You have asked a question which could encompass many thousands of
words and a myriad of challenges which face businesses as they
consider globalization. I have researched this topic extensively in the past, and have tried to compile some of the most important challenges into an answer for you.
Major Challenges Facing Companies Due to Globalization
The following information and excerpts can be found in the article, Meeting the Challenges of Globalization, by Michael Smith. Caux Conferences 2002. For a Change Magazine at http://www.mra.org.uk/fac/oct02/industry.htm
Lack of global anti-trust laws and accounting standards ***************************************************************************** ** The asymetrical development of globalization was a concern emphasized by conference participants representing companies located in both industrialized and developing countries. **The lack of global anti-trust laws and common accounting standards** has made globalization like an Olympic competition, but without any rules or referees according to Kimon Valaskasis, founding president of the Club of Athens, and a former Canadian ambassador to the Organization of Economic Cooperation and Development. The WorldCom and Enron accounting scandals would have been scarcely possible before globalization, he claimed.
Taking care of employee needs in foreign countries can increase costs and demand downsizing: ***************************************************************************** ** Housing, healthcare, and education in a foreign country are all concerns of employees who are transferred to a foreign country due to globalization, and it is the corporations responsibility to see that their needs are being met. Two Indian companies, Tata Steel (Tisco) and Tata Engineering (Telco), which spend around $20 million a year on providing facilities for their employees, has had to downsize drastically, while trying to implement liberal severance schemes to protect the salaries of displaced employees up to their retirement. The human asset is the greatest asset and should be treated as such.
Companies must learn to increasing efficiency and reduce costs: ***************************************************************************** ** With so many companies expanding their business on a global scale, one of the biggest challenges facing smaller, or less experienced companies, is how they can compete and remain financially viable. India-based Transasia Biomedical, which produces and exports diagnostic machines for blood disease to some 30 countries, faced extreme competition from US, German and Japanese manufacturers during the time that Indian tariffs were reduced. We realized that globalization was not only for these countries but also for us," said founding director and manager Suresh Vazirani. "We reduced our costs and decided to compete with all the other players in the world. Efficiency was the keyhow to reduce man hours. The company was manufacturing 5,000 machines annually for the domestic market, but calculated it could produce 20,000 annually for the world market. The efficiencies introduced allowed Vazirani to transfer 30 of the companys 350 employees to research and development, rather than making them redundant. We are now technically as advanced as Japanese and European products, he claimed. The company sells to Germany and is breaking into the Japanese market. It now employs 450 people and anticipates a turnover this year of $20 million. **Please read the entire article mentioned above for more complete explanations at http://www.mra.org.uk/fac/oct02/industry.htm
Efficient Budget and Resource Allocation ***************************************************************************** ** A study by Aberdeen Group has recommended that if companies want to remain competitive in this rapidly paced Web environment, they need to create and budget enough resources to efficiently maintain a global Web presence. If a product or Web site is not optimized for international transactions, the logistics of marketing to an international market can be crippling, with return rate as high as 46% for all products sold internationally. This recommendation is based on the fact that by 2003, 66% of all e-Commerce spending will originate outside of the U.S. and that more than 66% of all users on the Internet will reside outside of North America. ** Read the abstract titled Web Globalization: Write Once, Deploy Worldwide. Aberdeen Group (5/2001) at http://www.aberdeen.com/ab_company/hottopics/web_globalization/
Challenge of Providing Efficient Customer Service ***************************************************************************** ** Globalization requires customer service that allows for easy conversation exchange in the customers native language. Returns must be able to be accomplished easily. Either customer call in centers or e-mail correspondence in the customers language must be available for a company to compete successfully on a global scale. To efficiently handle e-mail customer inquiries, most companies will need to implement technology made possible by recent advances in analytics and natural language processing. "Right now the language processing being used with most installed e-mail systems is pretty rudimentary. Better-equipped templates can dissect e-mails for content, and analytics improvements have made e-mail smarter by helping companies figure out exactly what a customer is asking. The newer systems can either suggest a short list of possible solutions or route the customer to a specialist who has the answer. Read Why E-Mail Customer Service Fails, by Lou Hirsch. CRM Daily (10/14/2002) at http://www.crmdaily.com/perl/story/19667.html
