Changes in Operations Strategy due to Globalization
Organizations need to dramatically change their internal management processes to successfully globalize their operations. They need to adopt more stringent quality and performance standards than they ever had to in their local markets. Maintaining a high level of quality is essential since the cost of a defect can be very high for an organization operating in global markets. Global organizations require competent managers because issues in international markets and operations are much more complex and demanding than those in the domestic market. They need to look not only for market opportunities or resource availabilities, but also for talent that can be used to design future products. In other words, global managers should strive to leverage the local assets of their organizations for global advantage. The difference in approaches between national and global goals and management necessitates changes in several key strategic operational decisions. The following sections describe the differences in each of these approaches.
Selection of Markets
The selection of a market is a simple task for national organizations. The managers at headquarters and their counterparts in the divisional offices select markets for their products. However, market selection is a more complex task for global organizations and requires considerable attention to factors like market size, the capability of the subsidiary, the value of experience that can be gained there and so on. Information about customers, suppliers, competitors, and other macro economic factors is also necessary for market selection. Hence, managers of global organizations need to discuss numerous issues with the managers of subsidiaries when selecting markets for their products.
Product Development and Technology Choice
New product development by a national organization is based on the local need for the product and the potential for returns on investments made in the national market. The managers and the technical staff at headquarters select technology for these organizations. However, in the case of global organizations, the managers at the head office do not dictate product development and technology choice to their subsidiaries. In these organizations, product development involves the joint efforts of experts located in different countries and markets, who pool their knowledge and experience to develop a globally competitive product. Decisions regarding the use of technology in product and process development are dependent on inputs from managers and technologists from headquarters and various subsidiaries. Organizations like IBM, P&G and Ericcson carry out their product development activities with the help of experts located in different countries.
Allocation of Resources
Whenever national organizations refer to resources, in most cases, they mean capital resources. In these organizations, the head office generally allocates capital to its subsidiaries and controls their activities. Capital allocation is done on a project to project basis. Local managers can reinvest their profits as long as the investments earn a return that is not less than what the organization would have earned elsewhere. In the case of global organizations, the concept of "resource allocation" is broader in scope. The most scarce and precious resources in many global organizations are their technologists and international managers who can coordinate the work to attain continuous improvement.
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