Customer Reviews

Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter

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Proponents and opponents of globalization have one thing in common: They believe globalization has arrived. The former cheer this change; the latter lament it. But both are wrong. Most business takes place within - not between - those anachronistic entities called "countries." If you assume "the world is flat," you'll founder. You will do far better, argues Pankaj Ghemawat, if you accept the reality of "semi-globalization" and navigate with the clever tools and in-depth case histories he provides. Ghemawat's noun-heavy prose suggests that he's been reading too many academic journals. Even so, we are well satisfied with this dense read, which provides far more nourishment than the insipid, fatty "globaloney" served by many business gurus. This book is a feast.

This book is a delight to all of us engaging with global strategy, as scholars, teachers and practitioners. Based on a thorough and deep analysis, Ghemawat provides a much-needed counter statement to the journalistic-style thinking that has threatened to dominate the common wisdom on globalization. He forcefully illustrates the inherent tension between the forces of globalization and localization, and the complex relationships between them. In doing that, he advocates a nuanced view of the impact of globalization on business, in which its diversity and plurality are explicitly recognized. A most important argument made by Ghemawat that should not be overlooked is that differences between countries are not only an obstacle to overcome, as commonly believed; In addition, they open up important opportunities, for the companies able to take advantage of them.

For those readers who are not familiar with Prof. Ghemawat works but are involved in business operation expansion via internationalization, ABSOLUTELY this is the right book for you. I go so far that recommend holding your choice of expansion until you and your management team finish reading this book.

The whole content of the book is so well bind together and is so coherent that you have to just follow the steps and make a map of your plan with recommended below tools:
1. AAA Triangle ( Adaptation, Aggregation, and Arbitrage ): These describe what right mode of your expansion is; depend on type of your business and nature of competitors and market conditions.
2. CAGE ( Culture, Administration or politics, Geography, Economics) tool to analyze either the nature of countries you would like to enter or nature of industries in the country that you would like to enter.
3. Finally make a map of your plan for decision making by ranking your choices through using "ADDING ( Add volume or growth, Decrease costs, Differentiation, improving industry attractiveness, Normalizing risk and Generate knowledge) value score. This tool will clarify for you and your organization: what is/are the drivers for your company to expand.

Having been involved in B2B international business over 17 years, I recommend to use first the "ADDING" tool and then move to "AAA triangle" and then analyze and priorities your choices through using "CAGE" tool.

So many thanks to Prof. Ghemawat who really described and explained the SEMIGLOBALISATION and then also explain how to thrive in this world by first describing the above tools and then explicitly showing the application of these tools in business such as car industry ( Toyota), Cement Industry ( Cemex), Retail industry ( WAl Mart), Health care ( P&G), IT industry (IBM), Software services ( Cognizant), Coca-cola and several others.

This book was required reading for a course in my MBA program. Ghemawat makes a lot of good points to support his belief that the world is not quite as integrated and "globalized" as many would have us believe. If you are looking for some insightful counter-arguments to the subject material that you'll find in Thomas Friedman's writings, this is a good buy.

Also the physical quality of the book was excellent; I bought it used and it looked like new. It arrived in good time and there was no damage nor missing pages.

This is a thoughtful book about globalisation and consequences for multinationals. It is based on several years of research. (Too many books are just based on one research project.) Ghemawat is familiar with the academic literature (i.e Prahalad/Doz, Bartlett/Ghoshal), which he reviews before presenting is own framework. This book is practical, but it keeps references the academic literature so I think it will appeal mostly to practically oriented business school scholars. His own framework(s) is interesting, but it is not a game changer from international business. Ghemawat's style of writing is fine, but not captivating. However, he has a good analytical mind that shows through in the book.

Too often firms with a strong presence in the U.S. fail when they cross-borders into other nations. Their flawed assumption - 'one-size-fits-all.' Victims, per Ghemawat, include Ford (Europe), G.E. (European appliances), and Wal-Mart (Germany). "Redefining Global Strategy" explains why different strategies are often required, along with examples and a structured approach for analyzing a potential border-crosser's situation.

The 'good news' is that the potential rewards of successful overseas expansion are no mirage - eg. Coke is much more profitable overseas than in the U.S., even though its per capita consumption here is 10X that of other nations. (Ghemawat also adds that differences between domestic and foreign market penetration are even larger in most instances.) The 'bad news,' per the author is that growth fever focused on foreign markets is often exacerbated by investment bankers interested in doing deals.

Reality is that U.S. multinationals typically operate in just 1-2 foreign nations, and that Canada is most likely one of those. Coke is one of only a dozen or so Fortune 500 firms that derive at least 20% of their sales from each of North America, Europe, and the Asia-Pacific region. Google, for examples, has had difficulties in Russia (#3) due to greater difficulty of the Russian language and the weakness of credit-card payment mechanisms in that nation. In China, Google ran into major problems over differences vs. the U.S. regarding government relations.

