Globalization of Management is a fact of life

The globalization of management is a fact of life. The daily press is filled with reminders of how organizations have taken on a global focus. News reports frequently mention such matters as international trade balances and currency fluctuations. It is common to read about Japanese companies making inroads in United States markets or American companies making inroads into Japanese markets. There are stories about managers from the former “Iron Curtain” nations training in Western Europe or the United States, and American and British companies teaming up to provide new telecommunications and airline travel services. Today, no manager can afford to assume that his or her organization is isolated from all of this global activity. Customers for Sumitomo’s chips, such as Hewlett-Packard, can attest to that.

Today it is not unusual for a global organization headquartered in the United States to oversee manufacturing operations in, say, the United States, Germany, and Singapore; to sell its products in dozens of countries; and to face competition from companies based in the so called “Four Tigers”- Hong Kong, Singapore, South Korea, and Taiwan.

It is not just large corporations that have global focus. Increasingly, small businesses are going global. A poll of the 1993 INC. magazine 500 showed that 38percent were doing business globally, with an average of 15% of sales from other countries. The most popular trading venues are Canada and Mexico, though 25 were doing business in Latin America, 115 in Europe, 73 in Asia and 30 in Australia. According to the U.S. Department of Commerce, most exporters are not very large. Very small companies employing 20 or fewer employees accounted for $30billion or 12% of U.S. exports in 1987.

What do we mean by the globalization of business? We see the phenomenon of globalization as consisting of three interrelated factors-proximity, location, and attitude. Taken together, these three facets of globalization emphasize the unprecedented lineup and complexity of relationships that confront a global manager.


First, managers now operate in much closer proximity than ever before to a greater numbers and range of customers, competitors, suppliers, and government regulators. This proximity, a function of the “shrinking globe”, is partly a matter of time, as today’s telecommunication technology allows people around the world to share voice, videos, and facsimile information in minutes. The increasing technological and managerial capabilities of people around the globe are another aspect of proximity. Managers find themselves competing or even collaborating with a new cast of global players. Honda, for example, moved nearly sixty American specialists to Japan for several years to work with their Japanese counterparts on design for the 1994 Honda Accord.

To emphasize this new spirit of closer ties and the insignificance of miles in today’s business world, Kenichi Ohmae, a longtime consultant to global business organizations, urges managers to treat all customers as “equidistant” from their organizations.

Second, the location and integration of an organization’s operations across several international boundaries is part of globalization. For example, American Telephone & Telegraph (AT&T) telephones and telephone switching computers are designed in the United States, manufactured in Singapore and the United States and sold world wide to customers who use the equipment to connect with AT&T long-distance services that reach all corners of the globe. In 1990, companies based in the United States employed 2.8million people in Western Europe, 1.8million in Asia, and 1.3 million in Latin America. Toyota, Nissan, and Honda operate auto assembly plants in the United States.

Toyota finds U.S. Workers that Share Its Values:
Japanese automobile firms that have established operations in the U.S. have brought with them their ideas, processes, and management of quality. Although not all methods that work in Japan have been transplantable to the U.S. culture, many are especially if employees are carefully selected. One firm that has used a careful screening process successfully is Toyota Motor Manufacturing Inc. of U.S.A., located in Georgetown, Kentucky.

Toyota builds its quality efforts around its employees, recruited almost exclusively from within Kentucky. In order to match the needs of the organization with the interests of the potential employees, Toyota conducts an exhaustive value-based hiring process that allows the company to identify potential workers with the types of skills it needs-problem-solving and interpersonal skills. These skills are compatible with the company’s basic values. The company wants people who can think for themselves and solve problems; it also wants people who can work on a team. Toyota managers see each employee selection as a long-term investment decision.