Cultural and Language Issues ***************************************************************************** ** Company Website Translation and Customization: Although a study by International Data Corporation shows that by 2003, 39 percent of visitors to an internet website will speak a language other than English, 55 percent of U.S. companies have done nothing to customize their websites for foreign users. These companies can be losers in the projected 1.6 trillion dollar global e-marketplace if they do not tackle the technical and legal issues involving language and customization. Languages must be translated correctly and often require re-writing of content to avoid translation pitfalls. For example, Pepsi translated its promotional material in China, where its slogan "Come alive with the Pepsi Generation" translates into "Pepsi brings your ancestors back from the grave." Symbols and colors must also be customized to the particular country site, so they are not culturally offensive. Hand gestures that are friendly in the United States have negative meanings in other countries. A palm-forward wave is a nasty gesture in Greece and Nigeria. And the thumbs-up signal and thumb-and-index-finger "OK" sign are slights in Iran and Brazil, respectively. Colors, too, carry different meanings in different places. Black, a color that connotes hipness and sophistication in the United States, symbolizes death and bad luck in China. The avoidance of cultural blunders is considered so important that specific companies like Mainspring perform "cultural audits" on sites to make sure mistakes like these don't kill a company's global push. Companies must also adapt to different forms of payment. Although credit card use is common in the United States, countries like Japan, Germany and certain Latin American countries either dont use credit cards or hesitate to use them online. Phone or fax number can be provided on country-specific sites to overcome these barriers. Addressing standards also vary across countries. Hong Kong shoppers do not have zip codes, for example. If a Hong Kong customer types in an address, and leaves out the zipcode, the order may not go through if the site has not been adapted locally. Therefore, foreign websites must be customized to the address specifics of a particular country, rather than utilizing US standards. **The above information is from the article How to Avoid Global Website Disasters, by Emelie Rutherford. CIO (11/14/2000) at http://www.cio.com/research/global/edit/111400_disaster.html
Recognition of Cultural Differences When Doing Business Business behavior varies from country to country. Employees should be trained to handle business in the manner of the country in which they are working, or the company can suffer economic loss as well as cultural embarassment. Japan offers an excellent example of cultural differences: The Japanese place a tremendous importance on trust in relation to business transactions. Trust is obtained through a lengthy process of getting to know someone both in a business and a personal sense. Mutual cooperation and fellowship are preferred in the business atmosphere. It is commonly accepted that among trusted business partners, money and details need not be discussed. Self-promotion is considered arrogant. Contracts and invoices are rare in Japanese business transactions, since discussion of money implies a lack of trust. Hierarchy within the business organization is also extremely important and requires a great deal of deference to those who hold higher positions. Every company employee knows what shocks most Westerners; that one does not argue with the boss if one wants to succeed within the firm. Therefore, if foreign business enters Japan, it is vital to understand the Japanese way of doing business. Both cultural entities must be enlightened to the others way of doing business, and respect each other accordingly. Read Cultural Barriers to Globalization, by Britta C. Lietke. (8/7/1998) at http://216.239.33.100/search?q=cache:D9w6WkAdjZgC:www.ww.uni- magdeburg.de/fwwdeka/student/arbeiten%255C001.pdf+barriers+to+business+global ization&hl=en&ie=UTF-8
Brand Loyalty and Cultural Differences in Transacting Business are a Major Hurdle ***************************************************************************** ** Different countries transact business in different ways. It may be hard for a foreign company to break in, both due to traditional brand loyalty and accepted forms of legal transaction. For example: Autobytel is a California-based, online automobile company without an actual physical presence in any of the countries where it transacts business. Though the company has worked out a business relationship with US auto dealers, it is still not a smooth one. According to Adam J. Weiner, an analyst at Gomez Advisors in Lincoln, Mass., "It's got to be very tough for a company to go into an established retail and distribution system and say, 'We're better even though we don't make the cars, we don't service them, we don't own the brand, we don't own the experience.'" This problem is especially applicable to countries like Germany, whose brand loyalty runs deep. BMW is the car of choice for many, and remains the car of choice for life. Japan and many other European countries are also very loyal to their countrys car manufacturers. Differences in business transactions are also a major challenge to companies hoping to expand globally. Autobytel faces a big hurdle in Japan, where dealers transact with customers individually to order cars. Vehicles are not stored on dealers lots like they are in the United States. An in the European Union, a currently imposed "block exemption" (which is up for review this year) to competitive-trade rules exists, allowing carmakers run exclusive distribution chains, which prevents Internet services from listing their inventory on the Net and from buying new cars from dealerships. In other words, the block exemption utterly hobbles