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© 2009 Pankaj Ghemawat

Globalization of Business Enterprise(GLOBE)

0. Introduction: Globalization

Professor Pankaj Ghemawat

SAMPLE

GLOBE Class Outline

Module I. Introduction: Globalization (3)

Module II. The CAGE (Cultural–Administrative–Geographic–Economic) Distance Framework (7)

Module III. Maximizing Global Potential (2)

© 2011 Pankaj Ghemawat

Globalization and Business

In 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 for…collaboration on research and work in real time, without regard to geography, distance or, in the near future, even language.

—A journalist

© 2011Pankaj Ghemawat

Levels ofInternationalization

Telephone calls

Immigrants (to Population)

Direct investment

Equity investment

Exports (to GDP)

20% 40% 60% 80% 100%


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 Friedman’s critique


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 19951985 2000 2005 2010

8%

6%

4%

2%

0%

“1. Flat Tomorrow If Not Today”


“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.”



Average Net Capital Flows for 12 Major Economies׀current account׀) as % of GDP)

0%

1%

2%

3%

4%

5%

6%


Post Crisis Strategy



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


“3. Information is IT”

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


Administrative Distance

Geographic Distance Economic Distance

“4. Think Culturally/Politically”The CAGE Distance Framework

*Pankaj Ghemawat, “Distance Still Matters,” HBR, September 2001

Cultural Distance


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


U.S Military Interventions

“5. Hard Power/Military Hegemony”The Pentagon’s Old “New Map of the World”


Trade Disputes


6. The Friedman Critique

“Ghemawat’s data are narrow.”


Bases of Globaloney

Lack of data

Projection bias

“People believe what they want most or fear most”

Social pressures

Media hype

Techno trances


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 space…The 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.Introduction: Globalization

4 Star TV

5 Cultural Differences

6 Endesa de Chile Investing in Peru

7 Administrative Differences

8 The Indian IT Services Industry

9 Haier in the US in 2008

10 Mittal Steel in 2006

II.The CAGE (Cultural-Administrative-Geographic-Economic) Distance Framework

III. Maximizing Global Potential

11 The Policy Agenda

12 The Personal Agenda


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


Zero Globalization Complete GlobalizationSemiglobalization

The Scope for Distinctively Global Content


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


Three Key Points

Recognize that differences matter--that the world isn’t

perfectly integrated

View the world—differences and similarities—from a

particular perspective

Remember that the real challenge is not just to understand

differences but to address them


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

Imports associated with significant innovation and

productivity gains

Typical aspiration to (continue) increase rather than hold

steady or decrease


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Documents

pankaj ghemawat2

pankaj ghemawat3

pankaj ghemawatinbound

cultural distance

crisis changes everything0

real time

global potential

major financial centers