Carrying out business beyond borders
Conducting business in the era of globalization means more than just thinking globally and acting locally, writes Neil Runcieman

The onset of globalisation, seen in facets such as international travel, led former UN secretary general Kofi Annan to say that arguing against it is like ‘arguing against gravity’. Photo : Bloomberg

The mantra for globalization is “Think Global, Act Local”. Like most taglines, it is brief, memorable and based on an age-old rhetorical model. Like most taglines, it is glib, simplistic and facile.

Had General Motors acted less locally in the United States, it might not be facing bankruptcy. Toyota is one of the prime examples of successful globalization, but that is largely because it acted globally to impose best practices, often in the face of strident local opposition.

A company such as HSBC may well spend the equivalent of a small nation's GDP advertising itself in airport terminals worldwide as ‘the world's local bank', but try depositing a local cheque at any branch in Britain into your Hong Kong account and see where it gets you. The systems are still far from integrated: they “act local”.

Globalisation, stripped of any political overtones, defines the breaking down of barriers between nations, including financial, social, trade and cultural. Its spread over recent years has been so swift and inexorable that it prompted Kofi Annan, the former United Nations secretary general, to state that “arguing against globalization is like arguing against gravity”.

The fears of contemporary anti-globalists are that today's multinationals are no less violent in imposing global corporate imperialism in their relentless quest for profit, exploiting poor workforces and ravaging the environment, among many other ills, than their empire building predecessors of previous centuries.

They worry as much about cultural globalisation: the McDonald's syndrome, where the same products are available in exactly the same way everywhere in the world – life reduced to a reliable but bland and soulless lowest common denominator.

And it's not just at the low end. Look at luxury brands in the shopping malls. We are constantly solicited to visit Dubai, Singapore and Hong Kong to buy the same expensive goods (often produced abroad) that you can buy in Paris, Milan or London.

The same flattening out applies to the corporate world and workplace, too. Globalisation requires global systems, global processes and global controls. The challenges for companies sourcing from abroad to feed their domestic market – the Wal-Marts and Home Depots – are different from those selling their services on domestic markets internationally. “Think Global, Act Local” may trip off the tongue, but when putting it into practice implies paying huge bribes to government officials in a country with an embedded culture of corruption, the results are uncomfortable – and on the occasion that they become public, highly embarrassing.

Yet globalisation appears irresistible, the local outcome of growing market interdependence catalysed most recently by the end of two socio-political revolutions, in Russia and the mainland, and the rise of one technological one: The computer. With so many barriers to trade and communication now down, today's aspiring business plan grapples nor with the issue of whether to move outside its home country, but how and when to do so, dealing with differing working practices, logistics and diverse customer tastes.

What is statistically undeniable is that globalization drives prosperity. This may cause the anti-globalists to choke, citing exploitation of the poor and destruction of age-old communities and cultural values, but consider the following figures from the World Bank: between 1981 and 2002, official poverty levels in the heartland of globalisation, the mainland, dropped from 63.8 per cent to 14.4 per cent. A similar pattern runs though Southeast Asia and the Middle East. In sub-Saharan Africa, however, where, where there has been little or no globalization, poverty rates have increased marginally to 44 per cent.

For the corporate world, the greatest challenge of globalization is how to manage it effectively. The culture clash of western managers with no experience outside of their home country being “parachuted” into newly acquired mainland companies or joint venture is legendary. Many hard lessons have has to be learnt, particularly by companies that had already had their fingers badly burned in earlier rounds of overenthusiastic and underinformed international expansion.

Successful globalization works best when based upon open principles of communication, a spirit of compromise and procedural transparency – not qualities for which the Chinese are traditionally renowned.

Nonetheless, the Chinese model - recession or no recession – has worked well. The language of international commerce is English, and nearly all Chinese now study English. That is complemented by a growing number of expatriate managers who have studied Chinese at university, or who commit themselves to a long-term career in China, immersing themselves in the culture and language – without which they have no chance of understanding what makes their local partners tick.

Until recently, globalisation on the mainland was synonymous with cheap production of goods for sale on the international market. Now the model is changing again, with the focus increasingly on feeding and developing the burgeoning numbers of domestic consumers. This presents different challenges for the global companies, as pioneers such as Carrefour and Wal-Mart, Volkswagen, Toyota and other international automotive manufacturers have discovered.

The next phase will be now fascinating still, as the mainland's domestic brands look to globalise on the international markets. Will the Chinese take on board the lessons they hope they have already taught their western visitors? Or will they still be “thinking global”, but only “acting local”?

SCMP
20th May, 2009

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