services like Autobytel, reducing them to information providers. One solution to these challenges is partnering with local companies within each country to help in global expansion. Concerning Japan, Autobytels management says, "Initially, we were going to set up just one international company. But we found that if we did that without local strategic partners, which know the customs and have the contacts, it just wouldn't go." Handling business transactions is another cultural hurdle that stands in the way of globalization. In Mexico, for instance, online billing just does not work. The archaic systems employed by so many businesses makes computer transactions nearly impossible due to system incompatibility. Therefore, GE TradeWeb, a forms-based service that lets small businesses exchange business documents electronically with trading partners, must deal with paper invoices sent through the mail, bypassing the speedier, electronic billing method. In addition, online contracts are not seen as legally binding in Mexico, so they must also be handled by mail or fax. The above information is from All the Worlds a Stage, by Steve Ulfelder. CIO Magazine (10/1/2000) at http://www.cio.com/archive/100100_stage.html
Excellent Business Leadership Skills are a must! ***************************************************************************** ** According to Dr. Marvin Zonis, an International Political Economist and Professor at the Graduate School of Business at the University of Chicago, the many global challenges facing corporations require that strong business leadership, and a true understanding of what defines leadership, is more essential than ever. From Speakers Platform at http://www.speaking.com/speakers/marvinzonis.html With the threat of terrorism spreading around the globe, business leadership and confidence is more important than ever. "In the wake of September 11, the defenders of globalization need to speak with an even louder, more confident voice," writes David H. Komansky, chairman and CEO of Merrill Lynch & Co. CEOs of international companies can touch lives of employees, consumers and business partners throughout the world. "Corporations with a global presence already have a large amount of clout in the world's economy and their leaders are in a position to make a significant difference in how the world's economy develops," says Nannerl Keohane, president of Duke University. From Overcoming Challenges in a New Era at http://www.nyse.com/content/magazinearticles/NT0006F4FA.html
Challenges involving order fulfillment and product shipment ***************************************************************************** ** Problems can occur when a company has no regional office or distribution center in a foreign country where they do business. Piecemeal shipping is expensive and customer service can easily break down over great distances. One solution is to hire a distribution representative to represent the company in a foreign country. A global carrier, such as DHL Worldwide Express, may also work well for consumer goods companies that have a relatively low international volumes, as well as customers who require little service assistance (a tall order). From How to Avoid Global Website Disasters, by Emelie Rutherford. CIO (11/14/2000) at http://www.cio.com/research/global/edit/111400_disaster.html
Internet challenges concerning connectivity speeds, forms of connection and software ***************************************************************************** ** Many countries have extremely slow connection speeds, which can alter website performance. Companies must account for regional differences by building lower-bandwidth sites. Use of mobile (web-enabled cell phones) is the more predominant form of internet access in many Asian and European countries, so companies hoping to compete in these countries must ensure PDA-enabled access to their websites. Software difficulties are a major challenge, especially in countries with complex language translation problems. The Forrester report, titled The Multilingual Site Blueprint, interviewed 27 U.S.-based multilingual-site owners and found that their greatest challenge is adapting software to work with other languages. To make Web software work with Asia languages that contain up to 6,000 characters, for example, site operators must install Unicode, a character coding system that supports written texts in different languages. From How to Avoid Global Website Disasters, by Emelie Rutherford. CIO (11/14/2000) at http://www.cio.com/research/global/edit/111400_disaster.html
Local Laws and Regulations ***************************************************************************** ** Each country has its own set of laws regarding business, including tariff regulations. Foreign consultants familiar with the regulations of a particular country are essential to efficient globalization. Two examples: Germany bars retailers from offering guarantees beyond 14 days. China does not allow sites to carry telephone traffic over an IP network, so a company with a call center as a part of its Web could be locked out of doing business in China. From How to Avoid Global Website Disasters, by Emelie Rutherford. CIO (11/14/2000) at http://www.cio.com/research/global/edit/111400_disaster.html
Additional Resources An excellent article titled The Blessings and Challenges of Globalization, by Daniel T. Griswold. Center for Trade Policy Studies at http://www.freetrade.org/pubs/articles/dg-9-1-00.html provides a comprehensive overview of how globalization has affected the countries of the world.
I hope this information gives you a good start in understanding the challenges facing businesses as they look toward globalization. (Word count is 2404, which should account for the reference information)!!! Please let me know if I can be of further help!