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Meeting of the minds
Does globalization really matter?
by Alan Joch
IN 1983, HARVARD BUSINESS
SCHOOL Professor Ted Levitt fired a theoretical shot heard
’round the world. In a concise but illuminating article
for the Harvard Business Review titled “The Globalization
of Markets,” Levitt warned that multinational companies
were facing increasingly dire prospects for growth while a new
type of business entity, the global corporation, was forging a
new business reality.
“The emergence of global markets for standardized
consumer products [is] on a previously unimagined scale of magnitude,”
Levitt said. “Gone are accustomed differences in national
or regional preference. Gone are the days when a company could
sell last year’s models—or lesser versions of advanced
products—in the less-developed world. And gone are the days
when prices, margins and profits abroad were generally higher
than at home.”
Twenty years later, Levitt’s global view
is as relevant as it was revolutionary. A new generation of business
executives, armed with essential technologies like the Internet
and data warehousing that provide real-time market intelligence,
are learning from and acknowledging the weight of Levitt’s
insights.
Scores of these forward- and global-thinking
executives gathered recently at the Harvard Business School for
a Globalization of Markets Colloquium that, in part, paid homage
to Levitt’s ideas. Even more significantly, attendees discussed
how globalization continually transforms their corporations.
At a roundtable discussion organized by John
Deighton, Harvard professor of business administration, executives
from three leading corporations—NCR, Goodyear Tire &
Rubber Co. and Intel Corp.—described their ongoing strategies
to compete in a global market. Each agrees that success hinges
on many factors, but three business strategies are key: the successful
application of information technology, liberal doses of human
creativity and imagination, and dogged determination to change
with global imperatives. Here are some highlights of their discussion.
A unified vision
For many years, NCR enjoyed the fruits of a sales infrastructure
developed over the course of its history. The company had built
a formula for selling enterprise hardware and software throughout
the world, but the challenges of competing globally led the company
to the gutsy decision of dismantling its successful strategy.
“The reality was we didn’t have
global competitive advantage,” admitted Earl C. Shanks,
senior vice president and chief financial officer. “We were
selling 50-plus different solutions around the globe. In any given
country we would sell what the local team was confident to sell,
what they understood. But we weren’t good at leveraging
across the entire organization the skill sets and knowledge that
we had. So we stepped back and asked ourselves, ‘What are
we really doing to be competitive in the long term?’”
Out of that introspection came a new strategy
that eliminated NCR’s country-by-country model of selling
technology to individual markets around the world and turned instead
to a more unified vision that was bolstered by standardized marketing
messages and pricing. “We moved away from the country model
to a global model,” Shanks explained. “And we communicated
this vision. Now, we’ll offer the same ROI solution whether
it’s to a CIO in California, in Ohio or in (a country outside
the U.S.).”
A consistent approach
The Goodyear Tire & Rubber Co. faced a similar challenge
of reshaping itself to compete globally. “The hard part
is coming up with new, innovative ideas that you can deploy across
the marketplace in a way that would allow the enterprise to gain
sustainable competitive advantage,” said Eric Berg, then
vice president, e-commerce and chief information officer. “We
were competing against lots of local firms, and we didn’t
have that competitive advantage. The question was, how could we
take IT and deploy global solutions that would enable us to be
better than our competition?”
Goodyear’s answer was to forge closer
collaboration between its IT and marketing departments. “We
put a group of folks together in a room and we said, ‘You
will come up with ideas to leverage Goodyear’s global scale,’”
Berg recalled.
One outcome of this team strategy was the development
of a new data warehouse designed specifically to increase the
company’s understanding of its global customers. Another
idea led to the creation of an Intranet site that helped define
what Berg calls “the essence of the brand” for each
of the company’s tire models. “We came up with a decentralized,
distributed content approach so that marketing materials could
be disseminated across the world,” he said.
Dovetailing with a consistent marketing strategy
is a sales approach that offers standardized prices for Goodyear’s
products across the globe. “We found out that with the Internet
and information availability, we had to quickly come up with a
way to standardize our prices and eliminate any potential anomalies,”
he explained. “We have very sophisticated customers who
know how to use the data, how to slice and dice and mine it.”
This realization forced Goodyear into a process
of systematically reevaluating how it positioned all of its tire
brands. For example, the company found that some of its premium
tires lines were the original-equipment choice for high-end performance
vehicles as well as for economy cars. “This resulted in
inconsistent communication to consumers about the differences
between our brands,” Berg said. “So we came up with
the essence of the brand and brand pricing, and we began moving
our OE fitments on economy cars to our value lines and performance
cars to our high performance lines.”
A flexible strategy
Global marketing isn’t just about standardization. Innovative
companies also must know when to act locally while thinking globally.
As a worldwide supplier of computer processors and networking
and communications products, Intel Corp. designed a flexible,
global marketing strategy. “It’s not a universal model.
There are differentiations—not in individual products, but
in how you reach your customers,” said Douglas Busch, vice
president and chief information officer.
This model accommodates important market segments
such as original equipment manufacturers, resellers and large
enterprises. It is also adaptable enough to serve, say, small
dealers in China who build computers on demand in tiny storefront
shops. “Customers walk up to the kiosk, fill out a checklist
of what they want and the dealer builds a system for them on the
spot,” Busch explained. “The things we need to do
with IT to enable that very important market and the things we
do with IT to enable the direct channel or the OEM channel are
very different, but complementary to each other. One of the key
things we found is that product differentiation diminishes to
the point of zero in the global market, but interaction with the
customer does not. So we have to enable all those different varieties
of interactions.
A new reality
Although NCR, Goodyear and Intel serve very different markets,
their globalization efforts have led all three to similar conclusions.
One is that while technology is an essential underpinning for
devising and communicating a unified marketing message, it’s
not a silver bullet.
“The power to do the kinds of things we’ve
described does not derive from the ability to apply [corporate]
resources,” Intel’s Busch said. “It’s
more the power to apply insight and imagination. Even though IT
bills can look huge, as a fraction of the overall spending of
a corporation, it’s a very small part. So the key issue
is not the availability of actual resources. It’s the availability
of imagination to recognize how these resources may be used for
new opportunities.”
The roundtable also showed that each company
believes successful globalization requires hard work and perseverance.
Busch called it “one of the most difficult organizational
transitions that I’ve ever been a part of.” NCR’s
Shanks, referring to the deliberate dismantling of the company’s
sales strategy, conceded, “It was not easy. And we continue
to struggle with some of the issues today.” But even now
NCR is seeing the payoff. “As a result of these efforts,
we’ve been able to drive much more efficiency.”
As the Harvard event and Deighton’s roundtable
proved, Levitt’s ideas on the globalization of markets are
more than just a passing reaction to an ever-more-connected world.
They are essential truths that can make or break a company’s
long-term success. As he correctly put it two decades ago, “Companies
that do not adapt to the new global realities will become victims
of those that do.”
Would anyone care to disagree? T
Alan Joch is a New England-based business
and technology writer whose work has appeared in The
New York Times, Fortune Small Business and Byte.
Note: Just prior to the publication of this
issue, Eric Berg joined NCR as its chief administrative officer.
PHOTO BY RICHARD PASLEY
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