Impact of globalization on Strategic Management

he globalization of business has become so rapid that a new field called "Global
Strategic Management" has now emerged. This new field is a blend of strategic
management and international business that develops worldwide strategies for global
corporations. Whereas most studies in this field focus on ordinary business
conditions, the revolutionary events of the past few years make it clear that the
present is not ordinary. Such epoch-shattering events as the collapse of communism,
the unification of Europe, the information revolution, the arrival of an environmental
ethic, and other remarkable new developments signal that a new era is emerging in
global affairs. This article describes a broader approach to global strategic
management that encompasses these revolutionary changes.

The viewpoint presented here was developed in a project sponsored by the World
Future Society called "WORLD 2000." WORLD 2000 focuses on conducting a global
strategic management process among business, government, education, and other
sectors of society to define the emerging global system and help institutions adapt to
changes. It represents a fresh examination of the forces that are integrating the
earth into a coherent global order as well as those that are creating the disorder that
tends to characterize our time: the unification of markets and communications, as
well as the vast differences in cultures, local problems, and values erupting around
the globe. By gaining new insights into the emerging world system, social institutions
may better understand how they can adapt to these changes.

This seems to be an opportune time for such an examination. The transition to a new
global system is likely to be made during the next decade; the year 2000 offers a
highly symbolic turning point at which the emerging global order can be shaped and
molded.

Following is a global strategic plan, developed by synthesizing the literature and then
reviewing the plan with groups of executives. It follows the logic of a typical strategic
plan but carried to a global level. First, we summarize nine supertrends that describe
a long-term trajectory toward an advanced stage of "global maturity." Second, we
note five principal obstacles that must be overcome to clear the way ahead. Third,
we argue that these issues can be resolved by a newly emerging perspective that
recognizes the essential unity of a global community.

THE TRAJECTORY TO GLOBAL MATURITY

The following trends represent the principal driving forces that are now moving the
world in new directions. They could be called "supertrends." Little attempt is made to
offer justifications, and many other trends that capture finer details are not covered.
This summarizes the major features that characterize the emerging shape of the
globe as it moves along a long-term trajectory toward a new stage of global
maturity.

Trend 1: A Stable Population of 10-14 Billion

The earth, which already is teeming with 5.5 billion people, is expected to double its
population to reach a stable level somewhere between 10-14 billion humans by the
mid-21st century. About 95 percent of this growth will occur in the less developed
countries (LDCs).

Trend 2: Industrial Output Will Increase by a Factor of 5-10

The aggregate level of material consumption, or industrial output, should increase by

a factor of 5-10 over the next few decades as most remaining parts of the world
industrialize to reach the equivalent standard of living enjoyed by Americans,
Europeans, and Japanese. Industrial throughout, however, is likely to grow less as
more efficient means are found to insure a sustainable form of development.

Trend 3: The Wiring of the Globe

Information technology (IT) is a revolutionary force that will continue to overthrow

governments, restructure corporations, and unify the world. This revolution will wire
the earth into a single communication network, a central nervous system for a
planetary society. However, the gap between information haves and have-nots is apt
to persist.

Trend 4: The High-Tech Revolution

The IT revolution is accelerating technical advances to create breakthroughs in all

fields: the mapping of DNA, genetic therapy, robotics, materials research,
sustainable "green technology," automated transportation, and even a "technology of
consciousness."

Trend 5: Global Integration

The globe is becoming integrated into a single community connected by a common

communication system, a global economy, and a shared international culture. In
time, this process may unify today's growing economic blocs and political federations
into a universal system of open trade, a global banking system and common
currency, and some form of world governance.

Trend 6: Diversity and Complexity

It is a great paradox that global integration will be accompanied by disintegration

into a highly diverse system. Ethnic enclaves, such as those in the former republics
of the USSR, will continue to seek autonomy; various groups within nations will form
pockets of self-governing subcultures; and modern societies generally will splinter
into a far more complex, differentiated social order.

rend 7: A Universal Standard of Freedom

Freedom and the recognition of human rights should continue spreading around the
globe, though this movement may ebb and flow at times. A majority of nations now
have political democracy and free market systems, and the number should grow to
the extent that freedom becomes the accepted norm, with authoritarian systems
being the exception.

