What strategy are most effective in the conditions of globalization
Theme:
What strategy are most effective in the conditions of globalization
The plan
THE INTRODUCTION
1. New game rules
2. Integration processes
3. Virtual life of the real company
4. The contractor sounds is proud
5. Heroes of local scale
THE LIST OF REFERENCES
THE
INTRODUCTION
Every day the
world economy becomes more and more global. This tendency hasn't avoided also
Ukraine. Many domestic companies have already felt on themselves negative
consequences of this process: the competition amplifies, risks become more
various including from the point of view of consequences, requirements to
skills and knowledge of the personnel constantly grow. However to consider the
international character of a business activity it would be exclusive through a
prism of negative events incorrectly. New conditions of business dealing is
first of all new possibilities. To use them to the full, effective strategy of
development is necessary to the companies.
Страте́гия (other-grech. στρατηγία — «art of the commander»)
— the general, not detailed plan of any activity covering the long period of
time, a method of achievement of the difficult purpose.
In general
understanding Strategy is a hierarchy of the purposes, which consecutive
achievement, since bottom levels, leads to goal achievement of the uppermost
level. To be the strategist - means to be able to build such hierarchy which
with the minimum costs of resources (time, forces, money and so forth) will
lead to goal achievement (or the purposes) top level.
Strategy as a
method of actions becomes necessary in a situation, when for direct achievement
of a main objective not enough cash resources. A strategy task is the effective
utilization of cash resources for main objective achievement. Tactics is the
tool of strategy implementation and is subordinated a strategy main objective.
Strategy reaches a main objective through the decision of intermediate tactical
tasks on an axis "resources-purposes".
Globalization
— process of the world economic, political and cultural integration and
unification. The basic consequence of it is world job specialization, migration
(and, as a rule, concentration) in scales of all planet of the capital, human
and production resources, standardization of the legislation, economic and
engineering procedures, and also rapprochement and merge of cultures of the
different countries. It is objective process which has system character, that
is covers all spheres of life of a society. As a result of globalization the
world becomes more connected and more dependent on all its subjects. There is
as increase in quantity of general for groups of the states of problems, and an
expansion of number and types of integrated subjects [1].
Economy
globalization — one of laws of world development. Interdependence which has
immeasurably increased in comparison with integration of economy of the various
countries. It is connected with forming of economic space where branch
structure, information interchange and technologies, geography of placing of
productive forces are determined taking into account a world conjuncture, and
economic elevatings and recessions acquire planetary scales.
Growing
globalization of economy is expressed in sharp increase in scales and rates of
moving of the capitals, advancing growth of international trade in comparison
with gross national product growth, origin of world financial markets round the
clock working in real time. The information systems created for last decades
immeasurably have strengthened capability of a financial capital to fast moving
that comprises, at least potentially, capability to destruction of steady
economic systems.
Economy
globalization — difficult and inconsistent process. On the one hand, it
facilitates economic interaction between the states, creates conditions for
access of the countries to the advanced achievements of mankind, provides
economy of resources, stimulates world progress. With another, globalization
bears negative consequences: fastening of peripheral model of economy, loss of
the resources by the countries which are not entering in «gold billion»,
small-scale business ruin, distribution on the weak countries of globalization
of a competition, decrease in a level of living, etc. to Make globalization
fruits accessible to the maximum number of the countries — one of the tasks
facing the world community. Arising tasks of economy, often, are discussed by
influential politicians and economists together
1.
New
game rules
Economy
globalization is accompanied by variety of changes. We will consider most
appreciable of them.
The
strengthened fragmentation of a price chain. In the conditions of globalization
specialization of each link of a price chain to that promote increase in
quantity of accessible markets, occurrence of new vehicles and kinds of the
cooperation amplifies, allowing to keep in touch on distance. Simultaneously
with it the competition that causes in the companies aspiration to surpass
others in the area becomes tougher. In such conditions the classical
organizational structure with accurate hierarchical submission of divisions quite
often appears insufficiently effective. As alternative to it many international
companies use the structure based on interaction of autonomous links,
participating in process of production of a product. For example, Benetton
reserves marketing and goods quality control, and other operations, such as
design, production and sale, charges to the partners.
