Four Main Debates in the Field of Global Strategy - Essay Example

QUESTION 2: IDENTIFY FOUR MAIN DEBATES IN THE FIELD OF GLOBAL STRATEGY Name Institution Professor Course Date Question 2: Identity Four Main Debates in the Field of Global Strategy Introduction Globalization is one of the emerging trends in the modern economy focusing on enabling business entities and investors to transact business activities across the globe. Globalization refers to the process of interaction and integration among individuals or people companies, and governments of different nations, which is a process under the influence of international trade, investment, and information technology. On the other hand, global strategy refers to the global, multinational, and international techniques and mechanisms vital in guiding the concept of globalization. According to Peng & Pleggenkhule-Miles (2009), there are four critical debates in relation to the field of global strategy. The purpose of this essay is to identify four main debates in relation to the field of global strategy. In addition, the essay will focus on critical assessment and evaluation of the ability and capacity of the debates to capture fully the complexity of the influences of globalization on global strategy. Analysis There are four critical debates in the global strategy area: cultural vs. institutional distance, global vs. regional geographic diversification, convergence vs. divergence in corporate governance, and domestic vs. overseas corporate responsibility (Peng & Pleggenkhule-Miles, 2009). Global Strategy There are three critical perceptions in relation to understanding the essence of global strategy. In the first instance, global strategy comes out as one specific form of multinational enterprise strategy, which has the ability to treat nations across the world as a common or global marketplace. Secondly, global strategy refers to the international strategic management, which appears to a broader perception of the concept. Thirdly, global strategy refers to the mechanisms and techniques of business entities and firms across the globe, which is critical in enabling the institutions to compete effectively, efficiently, and successfully. The third conception of the global strategy focuses on incorporation of international and domestic firms’ strategies. In the concept of developing this argumentative essay, global strategy will refer to the diverse strategies by firms across the world. Cultural vs. Institutional Distance In spite of culture being a critical part of international business research, it fails to be part of the core research underpinning the essence of global strategy. This is because of the ability and tendency of culture to be more micro in comparison to the essence of strategy, which is more macro. In the last decade, there has been an emergence of a new institution-based view in relation to understanding the issue of global strategy (Peng & Pleggenkhule-Miles, 2009). According to the new institution-based view, global strategy undergoes fundamental shaping under the influence of formal and informal institutions, thus the aspects of the rules or principles of the game. This approach generates a critical debate in relation to assessment of the role of culture in relation to the institution-based view or perception of the global strategy. In addition, there is need to differentiate culture and institution prior to determination of the more comprehensive construct between the two aspects of global strategy. Since 1980s, there have been critical debates on the role of culture within the global environment. Culture refers to the cumulative of societal values, norms, beliefs, and behavioral patterns. It is critical to note that international business transactions tend to incorporate interactions between diverse societal value systems, which make culture a critical element of every business activity (Hennart and Zeng, 2002). Both culture and institutional heritage have been essential in assessing the impact of major business entities with reference to capital structure, internationalization, and entrepreneurial founding. One of the current debates emerging from this perspective is whether cultural distance or institutional distance is a better measurement. Cultural distance relates to the investigation of the principal differences in the national cultures between the home nations of the MNEs and the operations of the host nations. On the other hand, institutional distances incorporate cultural differences, as well as additional factors with reference to regulatory differences, cognitive identification, and different normative pressures. Increased cultural distance has the potentiality to generate higher levels of complexity and uncertainty in the managerial decision-making, thus massive increase in the managerial risk. It is critical to note that the influence of cultural distance in the illustration of diverse MNE strategies and organizational characteristics. For instance, cultural distance is vital in understanding why joint ventures between diverse nations are typically shorter lived in comparison to the ventures between firms from the same nation. In addition, cultural distance has been applicable in understanding why business entities gradually enter culturally similar nations prior to entering nations that are culturally distant. Other implementations of the cultural distance are evident in the determination of the MNE entry mode choice, international diversification, and performance of such business entities in the global context. However, there are diverse shortcomings in relation to understanding cultural distance. In the first instance, there are numerous findings inconsistent with the hypothesis that joint venture between local firms outperform the ventures between local firms and foreign entities. Moreover, there are elements of inconsistencies in relation to assessing the relationship between cultural difference and the performance of the MNE with reference to positive, as well as negative relationships between the two approaches. Most research articles on globalization note that cultural distance is one of the major factors to consider prior to implementation or adoption of the global strategy. Furthermore, Tihanyi et al, (2005) notes the essence of a near zero relationship between cultural distance and critical variables with reference to MNE performance, entry mode choice, and international diversification. According to the recent studies on the issue of globalization, institutional measures might prove more effective and efficient in the provision of comprehensive explanations of the behavior and performance of the MNEs in the global context. In spite of these