Skip to main content

Going global: foundational ideas

Published on April 2, 2014 Reviewed on January 31, 2017   28 min
0:00
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 underly the whole process of decision-making, that a company needs to go through, in designing a global strategy.
0:26
So 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?' And my stock answer was, 'GE does not have a global strategy. Each of my businesses has a global strategy, but not GE.'" And so 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, it's 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. And so 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. So at that level of business, of course, we are thinking about this 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? And 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. Now we know that, for instance, GE Transportation or GE Aircraft Engines or Aerospace, they are highly globalized businesses. But look at home appliances, it's almost totally US or North America-centric or hardly globalized at all. And so that's my point here. It's 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. And so 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. So 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 the company; we essentially are going to misfire on the rest of the analysis.