Difficulties in Managing Globalization

The success of an organization's globalization efforts depends on the ability of the managers managing it. As Wharton Professor Howard Perlmutter wrote, "Making the change from a typical American or Japanese multinational organization with a dominant and ethnocentric headquarters that made all important decisions or even from a typical polycentric European organization with a very small headquarters and strong local managers to a geocentric, or global organization is tortuous." The problems of raising the initial investment are not the only problem that firms encounter during the globalization.

Let us look at the performance of General Motors and Honda between 1983 and 1993. The differences in their performance indicate that the successful implementation of the globalization process requires more than heavy investments. Though General Motors made substantial investments in technology and workplace transformation, it was able to increase its sales by only about fifty percent. Honda, however, tripled its sales during the same period, though it did not have the experience and financial strength that GM had.

Both Maytag and Whirlpool started their globalization initiatives in the 1980s. By 1989, they were able to acquire significant market share in the European markets. Even though Maytag appeared to be leading the race intially, Whirlpool was the one which was able to improve shareholder value.   

In 1994, Maytag lost its investment in foreign operations, and as a result, shifted its focus to the domestic market in 1995. Whirlpool, however, steadily increased its sales in foreign markets and became a global leader by 1995. These examples suggest that the amount of strategic resources allocated for globalization efforts cannot alone explain the growth in global operations. There are certain impediments to globalization that can block an organization from globalizing its activities altogether. These impediments can be broadly classified as

• Economic Impediments

• Managerial Impediments

• Institutional Impediments

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