findings, there is critical need for the organization and execution of further research with the intention of substantiating the conclusions in relation to cultural distance and institutional distance as diverse components of global strategy. Global vs. Regional Geographic Diversification One of the important dimensions in global strategy is the geographic scope of the business entity. This relates to determination of the ‘global-ness’ of a firm, which is not a new concept in relation to the issue of globalization (Peng & Pleggenkhule-Miles, 2009). According to the initial studies on this perspective, difficulty in defining the degree of multi-nationality emanates from the diverse parameters, which are critical in describing the overseas transactions of the business entity. These findings led to the generation of the three critical concepts of international business: ethnocentric, polycentric, and geocentric through turning inward and examining the internal attributes prior to classification of the firm as a multinational. In the 1980s, firms were motivated to ‘go global’ through encouragement by the media and academics. Nevertheless, there were critics that the perspective on global competition and globalization of niches were incomplete and misleading. This relates to lack of substantial information by the executives and management on the concepts of global competition and development of the global competitive framework. Emerging debates develop on the finding that few of the MNEs are global. In the course of the study by Rugman & Verbeke, there are few global MNEs, bi-regional MNEs, and home region oriented, thus the essence of ‘regional’ perspective. The findings are vital in signaling the misleading perception of the ‘global’ in describing the MNEs. The findings are critical in the development of two crucial implications. In the first instance, much of the international activity of MNEs undergoes transactions at the intra-regional rather than inter-regional (global) level in the modern society. In the second aspect, most of the MNE operations experience organization at the regional level as opposed to the global level (Peng & Pleggenkhule-Miles, 2009). One of the major reasons for the increased transactions at the intra-regional level is the lower liability of the foreignness within the region in comparison to between diverse regions. Furthermore, the major reason for the organization of the international operations at the regional platform is the difficulty in relation to management internal frameworks, thus making cultural and institutional distances to remain substantial. Regionally focused entities or MNEs tend to have substantial opportunities in maximization of their performance. There are two crucial criticisms in relation to understanding this debate. In the first instance, regional concentration of MNE activity proves to be more reflective of GDP and trade in comparison to a distinctive MNE strategy. Moreover, significant proportion of firms has the ability to obtain or gain global status under the influence of diverse schema (Witt, 2004). This debate continues to generate diverse implications such as how to define regional strategies, implementation of relative measures, assessment of regional diversification, and integration of diverse perceptions of a region (Singh, 2007). There are also issues in relation to the influence of economic, political, and cultural factors in the course of defining region. MNEs have the potentiality to exploit advantages and political resources between the home and host nations in spite of the presence of large cultural and institutional distance. The debate emerges because of the massive increase in the pace of globalization, as well as misconception of the ‘going global’. Convergence vs. Divergence in Corporate Governance The third critical debate in understanding the concept of global strategy is the convergence vs. divergence in corporate governance. Previous researchers have focused on evaluation and assessment of the similarities in relation to consumption patterns and culture-specific belief, as well as attitudes. The main aspect of this debate is whether economic ideologies or national culture is behind the existing societal values (Peng & Pleggenkhule-Miles, 2009). The scholars who believe in the influence of the economic ideologies as the driving force behind societal values focus on incorporation of the convergence perspective. On the other hand, the proponents of the national culture as the driving force of the societal values concentrates on integration of the divergence perspective. In spite of the existence of the debate for more than a decade, there seems to be a growing gap between the two perspectives. Scholars tend to focus on the determination of the global convergence or divergence of the corporate governance. According to the convergence perspective, globalization has the potentiality to unleash a ‘survival-of-the-fittest’ process, which enables firms to adopt and implement appropriate techniques and strategies to survive or withstand competition. This is because of the influence of market forces in the course of enhancing cross-national convergence on the international standards. Similarly, there are diverse set of principles with reference to market, nation-state, and foreign state, which are vital in the voluntary increase in adoption of the international standards (Young et al, 2004). The major driving factor in this context is the nation state’s regulatory concern with reference to the potential risk of the foreign market closure to non-compliant firms. Another potential illustration of convergence is the phenomenon of cross listing of shares on the foreign stock exchanges. The major reason for the MNE to engage in such activity is to enhance its chances in tapping into larger pools of capital. In the course of executing these issues, business entities have the obligation of adhering to or complying with the securities laws and corporate governance norms. From this perspective, convergence perspective focuses on the promotion of fair strong foothold in maximization of the opportunities in the global contexts. Convergence promotes the need for similarity of governance regulations under the implementation across the globe. On the other hand, divergence concentrates on need to change the underlying structures of concentrated ownership and control with reference to exporting regulations to other nations, as well as implantation of the informal norms, values, and traditions across the globe (Peng, 2008). It is critical to note that complete divergence is probably unrealistic, particularly for the large business entities in pursuit of capital from the global investors. Similarly, complete