Fashion Marketing: Contemporary Issues, Second edition - Pr School

Globalization: global markets and global supplies 15
Multinational companies build a strong local presence through sensitivity and
responsiveness to national differences. International companies exploit parent
company knowledge and capabilities through worldwide diffusion and adaptation,
whereas global companies build cost advantages through centralized
global-scale operations. The turbulent economic environments of the 1970s
and 1980s had led to a rash of reports, studies and recommendations to managers
offering prescriptions to run their businesses more effectively in the new
‘global’ environment. As Ghoshal and Bartlett (1988, p. 21) comment, globalization
became a term in search of a definition. The term was interpreted in a
variety of ways and given new meanings. A Newsweek (1986) article offered
advice to managers to reorganize and streamline their businesses by offering
standard global products and managing operations through a centrally
co-ordinated home office, a method, it was stated, that the Japanese had used
for years. However, many managers and academics remained unconvinced
by this formula of standardization, rationalization and centralization. It was
true that for some Japanese companies the formula had worked, but it was
equally true that for others it had not. Ghoshal and Bartlett (1998, p. 22) give
a number of examples where the formula had failed in Japan for companies
such as NEC and Kao, whereas some European and US companies not working
to any prescribed formulas had been successful (Unilever, Ericsson and
Procter & Gamble). The quest for global formulas was replaced by a search
for fit. The dominant strategic requirement of the business and the development
of strategic capabilities to match the requirement were seen as important.
Nevertheless, the forces of global change act very differently on different
industries, and any analysis of global strategy and organization must begin
with an understanding of where the industry is placed.
Levy (1995, p. 353) provides an economic definition for the phenomenon of
globalization as follows:
To economists globalization is seen as the increasing internationalization
of the production, distribution and marketing of goods and
services.
Govindarajan and Gupta (1998, p. 3) provide a number of different ways to
define globalization, but at the level of the specific country they refer to:
The extent of the interlinkages between a country’s economy and
the rest of the world.
They state that the key indicators defining globalization of an industry are:
the extent of cross-border trade within the industry as a ratio of total worldwide
production;
the extent of cross-border investment as a ratio of total capital invested in
the industry;
the proportion of industry revenue accounted for by companies that compete
in all major regions.