Trend 8: Continued Crime, Terrorism, and War

Traumatic upheaval is likely to produce disgruntled individuals, groups, and nations

resorting to a variety of crimes, terrorism, and limited wars. However, global wars
and the old fear of nuclear holocaust now seem unlikely.

Trend 9: Transcendent Values

As this transformation unfolds, most people in advanced nations should strive for
quality of life, community, self-fulfillment, art, spirituality, and other higher-order
values that transcend material needs. Many are cynical about such claims, but as the
philosopher Andre Malraux predicted, the twenty-first century will be the century of
religion.

CRITICAL ISSUES BLOCKING THE PASSAGE AHEAD

Although this evolutionary trajectory is likely to stabilize into a mature, coherent

global order in the mid-twenty-first century, business and government must resolve
the following five issues, which pose barriers to this forward movement. Once again,
this represents a quick survey--not a detailed summary--to highlight key issues that
now present major obstacles to progress.

Issue 1: Making the Leap to a Global Order

Most of the problems the world struggles with result from the fragmented economic
and political systems that continue unchanged from the industrial past. Trade
barriers, fluctuating currency exchange rates, and difficulties in communicating are
"old" problems that should not exist in a "new" global order managed as a coherent
system; they do not exist in the United States, Germany, China, or other societies
governed as coherent systems. The transition to some type of world order is
monumental because it requires sophisticated global systems that integrate the
world into a single whole, permitting a quantum leap to a global level of governance
heretofore unknown.

Issue 2: Reconciling Economic Interests

Communism may have yielded to markets, but markets do not exist only in
capitalism. The strength of Japan, for instance, hinges on a market system that is
based on collaborative working relations: a "Human Enterprise System" (Ozaki
1991). In contrast, the capitalism practiced in Western nations, such as the United
States, is in trouble because it exacerbates conflicts between labor and
management, rich and poor, business and government, domestic and foreign trade,
private and public sectors, and other basic incompatibilities. A sound global economy
for the future, therefore, awaits the creation of a new economic paradigm based on
some form of free enterprise that can reconcile these diverse interests into a
productive and harmonious community.
Issue 3: Achieving Sustainable Development

The present conflict between economic growth and environmental protection will be
resolved either rationally or through some form of decline. The anticipated five- or
ten-fold increase in industrial output is incompatible with any reasonable forecast
under existing conditions. Many solutions are being proposed to achieve sustainable
development, but the task of implementation remains formidable. Ecological systems
are suffering unsustainable stress even under today's far more modest load.
Developed countries (DCs) show little inclination to alter their profligate lifestyles,
and LDCs seem to be striving for Western affluence.

Issue 4: Managing Complexity

One of the most striking trends of the emerging future is the explosion of complexity
that is almost impossible to contain within today's cumbersome institutions. Much of
what passes for unsolvable disorder reflects an inability to respond effectively to the
diversity of individual and community challenges. This problem, which toppled
communism, is becoming severe in the West. Top-down corporations are struggling
to diversify so they can serve myriad market niches; governments have not yet
begun to grapple with the intricacies of education, poverty, crime, and other chronic
social problems. Dramatically different institutions are needed to manage this
complex new world, which may require an upheaval similar to the one now plaguing
the former communist bloc.

Issue 5: Alleviating the North-South Gap

The enormous disparity between the wealth of LDCs in the South and the DCs of the
North shows little sign of improvement, fanning an explosive antagonism between
these two halves of the globe. Average income in the South is now about six percent
of that in the North; little progress is being made in alleviating the misery of these
people, who make up three-quarters of all humanity. Unless serious efforts are made
to close this gap by bringing LDCs into the modem world, the Southern hemisphere
will seethe with the same potential for violent confrontation that was released in the
Los Angeles riots of 1992.

These five dilemmas are exacerbated by one of the most pervasive problems of our
time: a collapse of faith in the familiar old ideology that guided humans through the
past epoch with good success. It could be thought of as a "meta-issue." With the
USSR now defunct and the United States in crisis, the lack of superpower leadership
has left a vacuum of power. ideas, and moral guidelines at a time when the world is
facing Herculean new challenges. The result is political gridlock, economic
stagnation, destructive personal stress, social disorders, and many other symptoms
of breakdown. From all this apparent chaos, a new paradigm, model, or belief
system must somehow be formed that allows people to make sense of today's
different global realities.

