In Global Business, it’s more than just semantics!
Michael Porter, the highly acclaimed Harvard Business School professor, was one of the first scholars to define the differences between a “Multinational Company” and a “Global” company. In Competitive Advantage of Nations (1990), he argued that a multinational firm is one that operates businesses in many different countries, but a global firm pursues a unified strategy to coordinate various national operations.
So a conglomerate that has businesses in many countries that are only linked by several back office operations are probably closer to a multinational, whereas a company that links their supply chains from some countries, manufacturing in others, service and support in yet others is definitely closer to Porter’s global ideal. Other analysts and consultants have gone further suggesting that true global corporations essentially shed their home nation identity and act as stateless organizations. This trend has implications far beyond the economic including:
- the political ramifications of individual nations’ tax policies
- global trade policies
- global employment policies.
Imagine a company that gets its supplies from Country A, manufactures the product in Country B, sells them in Countries C-F, provides customer support in Country G and provides back office services from “headquarters” in County H? And this company is traded publicly on the stock markets of Countries H, C and D, with shareholders throughout the world. Whose company is that anyway?
Although companies have had international operations in some form or another throughout history, this trend toward true globalization is accelerating at a pace much greater than Porter probably imagined 20 years ago. Why would any company keep country operations separate when it is easier than ever before to integrate them across the world? There have always been country-based “differential advantages” for performing particular operations in certain locations based on the natural resources of the region; the availability, cost, or expertise of the talent pool; the local regulatory environment; and/or the needs and resources of the potential customer base. However, what hasn’t existed until recently is the technological ease to connect all of these places, giving companies the ability to truly leverage these competitive advantages and build an integrated global enterprise.
Of course, certain barriers will always exist — although figuratively flat, the world is still literally round and there will always be a nine hour time difference between Los Angeles and Frankfurt — but the multinational company is becoming extinct as it is replaced by the global competitor. If you are in the former camp, the time is now to take a serious strategic look at your operations. If you’re already a global company, then you need to focus on the most crucial element to connect your far flung operations — communication skills.
There is no more important investment than that which will promote what we call Enterprise Fluency, the communication, collaboration and operational proficiency companies must have to profitably expand their global footprint.
Take a look at the some of our client case studies which demonstrate how our clients are realizing immediate and significant business impact through improved individual performance and more efficient global team communication.