Going global: foundational ideas

This is Anil Gupta. I'm Michael Dingman Chair and Professor of Strategy and Globalization at the Smith School of Business at the University of Maryland. This presentation will cover some of the foundational ideas that underlie the whole process of decision-making that a company needs to go through in designing a global strategy.

The first idea I would like to cover is at what level of the company executives should be thinking about global strategy? My favorite quote here is from Jack Welch, the celebrated former CEO of GE. He says "When I was CEO, I was often asked what is GE's global strategy? My stock answer was GE does not have a global strategy. Each of my businesses has a global strategy but not GE." The point here is that when we think about the global strategy of GE, actually, the starting point is the global strategy, for example, for GE Capital or GE Healthcare or GE Transportation, and then from that to then go up to the next level to the corporate strategy level and see, how does it add up? What does it mean in terms of the global strategy of the corporation as a whole? To summarize this point is that when we think about the global strategy of a multi-business diversified corporation, the starting point should be at the line of business level and then to aggregate up. Essentially, when we think about the business strategy, for instance, GE Transportation or let's say the beauty care business of Procter & Gamble or say the software business of IBM, at that level of business, of course, we are thinking about the business strategy which is in terms of what is the market space the business will compete in. What its competitive advantage will be. How will it win? Then of course, we focus on what is the growth strategy for that particular business. Then another central dimension of the business strategy is, of course, how should that business globalize or in fact if that business should globalize at all. Going back to GE for instance, one of the big businesses of GE is home appliances. We know that, for instance, GE Transportation or GE aircraft engines or Aerospace, they're highly globalized businesses. But look at home appliances. It's almost totally US or North America centric, hardly globalized at all. That's my point here is that the global strategy can be very different across individual businesses even in a company like IBM where every business of IBM is extremely global. But the specifics - and in fact - important specifics of how the different businesses have been globalized are very different. Look at IBM's hardware business which is very heavily China centric in terms of where the hardware is manufactured. Software, very heavily US centric. But on the other hand, you look at IBM's services business very heavily India centric. Therefore, even for a very globalized company where the different businesses appear highly integrated with each other, the best way to understand IBM's global strategy, in fact the best way to design IBM's global strategy, is to start at the level of individual businesses and then to aggregate up from there to the corporate level. This is an important point because if we get the level of aggregation incorrect in terms of thinking about how to understand, how to interpret, how to design the global strategy of a company, we essentially are going to misfire on the rest of the analysis.