Globalization

Alkire

Globalization and You:

What You Need To Know About Globalization

Chapter Summary

You may have decided not to formally study international management during your time in college based upon the belief that international business will never play a part in your chosen career path. While it is remotely possible that this belief may come to pass, due to the ‘flattening’ of the world brought about by globalization, it is much more likely that international business will impact your career in one form or another regardless of whether or not you actively seek it out. This chapter covers the impact of globalization not only on our daily lives but on our current and future professional lives as well. Included in this chapter is also an explanation of how you can benefit from understanding and embracing globalization. The chapter will conclude with three suggestions on how you can be proactive in starting a global career.

The author of this article is a well-traveled former global executive that has both studied and worked abroad for many years. He witnessed firsthand the fall of the Berlin Wall, the implementation of the first common European currency; the Euro. Professionally, he took part in the acquisition and subsequent management of foreign subsidiaries acquired in Germany, France, Sweden and Japan. The author dealt personally with the various winners and losers of globalization as outsourcing was implemented and the production of key products was moved from one country to another. Globalization also brought about the formation in his company of 24 hours a day world-wide virtual project engineering teams where engineers in Germany, Seattle and Taiwan continually forward joint engineering projects to each other in a perpetual time loop synchronized with the beginning and ending of each group’s work day.

Globalization Is All Around You

Corrin is a university student majoring in Supply Chain Management. She currently lives in a small town in the western state of Washington where she attends the local university. Corrin recently considered taking one of the international business classes offered as an elective at her school but as she has no plans to move overseas or to ever work for an international company, she didn’t really see the relevance for her personally of studying international business. What Corrin doesn’t realize is that globalization has made international business relevant for all of us. Let’s take a minute to define just what is meant by the term globalization and consider a few examples of how it impacts our daily lives.

The term globalization is used to describe the coming together of the various people of the world through the advancement of technology (i.e. the Internet), commerce (free trade initiatives, international banking and finance), transportation (cheaper international air travel), political unions (the European Union, North American Free Trade Agreement, World Trade Organization, etc.), and logistics (overnight shipments via FedEx, UPS or DHL). This rapid transformation towards making the world more connected as a global community was aided by three pivotal events that happened more or less around the same time period. The first major driver of globalization was the opening of the Internet for public use which took place around 1988 and 1989. While the Internet was slowly starting to take off, a second major change in global dynamics took place with the fall of the Berlin Wall and the collapse of the former Soviet Union which also occurred in 1989. The third driver of globalization is often overlooked but is in many ways just as important at the other two. It was also right around 1988/1989 that the first cellular telephones were beginning to be introduced into circulation. Needless to say, the cellphone has become one of the most important (if not the most important) tools for personal and professional communication. In fact the majority of advertisements for today’s smart phones rarely mention the products intended use, i.e. placing telephone calls, but rather all of the other functions it can perform.

These three events which in many ways happened completely independently of each other nevertheless came together to create the spark that started the worldwide phenomenon that has come to be called globalization. The next ten years would see unprecedented advances in communication technologies in the form of instant messaging, e-mail, cellular telephones and more recently video conferencing, virtual meetings and the use of Skype. Businesses could suddenly communicate with their foreign subsidiaries in real time, at affordable rates. Documents and packages could be sent anywhere in the world with guaranteed delivery within 48 hours. Executives were never out of reach no matter far away from corporate headquarters they found themselves.