Wal-Mart in 2004 was profitable in only 4 of 9 foreign nations. Two of those (Canada, the U.K.) share the same language with the U.S., and one of the others is Puerto Rico - a U.S. territory. It has pulled out of South Korea (after ten years) and Germany (after nine years), however. Conversely, British retailer Tesco is succeeding in South Korea, relying heavily on local managers from Samsung. Experts believe Wal-Mart put off South Korean consumers by concentrating on dry goods while local rivals focused on food and beverages. (Google is also a weak player in South Korea.) In Germany, Wal-Mart failed to overcome local chain Aldi and its ability to provide cheaper, quality offerings. Wal-Mart has also clashed with German labor laws and unions, and further upset shoppers by bagging their groceries. (Turns out that Germans don't like strangers handling their groceries.)

Lessons - success is more likely when expanding into areas with a common language and similar cultures.

Canadian inter-province trade is about 5-10X that with U.S. states within an equal distance. Similarly, intra-regional trade is much greater than cross-ocean. Distance, lack of long-standing relationships (eg. colonial), shared values and ethnicities, and lack/presence of political hostilities are additional factors. Government interference is more likely when food and large local employers are involved.

Cemex has succeeded in its expansion by buying where it can end up with the largest market share. That international breadth has brought it lower capital costs, but not lower operational expenditures. Began when Spain's Holcion's (world's largest) expanded into Mexico, bringing the threat of a price war. Cemex responded by expanding into Spain - result was no price war in either location. Being established in a number of locales has also brought Cemex exposure to more best practices. Family relationships, interlocking board memberships, membership in strong business associations, and close links to the political establishment have also helped - eg. allowed Cemex to keep cheaper Russian cement from being unloaded in Mexico.

DaimlerChrysler encountered cost increases from its merger - first came the 28% stock premium, then the banker's fees, and finally the cost of raising the pay of its German managers.

BCG estimates that for manufacturing processes it is possible to reduce capital investments 10-30% below Western levels via local equipment suppliers, and by 20-40% by replacing capital with labor. Further reductions are possible by achieving continuous production. Reducing capital costs lowers one's B/E and risk.

About 40% of clinical trials are now conducted in developing countries.

"Redefining Global Strategy" is excellent reading for any firm considering expanding across borders. However, its analysis structure becomes overly laborious - I would suggest simply distinguishing between B2B and consumer trade. The former is much less vulnerable to cultural, etc. differences, and those differences (metric, voltage) are more easily accommodated. His recommendation that existing multinationals begin by examining country-specific profitability is a good one. Finally, however, I found his clinical analysis of outsourcing a bit off-putting - outsourcing is ruining our economy.

Pankaj Ghemawat is a bright academic, and he has picked a fine topic to debate. Leaves no doubt about that every lingustic, racial and geographic grouping of people needs a different business approach ... very solid examples ... but this book lacks a lucid and clear writing style that characterizes other books on globalisation like "The World Is Flat," by Thomas Friedman and "Making Globalisation Work," by Joseph Stiglitz. The writer quite often gets the reader lost with the academic jargon and circumlocuted emphasis ... bit nevertheless a gem of a book on the topic.