A STRATEGY BASED ON A NEW GLOBAL PERSPECTIVE

An enormous variety of policies and remedial programs are being proposed to

resolve all these problems, but their sheer number and diversity scatter attention
into confusing, uncoordinated, and ineffectual directions. This section synthesizes
these proposals into a "master strategy" based on a different perspective now
gaining increasing attention, one that recognizes the essential unity of the emerging
global system.

The key to understanding the emerging world view is to see that unprecedented new
imperatives have arisen--especially the revolutionary force of IT--that are unleashing
powerful new forces to integrate the globe. As communication systems encircle the
earth to form a central nervous system for the planet, the fragmented parts of
today's failing global order are being joined together into an interconnected,
coherent system. The most recent report of the Club of Rome (King and Schneider
1991) notes that current dramatic changes represent the first global revolution
because the entire earth is experiencing these events together at the same time.
This shift to a new global perspective is summed up in the Table. This perspective
then leads to the following elements of a master strategy required to overcome the
issues defined before:

Table
The Transition to a New Global Perspective
Old Perspective New Perspective
Technological Base Physical Technology Information Technology
Economy Capital-Centered Human-Centered
Frontier of Progress Material Growth Sustainable Development
Institutions Hierarchical Decentralized
Working Relationships Conflict Cooperation

Strategy 1: Disseminate Advanced Technology to Unify the Globe

Although many people fear its effects, the relentless advance of modern technology--
especially information technology--is the primary force driving the globe through its
present transition. It was the ubiquitous presence of television, radio, facsimile, and
video, for instance, that armed citizens of the former USSR and the Eastern Bloc with
the knowledge required to overthrow their governments.

Information technologies should be diffused, therefore, by corporations selling

sophisticated products abroad, governments fostering joint research and
development projects, individuals sharing technical knowledge, and any other
reasonable methods. There is a particular need to find ways of introducing these
technologies into LDCs to advance their modernization and unite them with the
world. All technology can be misused, so care is needed to ensure that it is applied
appropriately. The emerging global order is being constructed on a technological
foundation; the sooner that foundation is in place, the sooner this system can
behave as a coherent global community.

Strategy 2: Integrate Economics and Society

The conflict between economic life and social life is being reconciled, as evidenced by
breakthroughs that would have been unthinkable a few years ago. Japan has shown
the world that a union of economic and social interests is more productive, spurring
others to emulate this "human-centered" form of enterprise. Even General Motors,
long regarded as the antithesis of this idea, has formed GM-Saturn as a prototype of
socially responsive business, managed by a coalition of workers, customers,
suppliers, distributors, and local citizens. Saturn production lines cannot keep up
with demand because Saturn cars are now the best in their class, proving that social
goals are compatible with economic goals.

Intense global competition should, in time, drive most economies in this direction
because it is efficient. Decisions ranging from the shop floor to national
macroeconomic policy may then be made collectively by all affected parties,
including workers, labor, consumer advocates, governments, and citizens. If this can
be done, the leaders of business and other social institutions may then act as
stewards rather than managers, creating the badly needed trust, quality, mutual
service, and collaborative economic relationships that can instill the essential sense
of community that vitalizes society.

Strategy 3: Create a Symbiotic Society-Environment Interface

A harmonious economic-societal relationship will mean little if it is not supported by

a viable ecosystem. Civilization must be carefully redesigned to form a symbiotic
society-environment interface. Business firms are now competing to prove their
environmental consciousness because of public pressure. Stephen Schmidheiny,
Chairman of the Business Council for Sustainable Development, described the
advantages (1992): "Progress toward sustainable development makes good business
sense because it can create competitive advantage and new opportunities."

A wide range of difficult adjustments are under way to integrate ecological realities
into economic and social life. Sustainable technologies and practices are being
developed to increase economic efficiency, advance more modest but wholesome
lifestyles, develop renewable energy, reforest denuded lands, convert to organic
agriculture, recycle waste, and improve pollution controls. To evaluate this complex
situation realistically, social indicators must be incorporated into such financial
measures as GNP; social costs, such as pollution, should be internalized in the form
of taxes and credits to guide balanced economic choices.