Occurrence in
the market of players of new type. Specialization strengthening opens road for
active players of new type. In the conditions of globalization by winners
become not only world famous marks. Economic giants, at times even more
profitable, than their clients, can become still yesterday to nobody known
subcontractors. So, the turnover of Taiwan company Quanta has exceeded $10 млрд, and as to such marks, as Dell and
Hewlett Packard in their case it is possible to speak about the largest in the
world manufacturers of portable computers.
The raised
complexity. Promotion conditions have considerably changed. Speech doesn't go
any more producing more goods of better quality as it was before. For today it
is necessary to master new success factors. And it means, for example, to count
risks. In the conditions of geographical разбросанности the companies and
strengthening of dependence on numerous participants-subcontractors,
contractors, judicial bodies, etc. — there were new risks, and with more
serious consequences: risks of logistics, political, risks of loss of
reputation in connection with unworthy behavior of partners and etc. Besides
the companies, wishing to receive benefit from transfer of many functions (we
will tell, production or design) on outsourcing, should be able to adjust
relations with subcontractors who work and on competitors, but also, can become
competitors.
Globalization,
as a rule, identify with the large enterprises, capable to impose the interests
to the world market. But actually at the modern market much more shades. There
are many strategy which allow to become successful in globalization conditions,
and speech no means always goes about the companies-giants (drawing. 1).
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Drawing 1. Four strategy of achievement of success
in the conditions of globalization.
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To
play the integration card.
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To
become the virtual enterprise.
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For example,
it is possible:
To benefit by
opening of the new markets, using strategy of integration with other companies;
To specialize
on one link of a price chain and to develop as "the virtual"
enterprise, leaning against a network of partners;
To position
itself in the market as the master builder;
To use those
possibilities, which the competitors who have been concentrated in the world
markets neglect to surpass them on a domestic market.
2.
Integration
processes
Use of
advantages of integration — the first what remember when speech comes about
strategy in the conditions of globalization. The integration essence
internationally consists in implementing at world level model of the
traditional integrated enterprise, and then to search for benefit from use of
cheap labor power and production of the goods in great volume, to serve larger
market at the optimized prices. Such approach many companies (use Sony, Zara
and etc.).
That
integration strategy was successful, it is necessary to acquire success key
drivers, such as:
ü
Support
on strong position. To achieve success in the world market, the integrated
enterprise should adjust efficient control all components of a price chain that
will allow to resist to numerous competitors. To this strategy should adhere
and those companies which were already fixed in the sector. Beginners seldom
manage to use the given advantage, as they don't have that set компетенций, which are necessary to subordinate
to itself all links of a chain. So, it is better to them to specialize on one
of components of general activity and not to risk, trying to master others.
For example,
Sony has stopped the choice on integration. At a growing competition capability
to combine different types of activity allows this company to outstrip
competitors in an adaptation question to changeable requirements of the market
and to provide to the brand image of the manufacturer of high-quality
electronics;
ü
Enterprise
carrying over on the new place, allowing to get access to the most favourable
resources. Even if the integrated enterprises aren't subcontractors, all of
them are equally interested in receiving benefit from globalization, choosing
for the factories a convenient site and by that reducing the costs for
production. As an example it is possible to result the Spanish company Zara
which more than half of goods produces at home, but at the same time places
production and in the countries with cheap labor power (in the Eastern Europe
and Asia). The Hourly pay of work of the Chinese worker averages $1, while in
the USA or the Western Europe — from $15 to $30. Other example — large capital
publishing houses which use the typographies located in a province. Enterprise
moving on a new place allows to get also access to those компетенциям which aren't present in own market.
