Global Business Practice

Time plays two important roles in global management. In each instance, patience and a sense of history are involved. First, managers cannot simply transform their organizations into global participants overnight. It takes time and careful planning deliberately to establish a global position in the second sense of globalization – location – that we have discussed. In this article the discussion is on reasons for seeking global positions and possible paths for doing so.

Second, the globalization of business has resulted in relationships among managers whose cultural traditions not only differ, but have evolved down those different paths for hundreds, if not thousands, of years. Thus, it is unrealistic to expect global business relationships to evolve without considerable effort and adaptation. A classic case in point is the historical a cultural divide between the United States and Japan.
In an effort to bridge the cultural differences inherent in a global economy, The Gillette Corporation has developed a quality training program to ensure a supply of global talent through its international Graduate Trainee Program. Every year Gillette identifies and interviews top graduates from prestigious universities in Columbia, Japan, Mexico, and other countries in which Gillette operates. Some of the students become part of an 18 months training program, the first six months of which are spent in the home country, followed by a year at the Boston headquarters. In 1993, 25 students participated in the program from such diverse locations as Poland, Russia, People’s Republic of China, England, and Singapore. Of the 113 individuals who graduated from the training program from its inception in 1987 to 1993, 60 were still with the company in 1993, a 53% retention rate.

How Companies go International:

Few organizations start out multinational. More commonly, an organization proceeds through several stages of internationalization, where each stage represents a way of conducting business with closer proximity and contact to customers in other countries.

The first two stages involve exporting, the selling of domestically produced goods in foreign markets. Companies at the first stage of internationalization have only passive dealings with foreign individuals and organizations. At this point for example, a company may be content with filling overseas orders that come in without any serious selling effort on its part. International contacts may be and by an existing department. Third parties, such as agents and brokers often at as go-betweens for companies at the first stage if internationalization.

In the second stage, companies deal directly with their overseas interests, though they may also continue to use third parties. At this point, most companies do not base employees abroad, but domestic employees regularly travel abroad on business.

In the third stage, international interests shape the company’s overall make up in an important way. Although still essentially domestic, the company has a direct hand in importing, exporting and perhaps producing its good and services abroad.

It is at this juncture that managers face the possibility of establishing formal contractual relationships with managers in the other countries. They can use licensing, the selling of rights to market barn dame products or use patented processes or copy righted materials, or they can sell franchises a special type of license in which a company sells a package that contains a trademark, equipment, materials and managerial guidelines. Franchising is the primary way McDonald’s Pizza Hut and other fast food chains have extended into international markets.

Although licenses and franchises give corporations access to foreign revenues their role in management is limited. To gain a greater say in management organizations have to turn to direct investment At this, fourth stage, they either carte a foreign subsidiary or buy a controlling interest in an existing foreign firm.

Another option is the joint venture, in which domestic and foreign companies share the cost of developing new products or building production facilities in a foreign country. A joint venture may be the only way to enter certain countries where by law foreigners cannot own businesses. In other situations, joint ventures let companies pool technological knowledge and share the expenses and risk of research that may not produce marketable goods.