Hello, luknut-ga!
You have asked a question which could encompass many thousands of
words and a myriad of challenges which face businesses as they
consider globalization. I have researched this topic extensively in
the past, and have tried to compile some of the most important
challenges into an answer for you.
Major Challenges Facing Companies Due to Globalization
The following information and excerpts can be found in the article,
“Meeting the Challenges of Globalization,” by Michael Smith. Caux
Conferences 2002. For a Change Magazine at
http://www.mra.org.uk/fac/oct02/industry.htm
Lack of global anti-trust laws and accounting standards
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The “asymetrical development” of globalization was a concern
emphasized by conference participants representing companies located
in both industrialized and developing countries. **The lack of global
anti-trust laws and common accounting standards** has made
globalization “like an Olympic competition, but without any rules or
referees” according to Kimon Valaskasis, founding president of the
Club of Athens, and a former Canadian ambassador to the Organization
of Economic Cooperation and Development. “The WorldCom and Enron
accounting scandals ‘would have been scarcely possible before
globalization’, he claimed.”
Taking care of employee needs in foreign countries can increase costs
and demand downsizing:
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Housing, healthcare, and education in a foreign country are all
concerns of employees who are transferred to a foreign country due to
globalization, and it is the corporation’s responsibility to see that
their needs are being met. Two Indian companies, Tata Steel (Tisco)
and Tata Engineering (Telco), which “spend around $20 million a year
on providing facilities for their employees,” has had to downsize
drastically, while trying to implement “liberal severance schemes to
protect the salaries of displaced employees up to their retirement.
The human asset is the greatest asset and should be treated as such.”
Companies must learn to increasing efficiency and reduce costs:
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With so many companies expanding their business on a global scale,
one of the biggest challenges facing smaller, or less experienced
companies, is how they can compete and remain financially viable.
India-based Transasia Biomedical, which produces and exports
diagnostic machines for blood disease to some 30 countries, faced
extreme competition from US, German and Japanese manufacturers during
the time that Indian tariffs were reduced.
“We realized that globalization was not only for these countries but
also for us," said founding director and manager Suresh Vazirani. "We
reduced our costs and decided to compete with all the other players in
the world. Efficiency was the key—how to reduce man hours. The company
was manufacturing 5,000 machines annually for the domestic market, but
calculated it could produce 20,000 annually for the world market.”
“The efficiencies introduced allowed Vazirani to transfer 30 of the
company’s 350 employees to research and development, rather than
making them redundant. ‘We are now technically as advanced as Japanese
and European products,’ he claimed. The company sells to Germany and
is breaking into the Japanese market. It now employs 450 people and
anticipates a turnover this year of $20 million.
**Please read the entire article mentioned above for more complete
explanations at http://www.mra.org.uk/fac/oct02/industry.htm
Efficient Budget and Resource Allocation
*******************************************************************************
A study by Aberdeen Group has recommended that “if companies want to
remain competitive in this rapidly paced Web environment, they need to
create and budget enough resources to efficiently maintain a global
Web presence. If a product or Web site is not optimized for
international transactions, the logistics of marketing to an
international market can be crippling, with return rate as high as 46%
for all products sold internationally.”
This recommendation is based on the fact that “by 2003, 66% of all
e-Commerce spending will originate outside of the U.S. and that more
than 66% of all users on the Internet will reside outside of North
America.”
** Read the abstract titled “Web Globalization: Write Once, Deploy
Worldwide.” Aberdeen Group (5/2001) at
http://www.aberdeen.com/ab_company/hottopics/web_globalization/
Challenge of Providing Efficient Customer Service
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Globalization requires customer service that allows for easy
conversation exchange in the customer’s native language. Returns must
be able to be accomplished easily. Either customer call in centers or
e-mail correspondence in the customer’s language must be available for
a company to compete successfully on a global scale.
To efficiently handle e-mail customer inquiries, “most companies will
need to implement technology made possible by recent advances in
analytics and natural language processing.” "Right now the language
processing being used with most installed e-mail systems is pretty
rudimentary.” Better-equipped templates can “dissect e-mails for
content, and analytics improvements have made e-mail smarter by
helping companies figure out exactly what a customer is asking. The
newer systems can either suggest a short list of possible solutions or
route the customer to a specialist who has the answer.”
Read “Why E-Mail Customer Service Fails,” by Lou Hirsch. CRM Daily
(10/14/2002) at http://www.crmdaily.com/perl/story/19667.html
Cultural and Language Issues
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Company Website Translation and Customization:
Although a study by International Data Corporation shows that by
2003, 39 percent of visitors to an internet website will speak a
language other than English, “55 percent of U.S. companies have done
nothing to customize their websites for foreign users.” These
companies can be losers in the projected 1.6 trillion dollar global
e-marketplace if they do not tackle the technical and legal issues
involving language and customization.