convergence is also unlikely. The most likely outcome is the implementation of some sort of cross-vergence, thus the opportunity to balance the expectations of the global investors and the local stakeholders. There is need for the MNEs to focus on the implementation and incorporation of this balance to achieve diverse goals and targets in the modern context. Domestic vs. Overseas Corporate Social Responsibility Practitioners, policymakers, and scholars tend to have substantial debates in relation to the issues of corporate social responsibility. In the first instance, managers have the obligation of making critical decisions with the intention of maximizing the wealth of the equity holders of the firm. In the second context, managers have the duty to the society, which goes beyond the aspect of maximizing the wealth of the equity holders (Peng & Pleggenkhule-Miles, 2009). In this context, the debate relates to the ability of the MNEs to balance the conflicting demands concerning domestic and overseas CSR. Resources devoted to overseas CSR often illustrates fewer resources to the domestic CSR. From this perspective, it is critical to assess whose interests are important with reference to CSR: overseas employees and communities or domestic employees and communities. Nevertheless, MNEs should consider incorporation of diverse issues with reference to balancing the interests of the domestic and overseas operations or entities (Peng et al, 2008). For instance, there is need to expand overseas operations towards emerging economies to increase corporate profits, shareholder returns, and provide employment to host nations while developing the economies under the influence of the ‘base of the pyramid,’ which are noble to the CSR dimensions. Sufficient resources by MNEs should focus on taking care of both domestic and overseas employees and communities. In cases of confrontation of the relentless pressures for cost cutting and restructuring, managers should focus on prioritizing on the handling of the CSR in the domestic or global contexts. The rapid movement of the CSR generates great migration of employment opportunities from developed economies. Individuals and nations at the BOP (base of the pyramid) welcome such migration (Peng & Pleggenkhule-Miles, 2009). On the other hand, domestic employees and communities in the developed economies, as well as unions and politicians hate the issue because of lack of the CSR in the domestic approach. More and more MNEs engage in overseas CSR practices to reformulate strategies to work with other entities in the global context. In the course of developing diverse strategies for globalization, it is ideal for the business entities to focus on implementation of appropriate CSR policies and techniques with reference to the illustration of the demands and expectations of employees in the domestic and global contexts. On the other hand, managers should consider incorporation of effective planning and prioritization of the resources in handling the domestic and overseas CSR for effectiveness and efficiency in addressing expectations and demands of the stakeholders and shareholders. Evaluation of the approaches in capturing complexity of influences of globalization on global strategies The four debate perceptions have the potentiality of capturing the complexity of the influences of globalization on the global strategy. In the first instance, the schools of thought focus on integration of the implications of culture in the development and implementation of global strategy. Culture is one of the social factors, which has massive implications on the development of diverse techniques with the intention of achieving competitive advantage by the business entities or MNEs in the host nations. The cultural distance between the home and host nations tends to determine the ability of the business entity to adapt and exploit the existing opportunities in the host nation. On the other hand, culture might be a hindrance to the success and achievement of competitive advantage in the market and industry of transaction. MNEs tend to understand elements of the culture of the host nations with the intention of understanding on the appropriate ways to enter into the new niche of transaction while reducing the risks and costs of production (Young et al, 2008). Similarly, business entities must focus on tailoring the products and services to the demands and expectations of the native consumers within the market and industry of transaction. This makes it ideal for the business strategies to incorporate the appropriate satisfaction tools for the consumers to maximize the available products and services at their disposal (Qian et al, 2008). In addition, the debates are critical in capturing the global and regional distance in relation to understanding the operations of the MNEs under the influence of the appropriate global strategies for the achievement of the goals and targets in the market and industry of transaction. The regional distance is vital in understanding the appropriate technique for the MNE to enter into the global market under the influence of the effective and efficient marketing strategies (Segal-Horn, 2007). These attributes are critical in exploitation of the opportunities for the realization of competitive advantage in the industry of transactions (Rugman and Verbeke, 2004). On the other hand, the debates tend to focus on capturing the demands of the global market in relation to the ability of the organizations and institutions to incorporate ideal strategies for marketing and promotion of the products and services at the disposal of the consumers in the global markets. The debates are also vital in capturing diverse complexities of the globalization on the global strategies with reference to the political, technological, and economic factors (Mackey, 2007). These attributes are critical in determination of the appropriate techniques and strategies for the business entities to achieve competitive advantage in the market and industry of transaction. The debates capture these complexities of globalization with substantial implications of the global strategies. From this perspective, it is vital to note that the four main debates are ideal in understanding the complexities of globalization in relation to the global strategy. These elements are critical in understanding mechanisms through which MNEs can exploit to achieve competitive advantage in the global market. Conclusion Conclusively, globalization is one of the emerging trends in the modern economy focusing on enabling business entities and investors to transact business activities across the globe. 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