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The Business Challenges of Globalization



 

Taken from Creating New Superstars by Carol and Ennio Fatuzzo (1)

 

IMG_0065In spite of the chaotic world around us, the risks involved in playing some types of games haven’t changed. For example, playing roulette, whether it is Russian roulette or the more civilized version in Monaco, is the same as it always has been. However, in today’s fast paced environment, the “game” of business has become a much more dangerous venture. Developing a new business or expanding an existing one involves a whole new dimension of risk due to many developing “agents of change.” Globalization, including the rapidly expanding global economy and the consequences of global competition, is one of the most powerful influences.

On a positive note, globalization significantly increases potential market sizes, creating extremely attractive and visible business growth opportunities. Just think about the worldwide explosion of smartphones, or the rapid expansion of wine import and export businesses, or the huge potential for new cancer drugs. Even water is now a global opportunity, as the recent history of San Pellegrino shows. Twenty years ago it was a relatively unknown Italian mineral water. Today, it is distributed worldwide to more than 120 countries on five continents. (2) But with size comes different challenges.

Highly visible, big growth opportunities create new global competitors that were never before threats―Korean car manufacturers, Indian software developers, Chinese computer and internet-based companies, and more. The bottom line: More companies around the world are likely to be pursuing the same specific growth opportunity at the same time. Therefore, the risk of failure for any single company is high—significantly higher than in the past.

Looking at the situation another way, in the past a company had a reasonable possibility of being the only one pursuing a good new opportunity—one that was unrecognized by others. And that resulted in many single-company big successes: Kodak and silver halide film, IBM and computers, Motorola and cell phones, RCA and consumer electronics, and more. But in today’s dynamic global economy, due to the growing technical sophistication of global competitors and the faster pace of everything, there will not be many “lone pioneers.”

And there is another kind of challenge. Pursuing larger global opportunities requires greater resources than what are needed to be successful with smaller, “local” opportunities. This results in the financial risk being much higher, sometimes high enough to place an entire company in jeopardy. If a global project fails, for whatever reason, that failure is extremely costly. Kodak having to declare Chapter 11 bankruptcy as a result of its late and unsuccessful attempt to become a major global player in digital photography is a good example of today’s high cost of failure. (3)

But the risk of large financial investments isn’t the only challenge involving resources. In the past, under-resourcing a project or using resources ineffectively did not matter as much as it does today. Why? Any such “mistakes” will slow down progress; and in a faster paced and more competitive business world, this decreased speed will almost certainly create a significant competitive disadvantage. This, in turn, greatly increases the probability of a costly failure in the marketplace.

And finally, because of today’s need for speed, failure is not only is connected to making wrong or bad decisions. It frequently is the result of making good decisions too slowly. Kodak’s eventual management decision to pursue digital photography was a good one, but the delay in making that decision was a major contributor to the effort’s failure. This delay gave global competitors an insurmountable lead.

Bottom line, in a highly competitive, global business environment that is rapidly changing, a slow decision will almost always be a wrong decision; and being late to the market almost always assures failure. Just as in nature, a slow company will become prey for the faster, more aggressive one.

 


1. Ennio Fatuzzo and Carol L. Fatuzzo, Creating New Superstars: a Guide to Businesses that Soar above the Sea of Normality (USA: September 2016). Available from amazon.com.

2. S. Pellegrino Company Website, accessed October 18, 2017, https://www.sanpellegrino.com/us/en/company-intl-41.

3. Rick Newman, “Four Lessons from Kodak’s Comedown,” U.S. News online, January 19, 2012, http://www.usnews.com/news/blogs/rick-newman/2012/01/19/4-lessons-from-kodaks-comedown; “The last Kodak moment?,” The Economist, January 13, 2012, accessed online October 18, 2017, http://www.economist.com/node/21542796.

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