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Title: From Local Champions to Global Masters
Author(s): Paul Verdin and Nick Van Heck. Publisher: Editions Palgrave, 2001, 208 pages. Manageris 102a. Globalization is very much in the news today. Numerous companies have engaged aggressively in internationalization, propelled by the conviction that this is an irreversible market trend. From Local Champions to Global Masters warns that the decision to internationalize is often made for the wrong reasons. The authors exhort readers to analyze potential benefits and risks. They also advise selecting the organizational structure and expansion methods in accordance with the principal objectives to be served, such as cost savings, sales development, or learning opportunities. Main subject [Internationalization] |
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Reading Tips for..
This book views internationalization from a fairly original angle. The authors don’t plead for or against globalization or offer guidelines on the best way to internationalize. Instead, they basically tell companies to make the decision to internationalize based on their own specific objectives, not just because “it’s the thing to do.”
The book’s originality lies in the first section, which covers the reasons to internationalize. Readers will be enticed by the first chapter, which takes a series of popular slogans employed to justify internationalization and uses concrete examples to demonstrate that most of these assumptions are false. It is pointed out that internationalization must be justified by better reasons than “we’ve got to follow our customers,” “our competitors are doing it,” “we must take position rapidly,” or “we can find greater growth opportunities abroad.”
The authors do not speak against internationalization. To the contrary, chapter three describes the three main advantages that companies can derive from internationalization, i.e. lower unit costs, higher sales volumes with existing customers and learning.At the same time, two potential pitfalls are underlined, i.e. the tendency to overestimate cost and volume benefits, illustrated with the European market example, and the tendency to underestimate learning opportunities, a trap skillfully avoided by Tractebel, the Belgian conglomerate.
Readers who have already made the decision to internationalize (for the right reasons!) will find a plethora of ideas, unfortunately covered rather superficially, on organization and management methods in the two following sections. Chapter 3 offers a detailed analysis of the various methods for entering a foreign market, and the relevance of each method depending on the established objective. Chapter 4 presents an overview of possible organizational structures. Chapter 5 gives ever-useful tips on how to manage a change process.
Finally, readers may be interested in the last two, more general chapters. Chapter 6 suggests considering internationalization as a process, rather than a state. The last chapter lists questions that every company should ask itself about its internationalization policy.
Critical commentary…
By Pankaj Ghemawat, visiting Professor of General Management at IESE Business School, Barcelona.
This slim volume is a welcome antidote to the breathless rhetoric about the imperative to globalize—this rhetoric being useless at best, and dangerous at worst. Verdin and Van Heck take a more balanced approach toward globalization that recognizes both the potential opportunities and limitations of doing business across borders. Their lucid coverage is studded with company examples, and—most importantly—is highly pragmatic.
From Local Champions to Global Masters is organized around a triptych of questions about globalization, i.e. why to globalize, what organizational modes and blueprints to adopt, and how to manage the internationalization process. Each of these questions is addressed with a pair of chapters.
Perhaps the most original component of this book is how it treats the question, “Why globalize?” Chapter 1 cites a string of fallacious slogans about internationalization that are frightening precisely because they are heard so commonly. This string of myths is an invitation to analyze the topic in greater depth, which the authors attempt to do in chapter 2. Their simple “conelearn” framework unbundles the benefits of globalization into cost advantages, network advantages and learning advantages. While it is not entirely clear whether these advantages are mutually exclusive or exhaustive, naming them forces readers to focus on the micro-benefits of globalization that are often glossed over by champions of globalization. As the authors observe, this type of disciplined microanalysis is logically required before a company asks itself how to globalize. Unfortunately, many companies lack this discipline, even those with extensive international operations.
The following two chapters delve into how to organize the company for globalization, methods for entering foreign markets, and the required organizational structures. Although this ground is already relatively well-trodden, this book again makes some original contributions here. A good example is the analysis of different dimensions of what I call aggregation strategies—by product, function, competency, client industry, etc. The authors develop a perspective in which the optimal organizational structure depends on what the company wants to get out of globalization. The authors are careful not to recommend a particular form of organization as the ideal toward which all “advanced” global companies should strive. This is striking by its mere absence, given the dizzying variety of organizations that are normally recommended (from multinational to transnational, supranational, metanational, etc.). One may well imagine that this more subtle perspective will ultimately prove more fulfilling, if less flashy.
Chapters 5 and 6 focus on the often neglected question of how to manage the globalization process. The succinct coverage of this topic is likely to leave readers clamoring for more. However this book will help clarify the agenda for further work in this domain.
Further readings…
- Race for the World
L. Bryan, J. Fraser, J. Oppenheim, W. Rall – Harvard Business School Press. (Book) - Managing Across Borders
S. Ghoshal, C.A. Bartlett – Harvard Business School Press. (Book) - Globalizing Management
V. Pucik, N.M. Tichy, C.K. Barnett – John Wiley & Sons. (Book)
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