Languages must be translated correctly and often require re-writing
of content to avoid “translation pitfalls.” For example, Pepsi
“translated its promotional material in China, where its slogan "Come
alive with the Pepsi Generation" translates into "Pepsi brings your
ancestors back from the grave."
Symbols and colors must also be customized to the particular country
site, so they are not culturally offensive. “Hand gestures that are
friendly in the United States have negative meanings in other
countries. A palm-forward wave is a nasty gesture in Greece and
Nigeria. And the thumbs-up signal and thumb-and-index-finger "OK" sign
are slights in Iran and Brazil, respectively. Colors, too, carry
different meanings in different places. Black, a color that connotes
hipness and sophistication in the United States, symbolizes death and
bad luck in China.”
The avoidance of cultural blunders is considered so important that
specific companies like Mainspring “perform "cultural audits" on sites
to make sure mistakes like these don't kill a company's global push.”
Companies must also adapt to different forms of payment. Although
credit card use is common in the United States, countries like Japan,
Germany and certain Latin American countries either don’t use credit
cards or hesitate to use them online. Phone or fax number can be
provided on country-specific sites to overcome these barriers.
Addressing standards also vary across countries. Hong Kong shoppers
do not have zip codes, for example. If a Hong Kong customer types in
an address, and leaves out the zipcode, the order may not go through
if the site has not been adapted locally. Therefore, foreign websites
must be customized to the address specifics of a particular country,
rather than utilizing US standards.
**The above information is from the article “How to Avoid Global
Website Disasters,” by Emelie Rutherford. CIO (11/14/2000) at
http://www.cio.com/research/global/edit/111400_disaster.html
Recognition of Cultural Differences When Doing Business
Business behavior varies from country to country. Employees should
be trained to handle business in the manner of the country in which
they are working, or the company can suffer economic loss as well as
cultural embarassment. Japan offers an excellent example of cultural
differences:
The Japanese place a tremendous importance on trust in relation to
business transactions. Trust is obtained through a lengthy process of
getting to know someone both in a business and a personal sense.
Mutual cooperation and fellowship are preferred in the business
atmosphere. It is commonly accepted that among trusted business
partners, money and details need not be discussed. Self-promotion is
considered arrogant. Contracts and invoices are rare in Japanese
business transactions, since discussion of money implies a lack of
trust. Hierarchy within the business organization is also extremely
important and requires a great deal of deference to those who hold
higher positions. “Every company employee knows what shocks most
Westerners; that one does not argue with the boss if one wants to
succeed within the firm.”
Therefore, if foreign business enters Japan, it is vital to
understand the Japanese way of doing business. Both cultural entities
must be enlightened to the other’s way of doing business, and respect
each other accordingly.
Read “Cultural Barriers to Globalization,” by Britta C. Lietke.
(8/7/1998) at http://216.239.33.100/search?q=cache:D9w6WkAdjZgC:www.ww.uni-magdeburg.de/fwwdeka/student/arbeiten%255C001.pdf+barriers+to+business+globalization&hl=en&ie=UTF-8
Brand Loyalty and Cultural Differences in Transacting Business are a
Major Hurdle *******************************************************************************
Different countries transact business in different ways. It may be
hard for a foreign company to break in, both due to traditional brand
loyalty and accepted forms of legal transaction. For example:
Autobytel is a California-based, online automobile company without
an actual physical presence in any of the countries where it transacts
business. Though the company has worked out a business relationship
with US auto dealers, it is still not a smooth one. According to Adam
J. Weiner, an analyst at Gomez Advisors in Lincoln, Mass., "It's got
to be very tough for a company to go into an established retail and
distribution system and say, 'We're better even though we don't make
the cars, we don't service them, we don't own the brand, we don't own
the experience.'" This problem is especially applicable to countries
like Germany, whose brand loyalty runs deep. BMW is the car of choice
for many, and remains the car of choice for life. Japan and many other
European countries are also very loyal to their country’s car
manufacturers.
Differences in business transactions are also a major challenge to
companies hoping to expand globally. Autobytel faces a big hurdle in
Japan, where dealers transact with customers individually to order
cars. Vehicles are not stored on dealer’s lots like they are in the
United States. An in the European Union, a currently imposed "block
exemption" (which is up for review this year) to competitive-trade
rules exists, allowing carmakers run “exclusive distribution chains,
which prevents Internet services from listing their inventory on the
Net and from buying new cars from dealerships. In other words, the
block exemption utterly hobbles services like Autobytel, reducing them
to information providers.”