In Redefining Global Strategy, Harvard professor Pankaj Ghemawat outlines and engages in a thorough analysis of what he calls "semiglobalsim." He argues that distance--cultural, geographical, ideological, administrative, economic, or linguistic--still matters, in spite of the revolution in communication technology. Ghemawat suggests that differences (and barriers at borders) across countries are still larger than what both defenders and dissenter of globalization acknowledge. In fact, he doesn't oppose so-called globalization; rather, he emphasizes that it has not reached its peak, claiming that the real state of the world is "semiglobalized," not fully globalized. Thus, economically speaking, companies need to overcome the aforementioned barriers in order for their products and markets to go global. Ghemawat acknowledges the rift between the theory and experience of globalization, and he provides an array of strategies, policies, and approaches to bridge this divide and achieve fairer globalization in the future. To this end, he integrates a few prototypes of products (Coke, McDonald's, and others) that have managed to cross borders as a result of advocating a flexible business reality in making business decisions. Such a strategy doesn't strictly espouse either a country-by-country or a one-size-fits-all-countries basis. Instead, "What must be grasped is a business reality that lies in between one country and one world" (32).
Unlike David Harvey--geography's most influential analyst of contemporary urban life--who believes that the recent technological advancements have tremendously transformed the world into a small village in which "all that is solid melts into air," Ghemawat thinks that geographic distance or proximity, among other factors, still plays a central role in our postmodern, if not post-human, society. For Ghemawat, the greater the distance between any pair of countries, the less they trade and visa versa. Still, he is aware of other political, cultural, and ideological disparities that can impede bilateral trading relationships between bordering countries. Consider, here, India and Pakistan (albeit sharing a colonial past, a land border, and linguistic ties), Israel and Syria, and Turkey and Armenia as quintessential models of adjacent yet belligerent nations. Indeed, the long-standing mutual hostility between Israel and Syria, which stems from Israel's occupation of the Syrian Golan Heights, means that official trade between them is less than one-hundredth of what gravity models would predict it to be.
Perhaps the most original component of this book is how it addresses a question much in the air these days: "Why globalize?" The author makes it clear that tackling this question requires serious and multifaceted investigation. However, profiting, regardless of human and nonhuman suffering, is the simplest answer to this question. The book expounds on myriad mechanisms for creating "universal" or globally accepted values via adaptation, aggregation, and arbitrage. These techniques aim to subsume and fuse disparities across countries and classify them a priori and hierarchically. In short, a company must take both similarities and differences among countries in account in order to achieve a global reputation.
Ultimately, I enjoyed reading this interdisciplinary book. However, from a non-economics/non-business perspective, I want to see more on the responsibility of (post)colonialism or imperialism, in its covert and overt forms, for creating uneven, disruptive arenas among otherwise enormously dissimilar countries. Consider the role of the English language, let alone Christianity, in homogenizing far-flung parts of the world. In reality, this monolithic structure intensifies the gap between the privileged colonizers or neoglobalists and the disadvantaged and once-colonized who are coerced to consume the same (neo)colonial products and ideologies and thereby adapt to new superimposed realities. Also, Ghemawat neglects or avoids addressing the dire consequences of globalization on the weaker part of the equation. To put it mildly, the book's major concern is globalizing, profiting, and marketing, but the exploitation of people and nature in order to achieve this goal is not mentioned at all. These shortcomings aside, the book is still a handy source, not only for business majors, but also for those in other fields.

Many books on the maket explain issues concerning globalisation, corporate strategy and the like. Most of them are focused on key figures and market evolution. But none of the ones I have readen explain:

- How to analyse the benefits/risks of a possible globalisation (CAGE)
- Which tools you have to set whether it is suitable to go to a globalisation (ADDING)
- And finally, how to act (AAA).

OKs

- Good book if you want to expand your business.
- Methodological approach.
- Nice written.

KOs

- Difficult to implement. In fact, though there are several examples, it lacks of a global example, and the figures according to the approach (ROE, ROA, valuation,...).
- I'm in the banking business, and there are few examples of banks in the book.
- I think the book doesn't define what does 'boundaries' mean. It's clear that 'boundaries' apply when you want to go from Spain to China. But does it apply in an internal movement among different cultures and legislations (for example, from NYC to Hawaii)? In all cases?? How do I have to know when the 'boundaries' term is gonna being applied?

Redefining Global Strategy (RGS) reminds us that conventional wisdom is often falls apart in the clear light of analysis and research. This is an excellent book for those looking to understand the realities of global strategy and operations. Based on extensive research and deep case study analysis, Pankaj Ghemawat delivers a book leaders need to make real decisions.

Ghemawat starts with reminding us that the world has changed as commuincations, information technology and global logistics have created new opportunities for companies. He then reminds us that just because you can extend your company to Asia it does not mean that those markets are the same as yours. Ghemawat introduces and uses his CAGE framework through out the book to good effect. CAGE is a framework based on distance and expresses distance in the following ways:

Cultural distance - how different are the cultures in which you are looking to devise and implement a strategy

Administrative distance - the distance between standard policies, frameworks, the rule of law, business norms. We frequently brush past this type of distance but Ghemawat shows how important it is.

Geographic distance - how far apart or how hard it is to do business between your corporate center and the local market. That last point is particularly important as you may have a local plant but your decision center is the place to measure this distance.

Economic distance - the payment, financial and growth and development gaps that exist between countries and companies.

Ghemawat uses these distances to explain the results achieved by leading companies ranging from Phillips, Coca-cola and Wal-Mart. The in depth analysis provides the real world examples needed to inform those setting global strategies. That in depth analysis also makes this a book for people looking for real insight and data that they will have to work to understand. This means if you are looking for a light read, one that will not challenge your thinking and one that is easy to agree with - this is not the book for your. In fact the research and the depth behind these ideas require some reflection and study to get the most out of the book.

Redefining Global Strategy is not breezy book that you can read to gain a few buzz words or slogans for your strategy. It is the best bridge between good and practical scholarly research and application of that to business decision.

Clayton Christensen once commented that there was a need for more rigor, research and analysis in business books and literature. Ghemawat delivers on all of these counts.