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Long Range Planning

39/3 June 2006

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Charles Baden-Fuller Editorial

Globalisation is everywhere evident, but is everywhere evident. In this issue, we examine five dimensions of globalisation and how it is influencing businesses and executive decisions. In the opening piece, Arie Lewin and Carine Peeters look at the offshoring of administrative and technical work. India is currently the prime offshoring location and IT the most important dimension, and the trend looks to be continuing. The authors examine why companies have been experiencing better than expected results and why they must innovate in the ways of off-shoring if the benefits are to continue.

George Yip, Alan Rugman and Alina Kudina examine the globalisation of British companies. They argue that international competitiveness should not be measured by profitability alone, but also by global market share and international revenues. Many British firms are doing well by their measures, but in the service industry of finance they are lagging. The challenge is great, and the authors examine how British firms generally and those in the service sectors in particular can improve their positions.

Gina Beim and Moren Lévesque's paper naturally follows in sequence. They examine where companies should choose to invest. Their paper not only provides a useful model for making these decisions, but also provides data to help the busy manager, and a robust testing of the validity of their methods.

Jie Wu and Nitin Pangarkar ask: what should companies in local markets do when invaded by multinational firms? Following on from previous work published in this journal, they explore the validity of four different responses: Dodge, Contender, Defender and Extender. They examine when each response is appropriate and identify the risks and action points that are relevant to managers.

Finally, Olivier Boiral revisits our pages to discuss the challenge of Global Warming. He explores whether companies should have a proactive strategy to this issue, and if so how it is best adopted. He shows that some of the most proactive firms have been involved in the Energy Sector, and that there is no paradox here. Companies that contribute to Global Warming can also be seen to undertake positive actions to reduce their influence.

 

Arie Y. Lewin and Carine Peeters Offshoring Administrative and Technical Work: Business Hype or the Onset of
Fundamental Strategic and Organisational Transformations?ayl3@duke.edu

The increasing competitiveness of today’s business environment puts pressure on companies to cut costs. Many have sought to do so by outsourcing business processes to other countries that can provide low-cost but high-skilled workers who can do the job for a fraction of the price in the companies’ home territory. But what are the experiences of these companies, and do the results match the expectations they held when they first ventured on their offshore strategy? This paper reports on the findings of the Offshoring Research Network, a collaboration between the Center for International Business Education and Research (CIBER) at Duke University and Booz Allen Hamilton to study the offshoring of administrative and technical work to low-cost countries. Based on ORN’s first biannual survey, which received responses from 90 US companies with a variety of experience in offshoring, outsourcing abroad follows a fairly defined pattern: companies are likely to experiment with outsourcing IT functions, and then as they gain experience and confidence, will push other functions such as finance and accounting overseas as well. Even surprisingly
core processes, such as R&D, can be sent offshore. The authors note that while the cost savings achieved usually exceed expectations, the entire process of offshoring is often instigated through random experiments from the bottom-up level and surprisingly few corporate-wide offshoring strategies as yet exist. They suggest that offshoring, which itself
is being driven by advances in communication technologies, may actually only constitute the tip of an iceberg that is changing the shape of traditional business models.

 

 

George S. Yip, Alan M. Rugman & Alina Kudina International Success of British Companies gyip@london.edu

British companies have achieved mixed success overseas. For some, such as BP, some 83 per cent of revenues come from overseas operations while for others, such as the giant retailer Tesco, overseas earnings account for just 20 per cent of the total. This paper examines the international success of British companies in a matrix combining global market share and international revenues. The authors identify those industry segments in which British companies are most successful internationally and investigate whether these are attractive industries in terms of profitability and growth. They find that the industries with the largest global market shares for British companies are Mining, Casinos (and Gaming), Oil Companies (Major), Distillers & Brewers and Water Utilities. The industries with the highest international revenues are Precious Metals, Pharmaceuticals, Industrial (Diversified), Oil Companies (Secondary), and Mining. Virtually all of the largest British firms average over a 10 per cent global market share but the second measure, the extent of internationalisation, is found to be ambiguous. The manufacturing (product-based) firms tried to be highly internationalised, as they compete globally, but the largest British services firms (financials, retailers)
tend to have low internationalisation, and therefore appear to benefit from a still somewhat regulated home market. In addition, British companies have done a good job of building up global market shares in higher growth industries. The paper provides recommendations for managers as to how British companies with different combinations of global
market share and extent of internationalisation can improve their positions. The methodology can also be applied to analysing companies from other nations.

