their positions.
The methodology can also be applied to analysing companies from other nations.
Gina Beim and Moren Lévesque Country Selection for
New Business Venturing: A Multiple Criteria
Decision Analysis moren.levesque@case.edu
One of the first issues facing a company with global ambitions
is the matter of which country to enter. The international entrepreneur must
gather information on potential locations and evaluate this under several
criteria and from numerous perspectives. Very often such decisions are not
taken by one person, but by a group, who must decide a common and transparent
way to make their evaluations. This paper advocates a formal approach, Multiple
Criteria Decision Analysis (MCDA), as a way of measuring factors for country
selection, articulating the knowledge about decision processes and exploring
possible outcomes. The methodology also allows sensitivity analysis of the
results and facilitates the inclusion of subjective aspects in the decision
process. The authors offer an overview of the MCDA methodology to analyse
country selection. They created a hierarchy of criteria, which they point
out can be customised to any decisionmaker’s situation, and used published
international statistics to assess the performance of 14 countries in those
criteria. Five volunteers, experienced in international expansion, were presented
with the structure of the model and asked to imagine themselves in the position
of having to select a country to enter, to elicit their value functions and
weights. Sensitivity analysis was performed to demonstrate under what conditions
a country is outranked by another. The authors argue that the country selection
process with MCDA can better reflect the complexities of real
business environments as more facets of the problem can be considered simultaneously
and a non-equal weighting of performance-related constructs can be used, yielding
a more accurate set of preferences. As a result, country selection decisions
can be better explained and defended.
Jie (Jacob) Wu and Nitin Pangarkar Rising to the Global Challenge:
Strategies for Firms in Emerging Markets bizpn@nus.edu.sg
When well-resourced MNCs enter an emerging market, is the
game up for local firms? Not necessarily so, according to this article, which
uses data from 155 listed Chinese firms to show how local firms exhibit positive
ROA in the face of MNC entry. The article develops from Dawar and Frost’s
typology which arranges the response strategies available to local firms according
to industry pressure for globalisation and whether firm’s competitive
advantage is transferable to other geographic markets. This article give examples
of the four typical strategies - Dodger, Contender, Defender and Extender
- and the authors set themselves the task of looking for performance differences
across the different strategy types, as well as examining how size moderates
the strategy/performance relationship. Concluding that performance levels
depend on firm strategy, with internationally-oriented strategies resulting
in better performance; and large size helping performance for most strategy
types, they identify the implications of their findings for local firm managers
under MNC threat in emerging markets.
Olivier Boiral Global Warming: Should Companies Adopt a Proactive
Strategy? Olivier.Boiral@mng.ulaval.ca
Global warming is turning up the heat on companies to adapt
and cut emissions of greenhouse gases. Ever since the Kyoto Protocol was signed
in 1997, which required signatory countries to reduce harmful emissions, companies
have an environmental consideration to add to their strategy, whether they
have yet chosen to act on it or not. This paper asks whether companies should
adopt a proactive strategy, or whether they would be better off taking a ‘wait-and-see’
approach to environmental regulation. The issue has been complicated by some
uncertainties over the effects of global warming and the fact that the fastest-growing
emitters of greenhouse gases, China and India, as well as the US have not
bound themselves to the Protocol. Chief among the objections to the Protocol
are economic factors with some observers pointing to the huge costs involved
in adapting to reduce emissions. However this paper gives examples of some
companies that have achieved economic advantages by making changes to comply
with the Protocol at an early stage. The author proposes a global approach
for companies to anticipate the possible impacts of global warming and to
explore the policies and measures that managers can implement to cope with
this issue. As well as weighing up the proactive or the wait-and-see responses
to global warming, the author stresses the importance of promoting environmental
intelligence and other preliminary measures before deciding what strategy
to adopt.
This issue is available in full on-line at www.sciencedirect.com
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