2009 Pankaj Ghemawat

Globalization of Business Enterprise

(GLOBE)
0. I ntroduction: Globalization
Professor Pankaj Ghemawat
SAMPLE
GLOBE Class Outline
Module I . I ntroduction: Globalization (3)
Module I I . The CAGE (CulturalAdministrativeGeographic
Economic) Distance Framework (7)
Module I I I . Maximizing Global Potential (2)
2011 Pankaj Ghemawat
Globalization and Business
I n real estate, the mantra is 'location, location, location.' For global brand managers, it might
be 'localise, localise, localise.
A consultant
There is a balance on the spectrum between local and global that represents the sweet
spot[and makes for] the race to the middle.
A manager
The world got flat[creating] a global, Web-enabled playing field that allows
forcollaboration on research and work in real time, without regard to geography,
distance or, in the near future, even language.
A journalist
2011Pankaj Ghemawat
Levels of
I nternationalization
Telephone calls
Immigrants (to Population)
Direct investment
Equity investment
Exports (to GDP)
20%
40% 60%
80% 100%
2011Pankaj Ghemawat
University Students
Six Critiques of Semiglobalization
1. Flat tomorrow if not today
2. The crisis changes everything
3. Its all about information/ intangibles/ interactions
4. Think about culture and politics, not just economics
5. Remember (U.S.) hard power/ military hegemony
6. Tom Friedmans critique
2011Pankaj Ghemawat
Inbound FDI as % Of Gross Fixed Capital
Formation*
*The two estimates for 2009 are upper and lower bounds Source: UNCTAD, World Bank World Development Indicators, estimates
20%
18%
16%
14%
12%
10%
1970 1975 1980 1990 1995 1985 2000 2005 2010
8%
6%
4%
2%
0%
1. Flat Tomorrow I f Not Today
2011Pankaj Ghemawat
2. The Crisis Changes Everything
Global spread of crises from major financial centers for more than
200 years
Recurrent sense that This time, its different
This time around,
Everything is fine because of globalization, the technology
boom, our superior financial system, our better understanding
of monetary policy and the phenomenon of securitized debt.
2011Pankaj Ghemawat
2. The Crisis Changes Everything
Average Net Capital Flows for 12 Major Economies
(current account as % of GDP)
0%
1%
2%
3%
4%
5%
6%
2011Pankaj Ghemawat
Post Crisis Strategy
2011Pankaj Ghemawat
2. The Crisis Changes Everything
0% 5% 10% 15% 20% 25% 30% 35% 40%
Direct Investments
Venture Capital
Equity Investments
Bank Deposits
Governmental Debt
Recent Levels of Cross-Border Financial Holdings
2011Pankaj Ghemawat
3. I nformation is I T
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
European News
U.S News
Internet traffic
Patents
Tourist arrivals
Immigrants (to population)
Telephone calls
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
European News
U.S News
University students
Internet traffic
Patents
Tourist arrivals
Immigrants (to population)
Telephone calls
Levels of Internationalization
2011Pankaj Ghemawat
Administrative
Distance
Geographic Distance
Economic Distance
4. Think Culturally/ Politically
The CAGE Distance Framework
*Pankaj Ghemawat, Distance Still Matters, HBR, September 2001
Cultural Distance
2011Pankaj Ghemawat
Personal Contact
Intl. travel and tourism
Intl. telephone calls
Intl. remittances/personal
transfers
Political Engagement
Intl. org. membership
Treaties ratified
UN peacekeeping contributions
Governmental transfers
Technological Connectivity
Internet users
Internet hosts
Secure servers
Economic Integration
Trade
FDI
4. Think Culturally/ Politically
A.T. Kearney/Foreign Policy Globalization Index
2011Pankaj Ghemawat
U.S Military I nterventions
5. Hard Power/ Military Hegemony
The Pentagons Old New Map of the World
2011Pankaj Ghemawat
Trade Disputes
2011Pankaj Ghemawat
6. The Friedman Critique
Ghemawats data are narrow.
2011Pankaj Ghemawat
Bases of Globaloney
Lack of data
Projection bias
People believe what they want most or fear most
Social pressures
Media hype
Techno trances
2011Pankaj Ghemawat
Technotrances
The extension and use of railroads, steamships, telegraphs, break down nationalities and bring
peoples geographically remote into close connection commercially and politically. They make the world
one.
-David Livingstone, 1850s
The airplane and wireless know no boundary. They pass over the dotted lines on the map without
heed or hindrance. They are binding the world together in a way no other system can.
-Henry Ford, My Philosophy of Industry, 1929
We live in a single constricted spaceThe new electronic interdependence recreates the world
in the image of a global village.
-Marshall McLuhan, The Gutenberg Galaxy, 1962
The world got flat[creating] a global, Web-enabled playing field that allows for multiple forms of
collaboration on research and work in real time, without regard to geography, distance or, in the near
future, even language.
-Thomas Friedman, The World is Flat, 2005
2011Pankaj Ghemawat
GLOBE
1 Grolsch: Growing Globally
2 The Globalization of Cemex
3 Globalization of Business Enterprises
I .I ntroduction: Globalization
4 Star TV
5 Cultural Differences
6 Endesa de Chile I nvesting in Peru
7 Administrative Differences
8 The I ndian I T Services I ndustry
9 Haier in the US in 2008
10 Mittal Steel in 2006
I I .The CAGE (Cultural-Administrative-Geographic-Economic) Distance Framework
I I I . Maximizing Global Potential
11 The Policy Agenda
12 The Personal Agenda
2011Pankaj Ghemawat
The Focus on Differences
1. Empirical evidence
2. Typical objections
3. Fundamental bias
4. Private and social implications of the bias
5. Logical interest
6. Expert recomendations
2011Pankaj Ghemawat
Zero Globalization Complete Globalization Semiglobalization
The Scope for Distinctively Global Content
2011Pankaj Ghemawat
Expert Recommendations
Results of the Ghemawat, Yeung, AACSB survey suggest a robust organizing
framework for questions related to content. In the survey, thought leaders
across disciplines were asked:
What international elements of [your discipline] do you believe are
important for functional/ general managers with expertise in the
international dimension of business to master?
Six categories of environmental/ contextual differences emerged from a
careful analysis of the responses: cultural, legal/ regulatory, political,
economic, and other
-AACSB Report on the Globalization of Management Education, 2011
2011Pankaj Ghemawat
Three Key Points
Recognize that differences matter--that the world isnt
perfectly integrated
View the worlddifferences and similaritiesfrom a
particular perspective
Remember that the real challenge is not just to understand
differences but to address them
2011Pankaj Ghemawat
The Globalization of Firms
Businesses visible hand of globalization
Nearly 60% of sales, assets and employment of 100 largest
nonfinancial corporations outside home country
All but the very smallest companies tend to be exporters and
importers
I mports associated with significant innovation and
productivity gains
Typical aspiration to (continue) increase rather than hold
steady or decrease
2011Pankaj Ghemawat