When Thomas Friedman first published his book titled The World is Flat in 2005, the first major wave of globalization had run its course. His main objective was to inform his readers that globalization was here to stay and that it had fundamentally changed the way that business would be conducted in the future. What Friedman proposed by the term ‘Flat’ was the concept that through the advancements resulting from globalization, the world had become one giant ‘level playing field’ where all companies were (or soon would be) competing on an equal basis. Globalization is typically viewed as being the platform for the largest most interconnected expansion of global business since the first cavemen began trading furs for arrowheads. As has been discussed so far, globalization is most often used synonymously with international business and commerce. Friedman’s book, along with many others, also touched on an additional element of globalization that to use a term from classic economics might be described as an externality or unintended consequence. This untended consequence was the bringing together of not only businesses but also of people. Almost overnight, young people around the world were listening to the same music on the same MP3 devices. They were wearing the same fashions, playing the same video games, watching the same Hollywood action movies and posting their reviews to their global Facebook page. While the majority of the phenomena described so far have enjoyed a positive reception around the world, there is a darker side of globalization as well. One of the most controversial components of globalization has been the unprecedented number of jobs that have shifted from the Western industrialized nations to the so-called emerging market nations. The use of outsourcing by large corporations has become so common place that people complain of having their jobs ‘Shanghaied’ or ‘Bangalored’ or in other words moved overseas to lower cost workers in either China or India. Regardless of whether one considers globalization as a good thing or a bad thing, the truth is that globalization has resulted in an unprecedented worldwide social interconnectivity that continues to have implications on both personal and professional levels. In order to see how we are personally impacted by globalization, let’s go back to our university student Corrin and follow her as she goes through a regular day. See if you can guess how many encounters she has with globalization as the day progresses. The answer can be found in Table 1 below.

It is a typical morning as the alarm clock goes off at 7:30 am. Corrin reaches across the small wooden nightstand to turn the alarm off. She jumps into the shower where she shampoos with Suave and washes herself with Dove soap. She dresses in her normal student attire comprised of jeans, a t-shirt under a hoodie and Nike shoes. At the breakfast table, Corrin enjoys a bowl of Shredded Wheat cereal with a banana sliced on top. As she eats breakfast, the local news is playing from a new 42 inch RCA flat screen plasma TV purchased over the internet for less than 400 dollars. It’s now time to go; Corrin grabs her Thinkpad© computer and LG smart phone and jumps into a 2002 Volvo wagon which she inherited from her parents and begins the commute to her university. Along the way, she stops for gas at the local Shell station. Corrin watches in dismay as the price dial on the gas pump spins madly out of control. Before leaving, she notices that one of the Pirelli tires on the car is low and pauses to top it off with some air. On the way to campus, Corrin pulls into the Starbucks’ drive-thru for her regular double caramel latte. Once seated in the classroom, her first professor of the day, Dr. Kim, a supply chain management specialist, begins the lecture. Corrin opens her textbook and begins taking notes with a Bic pen. Corrin has recently started to notice that despite being located in a small, non-ethnically diverse town far from the nearest urban center, her university is actually quite multicultural. Sitting next to her in class are students from many different countries: three from China, three from Vietnam, one from Japan, two from Korea, one from Taiwan, one from Saudi Arabia and one from Chile. As she glances around at the number of foreign students, Corrin is thinking that perhaps taking a class in international management might be worthwhile after all.

As the above scenario demonstrates, the average American whether they are aware of it or not, is impacted by globalization each and every day. The reader may be thinking at this point that although globalization clearly impacts our everyday personal lives, a compelling argument linking why an awareness of globalization is important to our everyday professional lives has yet to be made. In order to establish this link, we will first start at the top and work our way back down the career ladder.

Table 1 : Globalization Is All Around You

The case can easily be made that the vast majority of the top American Fortune 500 firms are involved in one way or another in international business. Many of the largest most successful American firms describe themselves as global corporations. Firms such as Microsoft, Wal-Mart, Boeing, Hewlett Packard, General Electric, Exxon, Ford and Google consider the entire world as their marketplace and are actively present in a multitude of countries scattered around the globe. In order to enter the upper management ranks of many of these global companies, previous international experience is becoming more and more of a requirement. Those students wishing to someday apply for a senior management position with one of these global players will need to demonstrate at a minimum a comprehensive awareness and understanding of the implications of the global business environment. As candidates battle over top position openings, those individuals with actual international exposure and experience will truly standout from the competitors lacking any international contact. Needless to say, one of the most rewarding ways (both personally and financially) to achieve valuable international experience can gained through seeking out and accepting an expatriate assignment (see Chapter ?). Regardless of whether the expatriate posting is for six months or six years, the experience and skills that are normally gained from these types of assignments can help serve as a fast track to the top of the corporate ladder.