For example, the American players of the market of credit cards successfully
transfer some tasks connected with the analysis of client base to India. As a
result it is possible to lower essentially costs, and also not to involve in
the decision of this problem of the American specialists which consider its
excessively labor-consuming.
Benefit from
moving can be received, only if to improve necessary skills and to deepen the
knowledge. First of all it is a question of employees who are capable to
establish effective mutual relations, successfully overcoming language and
cultural barriers. Besides it is necessary to allocate means for quality
control of conditions of moving. And at last, to invest in struggle against
numerous specific risks (tab. 1), such as: policy risks, a know-how or
intellectual property leakage, risk of fast deterioration of reputation at
world level in case of origin of difficulties. So, at the factory in Haiti Levi
Strauss has faced a problem of non-observance of the labor law. It has catastrophically
affected its reputation, and the company has incurred essential losses which
have surpassed the economy received for the account of cheap labor power;
Costs necessary for decrease in
risks at the international integration of business
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Cost type
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Example.
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Administrative expenses (the
control of accomplishment of works, negotiating so further)
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Bear all companies bar none. On the
average constitute approximately 8 % of cost of the contract
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Expenses on quality control,
payment of production managers and tracing of working process
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Emilia Maglia (the Italian textile
company) has been forced to take for work of the Italian manager that he
observed of labor obtainable locally at the factories placed in Romania
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Expenses on repair work and
maintenance service
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In case of the company of Hewlett
Packard moving of system of the customer accounting to India has caused heavy
expenses as it was necessary to direct the technicians for check of operation
of system on places.
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The expenses connected with low
production of work
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Company Luxoptica has established
following quotations on production of one and steams of lenses: 1,2 dollars
for the Chinese worker and 2,63 dollars for Italian. However low production
of work of the Chinese workers, an over-expenditure of materials and other
factors couldn't compensate more attractive hourly rates
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The expenses connected with a local
infrastructure
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In India the electricity, and
telecommunication not always high quality often disconnect. It assumes heavy
expenses at placing in these countries of the service centers and accounting
systems.
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Expenses connected with local
standard conditions
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Labor law non-observance at
factories Levi Strauss placed to Haiti, has led to catastrophic consequences
for image of the company.
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The expenses connected with risks
of delegation of power
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When Sarp has realized that thanks
to subcontractors competitors use its high technologies, it has reduced
quantity of the operations transferred to partners.
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The expenses connected with policy
risks
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Political instability in some
developing states won't allow to count on that degree of reliability of
business which is warranted by developed countries.
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The expenses connected with social
risks
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The decision on moving of assets
British Telecom abroad has led to debate with labor unions and has caused
disapproving reaction of employees that has enough cost much to the company
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Adaptation of
the offer of the company to specificity of the local markets. The world market
only in rare instances can be perceived as uniform and homogeneous. Distinction
of cultures, methods of consumption, legislative arrangements and rules forces
the enterprises which want to react effectively to the demand existing in other
countries, to adjust the offer for local conditions.
Besides it is
necessary to conduct a clear boundary meanwhile that should be global, and that
shouldn't lose local color. The main condition of success of the integrated
enterprise — an embodiment in life of those processes which will allow to
benefit by scale economy thanks to some standardization and personification
without which not to manage at local level. So, pharmaceutical company GE has
developed the Chinese version of goods. Unlike the USA, in China of 80 %
ассортиментных positions GE implements at half price. Thanks to it enterprise
goods so well disperses in the local market that it takes in the lead positions
in the segment.
3.
Virtual
life of the real company
Creation of
the "virtual" enterprise — other method of action in the conditions
of the global market. The companies choosing this strategy, specialize on the
one and only operation, and the others charge to the partners from other
countries. So arrives, for example, IBM. Since 2004 it works as the integrated
"virtual" enterprise which receives accessories from different
suppliers (fig. 2). Ready computers are produced by the Chinese company of
Lenovo, and itself IBM renders consulting services and provides technical support
of decisions on the basis of these the personal computer.
