George S. Yip Pierre M. Loewe Michael Y. Yoshino
Deciding how to deal with the globalization of markets poses tough issues and choices for managers. There are both external business forces and internal organizational factors to consider. External business forces revolve around the interaction of industry drivers of globalization and the differentways in which a business can be global. Understanding this interaction is key to formu.lating the right global strategy. Intemal organizational factors play a major role in determining how well a company can implement global strategy. This paper provides a systematic approach to developing and implementing a global strategy.
MOST MANAGERS have to face the increasing globalization of markets andcompetition. That fact requires
Mr. Yip is Visiting Associate Professor of Business Administration at Georgetown University, and a Faculty Associate of the MAC Group. He is building a database on global businesses via the PIMS Global Strategy Program of the Strategic Planning Institute. His extensive business experience includes positions with Price Waterhouse, the MAG Group, and Unilever, in theUS and Europe.
each company to decide whether it must become a worldwide competitor to survive.^
European price premium by introducing minor upgrades to the European product. But its multinational customers will have none of it. They start buying the product in the United States and transshipping it to Europe. When the company tries to prevent them from transshipping, they go to a broker,who does the work for them; they still save money. The manufacturer doesn't have a choice. It's working in a global market. And it's going to have to come up with a global price. But management is fighting a losing battle because it is unwilling to make the hard strategic and organizational changes necessary to adapt to global market conditions. European and Japanese corporations also face thesekinds of organizational roadblocks. Large European firms, for example, historically
This is not an easy decision. Take the division of a multibillion-dollar company, a company that's very sophisticated and has been conducting international business for more than fifty years. The division sells a commodity product, for which it is trying to charge 40% more in Europe than it does in the UnitedMr. Loewe is a Vice President in the Gam- States. The price was roughly the bridge office of the MAG Group, an in- same in the United States and in ternatiorud general management consulting firm. He specializes in strategy and or- Europe when the dollar was at its ganiTMion assignments for multinational all-time high. The company built a firms. Prior to joining the MAG Group, he European plantwhich showed a was a marketing executive for Salomon/ greater return on investment with that North America. European price. But the dollar has Mr. Yoshino is Professor of Business Ad- fallen and, if the company drops its ministration at the Harvard Business School, where he teaches in ihe MBA and exec- European price to remain roughly utive programs, and a Faculty Associate the same as the US price,the return of the MAG Group. He has consulted on the plant becomes negative, and extensively to US, European, and Japanese some careers are in serious jeopardy. companies, and published numerous articles and books on international business. So it is attempting to maintain a 40%
have been more multinational than US companies. Their international success is due, in part, todecentralized management. The companies simply reproduced their philosophy and culture everywhere, from India to Australia to Canada. They set up mini-headquarters operations in each country and became truly multinational with executives of different nationalities running them.
national business. Until recently, overseas posts have been spurned. A marketing manager for new products in a United States...