Strategy 4: Decentralize Institutions to Empower Individuals

Almost all analysts agree that social institutions need to be restructured for a
knowledge-based global order, but confusion reigns over what is needed. The most
useful guide can be found in a dominant imperative now sweeping through modern
nations: institutions are being decentralized into networks of small, autonomous
units to master complexity. This imperative is the entrepreneurial half of the new
role emerging for institutions; the move toward collaborative, democratic
policymaking described in Strategy 3 constitutes the other half that unifies this
diversity into a harmonious whole.

For instance, large corporations are being disaggregated into small "internal
enterprises" that form the equivalent of market economies inside
organizations--"internal markets" (Halal et al. 1993). Under the pressure of limited
budgets and public demands, governments are also allowing the public to choose
among competing agencies. A good example is the way U.S. education is introducing
market competition among schools, which are also governed democratically by
teachers, parents, local citizens, and administrators.

The result of all these changes is to restructure authority relationships. Markets and
democracies share the common feature of placing control in the hands of ordinary
people to harness the growing diversity of thought and values into creative forces of
change, with institutions providing the overarching systems that support and guide
change. The decentralization of authority, then, empowers people to care for
themselves more effectively, which provides a self-organizing system for managing a
complex world.

Strategy 5: Foster Collaborative International Alliances

A knowledge-based society fosters pockets of collaborative problem solving in which

all partners benefit, while competition drives collaborating parties together. This is
why business managers and politicians are creating a flurry of strategic alliances with
their competitors. Cooperation has now become the most powerful force in world
affairs.

This new ethic of strategic collaboration is also being extended to forge productive
alliances between business and government, economists and ecologists, and
competing nations, knitting together a global community of diverse groups. Note that
an ethic of cooperation implies not altruism but a reciprocity of interests that benefits
all partners. It is enlightened self-interest.

The conflict between North and South, for example, could yield cooperative ventures,
such as the North American Free Trade Agreement, between DCs and LDCs based on
mutual advantages for both parties. LDCs gaining capital, jobs, and know-how, while
DCs gain access to markets and less costly labor.

Obviously there is no assurance that the world will pursue a path of this type. And it
is certainly true that difficult choices at dangerous junctures could deflect the
trajectory toward maturity into other directions. However, historic breakthroughs
have occurred in the past few years--the collapse of communism, a greatly reduced
threat of nuclear holocaust, and worldwide concern over the environmental crisis--
largely through the natural evolution of the global order. Barring unforeseen
disasters, it seems reasonable to expect that the other remaining obstacles noted
above could also be resolved from this same natural process, though we cannot now
anticipate how or when.

This does not mean that individuals and institutions are passive observers of an
immutable process of natural development: change is the sum of countless small
human actions that collectively produce social transformation. A coherent new world
order will emerge only if global corporations, national governments, and educational
institutions are able to adopt major strategies such as those outlined above.
Developing and disseminating advanced technologies, especially information
technology, will be essential in forming the foundation for a mature global society. A
collective model of enterprise must be defined that reconciles the interests of capital
with mounting social concerns, particularly environmental sustainability. Large firms
must be decentralized to empower individuals if we hope to manage a complex and
diverse world. Strategic alliances must be encouraged on a global scale to avoid the
conflicts that now divide the world.

Accomplishing these ambitious tasks will test us all because our individual
perspectives will have to yield to a broader perspective. In our work conducting the
WORLD 2000 global strategic management process for corporations, government
agencies, and other management groups, we find a common theme running through
all these changes: the emerging global order can be integrated into a workable whole
only by accepting the legitimacy of other views, even those we feel are antithetical to
our own.

The primary skill required to survive this critical transformation, therefore, is an

attentive ability to reconcile the conflicting, endlessly changing, overwhelming
complexity posed by today's diverse world. A crucial paradox lies at the heart of this
challenge. What is involved, fundamentally, is cultivating a more transcendent mode
of thought that can permit all of us to regain command over our affairs by
relinquishing the illusion of self-control in favor of shared control.

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