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Batteries.
Production is entrusted to the Asian service centers under specifications
IBM
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The
Keyboard It is produced in Thailand
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Drawing 2. IBM
as "virtual" production.
The success of
strategy of the "virtual" enterprise is provided with following
factors:
ü
The company
superiority in a certain type of activity. "The virtual" enterprise
which intends to specialize on the one and only operation, should carry out it
much better other partners (tab. 2). So, the success of the company of Apple in
a case with iPod is based first of all on its skill in the field of design. And
the most part of other works is charged those partners which are considered
competent of the областях:Toshiba delivers a hard
disk, ARM — the processor, Sharp — memory, and all it the Taiwan company Inventec.Takoj
collects together the approach has allowed Apple in record term (between
concept development iPod and the beginning of its sales has passed only one
year) to create absolutely new product, and with rather competitive price;
Table 2. Examples of specialization
of the "virtual" enterprises.
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Industry
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A company example
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Specialization
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Information
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Intel
Microsoft
Dell
IBM
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Creation of microprocessors.
Software development.
Assemblage of accessories and sale
of the personal computer.
Services (consultation, logistics
and so on).
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Shoe
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Nike
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Research, product development,
marketing.
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Textile
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Benetton
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Design and goods quality control.
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ü
Creation
of an essential part of cost of a product. Specialization on one type of
activity is profitable only in the event that the business dealing model
provides the companies strong position among other participants of process. For
example, the Intel specializes on microprocessors, having released from itself
from the obligations connected with other stages of creation of technics as
which she considers less attractive. But the company isn't content with skill
enhancement in the area. She tries to keep a strong position among designers
and to cool desire of manufacturers of the personal computer to pass to
cooperation with other suppliers of microprocessors;
Observance of
the precautionary measures warning a leakage of a know-how. As the company
should position itself as the specialist in one area, there is a necessity of
close interaction with other participants of a chain so, and risk of that the
know-how will be seen by potential competitors or there will be a leakage of
the important information. That is why Sharp has refused the subcontractor in
production of liquid crystal screens though thus it was possible to save
considerable means. And for this reason Airbus in 2006 has changed the
strategy: more careful analysis has allowed to specify strategically important
parts of a design of the plane, which production the company has reserved,
having transferred release of the others to subcontractors.
4.
The
contractor sounds is proud
In connection
with increase in quantity of the companies specializing on one type of
activity, there are the contract markets which value grows day by day. In new
conditions contractors manage to protect better the incomes of pressure of
clients. For example, results of one of recent researches of Reuters agency
have shown that some little-known Asian contractors have appeared more
profitable, than known marks on which they work. And in a case with Barbie it
was unexpectedly found out that at manufacturers completing (hair, clothes and
etc.) a recoupment above, than at the American distributors who are engaged in
sale of dolls.
Possibility to
position as contractor is a strategic choice for which it is necessary to show
consideration. The chief goal — not to get to dependence on the clients in the
future. Key drivers of success in case of a choice of this strategy are that:
Portfolio
diversification of clients. The income of commercial structure shouldn't depend
on a small amount of clients. Company-contractor Fang Brothers has well
understood it. In spite of the fact that its main client — the American
corporation Liz Claiborne — has offered it an exclusive privilege on servicing
of the production complexes scattered worldwide, Fang Brothers invests the
incomes in building of new factories to render the service also to other clients.
A variety of
clients allows to reduce the risks connected with sharp changes in the market.
