The article “Harnessing the Best of Globalization” by William Kerr informs the readers about the opportunities for businesses to become global. The phenomenon of globalization has been a major topic at the beginning of the 21st century. Many companies have been trying to take benefits of the opportunities to grow beyond the borders of their countries. Global corporations had several advantages over local businesses such as variable marketing strategies, supplier costs, logistics, and transportation. Starting from the time when consumer incomes have raised and countries have developed into more industrialized, big companies began to transform into multinational corporations trying to benefit from their growth. They have the ability to form strategic alliances around the world and use capitals raised in other markets for further expansion and marketing. Additionally, the multinational market allows global companies to access a greater pool of talents. Thus, the process of globalization is challenging. However, it has numerous benefits for businesses. The essay aims to discuss some models and approaches that are used when creating a global corporation or expanding it internationally.
“Harnessing the Best of Globalization” by William Kerr
Big companies are able to expand their business operations due to the widening impact of rapid digitization, the worldwide race for talent, and new emerging markets for their products. The stories of success such as those of Uber and Airbnb are highlighting the vulnerabilities of many traditional firms while inspiring the new entrepreneurs. The author William Kerr states that he has been researching global ventures for two decades. His aim has been to examine minor but crucial differences in how globalization is leveraged among companies that seem to be very similar on the surface (for example, outsourcing companies) (Kerr, 2016). Traditional globalization approaches often use the cross-border opportunity to lower prices. They begin with the intention of taking the best services or products of the firm to global markets. Thus, the author highlights several approaches to globalization.
Analyzing this issue, Kerr describes the first method as globalizing the best that a company can offer (Kerr, 2016). Such firms are less likely to use digital platforms and network effects; they may sustain success in several countries; a global strategy is developed after the maturity of business; companies that use this approach directly own core assets. Finally, businesses choosing this model are focused on globalizing their best capabilities. Thus, the first approach can be defined as self-oriented since companies offer their own resources.
The author uses a systematic approach to analyzing how globalization models can use profit formulas and enhance existing products. At the same time, other companies create their business on top of globalization. Kerr calls it “harnessing the best that the world has to offer” (Kerr, 2016). Obviously, such companies “harness” the ideas and resources of others, demonstrate a sharp and external focusing on the result and aim to achieve bigger global success in a timely manner. They are likely to use digital platforms and network effects as they need a global span to achieve success. Additionally, they make spontaneous decisions that often make them global from the very beginning of a venture. Such companies do not own a great number of core assets, and they are usually focused on the largest needs or gaps in the targeted community (Kerr, 2016). Thus, the second model can be defined as world-oriented, since the firms choosing it to use the resources of others.
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Although the digital economy has enabled the above ventures, the factual differentiator is the approach taken toward the business by the company’s management. However, there are several questions that the author left without answers: is there any third model which combines the features of those two? Is there a possibility that a company using this third method will start the new era of global expansion? Apparently, it will become known in the nearest future. Thus, a third model can also exist.
Additionally to looking at Uber and Airbnb, the author analyzes the global strategies of other big companies, including Bloomberg New Energy Finance, Rocket Internet, Alvogen, and Upwork. Undoubtedly, before launching a new business, it is important to determine the principles of its operation, the required type of leadership and management, and the rest of the factors that will govern the overall success. Thus, in this part of the article, the author analyzes the approaches to globalization. He describes two main methods that, in his opinion, are the models of expansion that determine the company’s strategy in the market.
What Companies Can Do
The second part of the article informs the readers about actions that companies can take to get from globalization as many benefits as they can. Kerr highlights best practices that can be used by top managers in globalizing their businesses, ranging from local firms to global corporations. Considering the trade-offs between the costs and benefits, the management can find the optimal strategy for their company (Kerr, 2016). However, it is obvious that the rapidly changing nature of globalization means that neither managers nor entrepreneurs can ever have a full picture of a global business environment before they need to take action. From this perspective, a simple analysis of globalization plans along these parameters allows corporate leaders and entrepreneurs to develop clearer decision-making processes and expectations. It will help managers pursue global expansion. Thus, in order to develop the best strategy for the company, management should first consider the trade-offs between the costs and benefits. It will help business entities build long-term advantages.
In particular, there are three main actions companies should take to reap the potential rewards of globalization. Firstly, they have to learn how to select partner firms and manage partnerships in an effective manner (Kerr, 2016). Secondly, companies should understand the need for tailoring the chosen business models to the particular areas they are seeking to enter (for example, when they hire local talents). Thirdly, firms must take advantage of the global and local network effects that surround the global market. Certainly, all three points are important. However, maybe, the best solution will be not creating partnerships at all. Undoubtedly, it is crucial to understand all possible barriers that a company could face when entering the new market. Thus, the key element of exploring new markets is understanding local, global and network effects. This aspect is crucial in the process of globalizing any business.
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Integrating the Pieces
In this part of the article, the author informs the readers about some general issues of working with global companies. He claims that it is important to develop a clear firm’s objectives so that the managers follow the global business principles, as well as that it is necessary to create an organized multicultural team that will work equally effectively with different nations (Kerr, 2016). Certainly, these statements are reasonable. Moreover, these principles are basic for the majority of outsourcing companies. Thus, the most important thing for any management team is to clearly understand the firm’s goals and be ready to work in a multicultural environment.
The most challenging phase for any company is a middle period. Analyzing this issue, the author provides the graph that informs the readers about this “middle zone.” However, it is most suitable for illustrating how outsourcing companies work. During that time, the costs are rising while benefits are decreasing (Kerr, 2016). However, one can disagree that after adding a third country at some point, business entities stop expanding due to increased costs and small incremental gains. On the contrary, in the case of outsourcing companies, the gains are relatively big, and they continue growing unless the management works ineffectively, or some significant event occurs that changes the situation in the market (Kerr, 2016). Thus, during a “middle zone” period any further expansion is challenging. One can make a conclusion that the most important thing is to identify the beginning of this phase in order to make it as short as possible.
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However, at some stage, the companies reach the point when further expansion becomes unprofitable even if a multi-nation presence is necessary. The readers can agree with the author’s opinion that the majority of business entities should limit their presence to five countries. In any other case, the focus of the management team will be lost, and it would be better to concentrate the resources and time to expand the companies’ capabilities within the current situation. Thus, a multi-country presence in more than five states may be unprofitable, and, therefore, it is not recommended.
To conclude, globalization provides numerous opportunities for established and young companies. However, the nature of the phenomenon is so rapidly evolving, multifaceted and complex that neither managers nor entrepreneurs can ever fully understand the global business environment before they need to take action. Generally, there are several approaches to globalization. The author highlights “what a company can offer” and “what a world has to offer” models (Kerr, 2016). The firms using the first approach use their own resources while those choosing the second model are using the resources of other business entities. The management teams should always learn to adapt to constant changes in the market. Undoubtedly, there are no guarantees in the business. However, a simple analysis of global processes will help managers to make effective decisions. Additionally, it is recommended to limit the multi-nation presence of a company to five countries.