Not all expatriate assignments are reserved for top management positions. Take the example of Steve Kirchner, a production engineer with a Kent based manufacturing company. Steve had been a lower to mid-range manager with his company for seven years, serving primarily as a production scheduler and quality control manager. He had never considered looking for a job outside of the Seattle area, let alone overseas. It therefore came as a complete surprise for him when, following his company’s acquisition of a German competitor, he was asked to go to Germany and be the new production manager of the newly acquired plant. After getting off to a rough start, he was soon able to adjust to life in Germany. Two years later, he was able to turn his position over to a newly trained German production manager and return back to corporate headquarters. Within six months of his return, Steve was promoted to the position of production manager and offered a substantial increase in salary. The message of this story (which actually happens to be true) is that the opportunity of gaining international experience may present itself to you when you least expect it. In Steve’s case, he was single at the time having just gone through a divorce and he had studied German for two years back in high school, accepting this position was an easy decision for him.

Most Americans are by now familiar with the term outsourcing which is normally associated with large numbers of American factory workers losing their jobs to cheaper overseas labor markets. Ironically, several well paid successful expatriate assignments have resulted from U.S. parent companies deciding to outsource production overseas. When this situation happens, it is not uncommon for teams of middle level managers to be sent overseas to manage and train the new workers in the parent company’s various processes and procedures. These positions often come with extra pay and benefits and they afford those individuals that are successful in their implementation an extremely valuable skill that can easily be marketed to other companies considering the same strategy.

Clearly, not everyone’s personal situation will be conducive to spontaneously accepting an expatriate assignment, nor does everyone have the ability or the desire to become a highly sought after global executive. Maybe you are planning on working for a small privately held company that operates on a local basis. Perhaps you are planning on starting your own local business and have no intention of taking it overseas. Even if your professional career never takes you outside of the United States, it still does not mean that you will not be affected by the global nature of today’s business environment. Regardless of the scope of your business, you may still find yourself dealing with foreign owned suppliers or buyers. In addition, given the recent trend of more and more foreign owned firms starting operations here in the U.S. market through acquisition or greenfield start-ups, you may find yourself in direct competition with a foreign owned company for your U.S. customers right here at home.

Since the majority of foreign direct investment (FDI) being conducted by foreign-owned multinational companies normally takes place through acquisitions, you may go to work one day at your local company only to find out that it is now owned by a company from outside of the United States. This event recently took place with the employees of a small bank in Washington State. One day, the bank’s entire staff arrived at work at one of the several small rural branches scattered throughout the state only to be informed that their bank was now owned by a large multinational French bank. As the value of the U.S. dollar continues to fall and the U.S. economy continues to struggle, these types of foreign-initiated takeovers will become more and more likely. The latest numbers show that approximately six million Americans are employed by foreign-owned companies.

In order to be somewhat more specific, let’s stay with our previous example of Washington State. As mentioned above, the state of Washington is home to several large global corporations (e.g. Microsoft, Amazon, Boeing, etc.). With its large world class sea and air ports, Seattle, Washington has a long history of dealing with international business. In the early years, the majority of products were being exported out of Seattle to various places around the world. Starting with the arrival of the Japanese automobiles in the 1980’s things started to turn around as Seattle also became a major center of imports as well as exports. While Washington based companies continue to sell products in over 200 different countries, the importance of foreign-owned subsidiaries has continued to grow. According to the Washington State Department of Commerce, there are over 2,500 subsidiaries of foreign companies in the state employing over 90,000 workers (http://www.choosewashington.com). As seen from a national perspective, Washington ranks 19th in the United States for the number of foreign-sponsored jobs (Organization for International Investment). With this kind of presence, the possibility of working for a foreign-owned corporation should not be seen as a long shot. Table 2 below is a partial listing of some of the foreign-owned firms operating in Washington States. As can be seen from just the partial listing given, there are firms from eighteen different countries engaging in a wide variety of industries and sectors.

Table 2: Foreign Owned Subsidiaries in Washington State