The contractor, unconditionally, will provide to itself steady position if will
work on some large companies concerning one industry, and to produce for them a
wide range of products;
Position
choice in the market and following to it. To develop as the contractor, at
first it is necessary to choose a good position — that which will provide to
the enterprise competitive advantage and the stable income. Then consecutive
work in the chosen direction should become the basic priority. Sometimes it is
necessary to renounce the transaction only not to endanger the position. For
example, the companies which place emphasis on low prices, as a rule, can't
respond to individual wishes of the clients: the concession forces to incur
additional costs and to lift service prices that leads to loss by the
competitive advantage company;
Establishment
of partner relations with clients. Activity of the contractor will be much more
profitable, if it adjusts long-term relations with clients as it will help to
reduce goods selling costs. The close cooperation with clients allows to
optimize, for example, expenses, it is better to supervise quality, to
accelerate product development process, to win round those who hasn't found a
corresponding service level in other place. Contractor ABB well understood it
when suggested Ford companies to start by common efforts factory on painting:
the close cooperation has allowed not only to cut down expenses on 25 %, but
also to improve quality of painting of cars.
5.
Heroes of local
scale
In the
conditions of globalization in many industries there is a gap at level of the
local markets. The reason that standardization of offers because of which they
don't correspond to specificity of local demand is peculiar to globalization.
It is no wonder that some companies spend considerable efforts to creation of
the products satisfying specific requirements of local consumers. Here some
levers which can appear effective at a choice of the given strategy:
Extraction of
advantage from capability quickly to react. Production for a domestic market
assumes fast reaction to arising demand which can provide competitive
advantage. Having adjusted in Malaysia release of reading devices for disks,
company Kenwood has transferred the production to Japan. The decision spoke
simply: on goods delivery in Japanese shops from factories in Malaysia 32 days
left, and carrying over of production to Japan has allowed to deliver the goods
within the country in the shortest terms. Thus, the company has had an
opportunity quickly to react to shifts in demand. This choice has allowed it to
increase sales volume by 25 % a year, cutting down expenses on 10 %. The
American company Liz Claiborne which, having translated on foreign markets the
most part of production of ready-to-wear clothes has in a similar way arrived
also, has left branch on tailoring of jeans Lucky in the USA. After all,
positioning the jeans in a premium-segment, it should react to the specific
inquiries of the American clients connected with painting solution,
depreciation degree, features of tailoring, seams, an ornament and etc.;
The rate on
acquaintance to clients. Focusing in the local market allows to benefit by
acquaintance to the clients. This strategy is used by many regional banks,
wishing to strenghten the position. While the large companies of the given
sector go by the way of internationalization and leave on global level,
regional banks, on the contrary, invest the capital in studying of a local
network of clients and acquaintance to them. Placing emphasis on personal
relations and good knowledge of local industrial organizations, monetary
institutions assign to themselves the status of the main bank as for the
physical persons preferring such kind of relations, and for the enterprises of
small and average business.
The universal
model of achievement of success in the conditions of globalization doesn't
exist. The global company is the unessentially integrated enterprise which
activity is characterized by a considerable territorial scope. And the choice
of the most suitable strategy depends not only on the market, but also from
features of the company: its positioning, traditions and competitive advantages.
THE LIST OF REFERENCES
1. Grinin L. E. Globalization and the national
sovereignty. History and the present. № 1-2005. With. 6-31.
2. Jordan D. Lewis. Trusted Partners. — The Free
Press, 2001.
3. Jeff rey H. Dyer. Collaborative Advantage. — Oxford
University Press, 2000.
4. Paul Verdin, Nick Van Heck. From Local Champions to
Global Masters. — Palgrave, 2001.
5. Федотова Century the Changing world and
globalization (beginning)//Knowledge. Understanding. Ability. — 2004. — № 1. —
with. 47-59.
6. Onions the Shaft. A.Vospitanie as the answer to
calls globalizations (beginning)//Knowledge. Understanding. Ability. — 2006. —
№ 1. — with. 101-109.
7. Zhuravlyov V.V.Globalizatsija: calls of history and
theory answers//Knowledge. Understanding. Ability. — 2004. — № 1. — with.
43-46.
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