Globalisation
Globalisation is the attempt by companies to sell the same product or service simultaneously in many different markets around the world. The spread of globalisation over the past few decades has been so wide that nobody is surprised to see Coca-Cola in rural Vietnam, Shell petrol stations in eastern Turkey or Nike shoes in Nigeria. Markets and tastes everywhere have converged at a rapid rate.
Globalisation has taken place in a number of ways. Some companies have chosen to export from a few domestic production facilities, largely to enable them to reap the huge economies of scale that can come from feeding the markets of the world from a small number of factories. Some companies, such as McDonald’s, Pizza Hut and Hertz Rent-a-Car, have gone global by setting up franchise operations in foreign markets.
Yet other companies have chosen to set up multinational manufacturing facilities with plants in a number of different countries. The main debate about globalisation has focused not on whether it is happening, but on the best way to go about it. The principal questions have been: should companies try to integrate themselves closely into the local markets in which they sell; or should they stand apart and ship out uniform products from centralised production facilities?
Many of the companies with the most global products are remarkably national. Gillette sells razor blades everywhere, but it manufactures them in only a few places and tightly controls the process from the United States. Citibank has branched out into all the major cities of the world, but wherever it goes it remains American, an outsider. American Express even bears its nationality in its name. Some companies have changed from one strategy to another. Robert Goizueta, when chief executive of Coca-Cola, said: “We used to be an American company with a large international business. Now we’re a large international company with a sizeable American business.” Some Japanese corporations have gone through a similar change. In their early days they shipped vast quantities of electronics goods and motor cars from tightly controlled production facilities inside Japan.
However, they gradually changed their strategy in the 1980s as Japan came under international pressure to reduce its huge trade surplus and as the companies began to see other benefits from opening factories inside the main markets that they served. In this they were influenced by Kenichi Ohmae, the only internationally known Japanese management expert. In two books, Triad Power and The Borderless World, he expounded the view that companies which did not have a full presence in the world’s three main trading blocs (Europe, the United States and the Pacific Rim) were dangerously vulnerable to competition from those that did. “The word ‘overseas’ has no place in Honda’s vocabulary,” he wrote, “because it sees itself as equidistant from all its key customers.” This Japanese view was most famously expressed in the Sony slogan devised by Akio Morita, its founder: “Global localisation”. In the United States, the idea of global localisation has not had such a warm reception (although Coca-Cola is an obvious exception).