RSS FeedBy M. Isi Eromosele
The typical multinational corporation, which had been the primary catalyst for globalization, has been slowly transformed, even as the paradigm for doing international business has evolved during the past decade. In its new form, it represents a new type of business organization – a globally integrated enterprise.
Global Integration
The transition from multinational Corporation to Globally Integrated Enterprise has assumed two profound forms. The first has produced changes as to where goods are produced and the second, changes as to who produces them. Up to a decade ago, companies generally preferred to produce their goods close to where they were sold. As such, most foreign investments targeted carefully chosen global markets. Today, overseas investment is geared more towards where access and thus market share could be gained to meet important sources of foreign demand. Economies of scale strategies have been implemented to streamline and consolidate production processes, thereby eliminating unnecessary bottlenecks.
This change in production in global production initiatives have been most manifested in China and India. In China, foreign companies have built over 150,000 manufacturing plants since 2005. Some of these factories target the huge Chinese domestic market, but many others target the global market. Japanese car makers, European chemical companies and United States based industrial and machinery companies have built and are still building factories in China to supply export markets around the world. Additionally, banks, insurance companies, professional services firms and information technology companies are building R & as well as service centers in India to support employees, customers and production on a global basis.
The above changes reach far beyond China and India. Radiologists in the United States send x-rays to Australia for analysis and interpretation. Customer service centers in Switzerland handle warranty enquiries for shoppers in the United States. Procurement centers in the Philippines process corporate purchasing on behalf of organization based in multiple countries around the world. Employees in Dublin, Ireland handle back office processes and process derivatives transactions for global investment banks located in New York, London and Frankfurt.
In the United States, biotech and pharmaceutical companies, such as Roche have built manufacturing and R & D centers to support their global research and production. Japanese chipmakers, such as Samsung and chip manufacturing equipment companies, such as Tokyo Electron, are leveraging U.S. based engineers and their knowledge to advance their manufacturing technologies.
Systemic Changes
The globally integrated enterprise requires fundamentally different approaches to production, distribution and global work-force deployment. New technologies and business models are enabling global companies to treat their far flung functions and operations as component pieces that can be transformed and adapted to respond to customer needs in any part of their global markets. These decisions are made based on strategic judgments as to which operations the company wants to excel at which it thinks is best suited to a particular marketplace. The extraordinary growth of service firms providing specialized expertise makes this possible.
New forms of collaboration are everywhere in global business; from increasingly complex intercompany production networks to open-source software production, which helped transform the traditional model of innovation. Today, innovation occurs mostly through a collaborative process that also combines technological and marketing expertise.
The globally integrated enterprise delivers enormous economic benefits to both developed as well as emerging economies. The integration of the work force in developing countries into advanced systems of global production has raised living standards, improved working conditions and created millions of jobs in these countries. The spread of shared technologies and business standards is creating an unprecedented opportunity for further global integration, not just within each sector of society, but across all of them.
M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance
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