 

 

Gina Beim and Moren Lévesque Country Selection for New Business Venturing: A Multiple Criteria
Decision Analysis moren.levesque@case.edu

One of the first issues facing a company with global ambitions is the matter of which country to enter. The international entrepreneur must gather information on potential locations and evaluate this under several criteria and from numerous perspectives. Very often such decisions are not taken by one person, but by a group, who must decide a common and transparent way to make their evaluations. This paper advocates a formal approach, Multiple Criteria Decision Analysis (MCDA), as a way of measuring factors for country selection, articulating the knowledge about decision processes and exploring possible outcomes. The methodology also allows sensitivity analysis of the results and facilitates the inclusion of subjective aspects in the decision process. The authors offer an overview of the MCDA methodology to analyse country selection. They created a hierarchy of criteria, which they point out can be customised to any decisionmaker’s situation, and used published international statistics to assess the performance of 14 countries in those criteria. Five volunteers, experienced in international expansion, were presented with the structure of the model and asked to imagine themselves in the position of having to select a country to enter, to elicit their value functions and weights. Sensitivity analysis was performed to demonstrate under what conditions a country is outranked by another. The authors argue that the country selection process with MCDA can better reflect the complexities of real
business environments as more facets of the problem can be considered simultaneously and a non-equal weighting of performance-related constructs can be used, yielding a more accurate set of preferences. As a result, country selection decisions can be better explained and defended.

 

 

Jie (Jacob) Wu and Nitin Pangarkar Rising to the Global Challenge: Strategies for Firms in Emerging Markets bizpn@nus.edu.sg

When well-resourced MNCs enter an emerging market, is the game up for local firms? Not necessarily so, according to this article, which uses data from 155 listed Chinese firms to show how local firms exhibit positive ROA in the face of MNC entry. The article develops from Dawar and Frost’s typology which arranges the response strategies available to local firms according to industry pressure for globalisation and whether firm’s competitive advantage is transferable to other geographic markets. This article give examples of the four typical strategies - Dodger, Contender, Defender and Extender - and the authors set themselves the task of looking for performance differences across the different strategy types, as well as examining how size moderates the strategy/performance relationship. Concluding that performance levels depend on firm strategy, with internationally-oriented strategies resulting in better performance; and large size helping performance for most strategy types, they identify the implications of their findings for local firm managers under MNC threat in emerging markets.

 

Olivier Boiral Global Warming: Should Companies Adopt a Proactive Strategy? Olivier.Boiral@mng.ulaval.ca

Global warming is turning up the heat on companies to adapt and cut emissions of greenhouse gases. Ever since the Kyoto Protocol was signed in 1997, which required signatory countries to reduce harmful emissions, companies have an environmental consideration to add to their strategy, whether they have yet chosen to act on it or not. This paper asks whether companies should adopt a proactive strategy, or whether they would be better off taking a ‘wait-and-see’ approach to environmental regulation. The issue has been complicated by some uncertainties over the effects of global warming and the fact that the fastest-growing emitters of greenhouse gases, China and India, as well as the US have not bound themselves to the Protocol. Chief among the objections to the Protocol are economic factors with some observers pointing to the huge costs involved in adapting to reduce emissions. However this paper gives examples of some companies that have achieved economic advantages by making changes to comply with the Protocol at an early stage. The author proposes a global approach for companies to anticipate the possible impacts of global warming and to explore the policies and measures that managers can implement to cope with this issue. As well as weighing up the proactive or the wait-and-see responses to global warming, the author stresses the importance of promoting environmental intelligence and other preliminary measures before deciding what strategy to adopt.

 

 

 

This issue is available in full on-line at www.sciencedirect.com

 

 
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