One solution to these challenges is partnering with local companies
within each country to help in global expansion. Concerning Japan,
Autobytel’s management says, “"Initially, we were going to set up just
one international company. But we found that if we did that without
local strategic partners, which know the customs and have the
contacts, it just wouldn't go."
Handling business transactions is another cultural hurdle that
stands in the way of globalization. In Mexico, for instance, online
billing just does not work. The “archaic” systems employed by so many
businesses makes computer transactions nearly impossible due to system
incompatibility. Therefore, GE TradeWeb, a “forms-based service that
lets small businesses exchange business documents electronically with
trading partners,” must deal with paper invoices sent through the
mail, bypassing the speedier, electronic billing method. In addition,
online contracts are not seen as legally binding in Mexico, so they
must also be handled by mail or fax.
The above information is from “All the World’s a Stage,” by Steve
Ulfelder. CIO Magazine (10/1/2000) at
http://www.cio.com/archive/100100_stage.html
Excellent Business Leadership Skills are a must!
*******************************************************************************
According to Dr. Marvin Zonis, an International Political Economist
and Professor at the Graduate School of Business at the University of
Chicago, the many global challenges facing corporations require that
“strong business leadership, and a true understanding of what defines
leadership, is more essential than ever.
From Speaker’s Platform at
http://www.speaking.com/speakers/marvinzonis.html
With the threat of terrorism spreading around the globe, business
leadership and confidence is more important than ever. "In the wake of
September 11, the defenders of globalization need to speak with an
even louder, more confident voice," writes David H. Komansky, chairman
and CEO of Merrill Lynch & Co.
“CEOs of international companies can touch lives of employees,
consumers and business partners throughout the world. "Corporations
with a global presence already have a large amount of clout in the
world's economy and their leaders are in a position to make a
significant difference in how the world's economy develops," says
Nannerl Keohane, president of Duke University.”
From “Overcoming Challenges in a New Era” at
http://www.nyse.com/content/magazinearticles/NT0006F4FA.html
Challenges involving order fulfillment and product shipment
*******************************************************************************
Problems can occur when a company has no regional office or
distribution center in a foreign country where they do business.
“Piecemeal shipping is expensive and customer service can easily break
down over great distances.” One solution is to hire a distribution
representative to represent the company in a foreign country. A global
carrier, such as DHL Worldwide Express, may also work well for
consumer goods companies that have a “relatively low international
volumes, as well as customers who require little service assistance (a
tall order).
From “How to Avoid Global Website Disasters,” by Emelie Rutherford.
CIO (11/14/2000) at http://www.cio.com/research/global/edit/111400_disaster.html
Internet challenges concerning connectivity speeds, forms of
connection and software
*******************************************************************************
Many countries have extremely slow connection speeds, which can
alter website performance. Companies must account for regional
differences by building lower-bandwidth sites. Use of mobile
(web-enabled cell phones) is the more predominant form of internet
access in many Asian and European countries, so companies hoping to
compete in these countries must ensure PDA-enabled access to their
websites.
Software difficulties are a major challenge, especially in countries
with complex language translation problems. “The Forrester report,
titled The Multilingual Site Blueprint, interviewed 27 U.S.-based
multilingual-site owners and found that their greatest challenge is
adapting software to work with other languages. To make Web software
work with Asia languages that contain up to 6,000 characters, for
example, site operators must install Unicode, a character coding
system that supports written texts in different languages.”
From “How to Avoid Global Website Disasters,” by Emelie Rutherford.
CIO (11/14/2000) at http://www.cio.com/research/global/edit/111400_disaster.html
Local Laws and Regulations
*******************************************************************************
Each country has its own set of laws regarding business, including
tariff regulations. Foreign consultants familiar with the regulations
of a particular country are essential to efficient globalization. Two
examples: “Germany bars retailers from offering guarantees beyond 14
days. China does not allow sites to carry telephone traffic over an IP
network, so a company with a call center as a part of its Web could be
locked out of doing business in China.”
From “How to Avoid Global Website Disasters,” by Emelie Rutherford.
CIO (11/14/2000) at http://www.cio.com/research/global/edit/111400_disaster.html
Additional Resources
An excellent article titled “The Blessings and Challenges of
Globalization,” by Daniel T. Griswold. Center for Trade Policy Studies
at http://www.freetrade.org/pubs/articles/dg-9-1-00.html
provides a comprehensive overview of how globalization has affected
the countries of the world.
I hope this information gives you a good start in understanding the
challenges facing businesses as they look toward globalization. (Word
count is 2404, which should account for the reference information)!!!
Please let me know if I can be of further help!
umiat-ga
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