Measuring global practices: global strategic planning through company situational analysis - includes diagnostic questionnaire

Business Horizons, Sept-Oct, 1994 by Robert N. Lussier, Robert W. Baeder, Joel Corman

According to Peter Drucker (1989), within five years there will be two kinds of managers--those who think in terms of a world economy and those who are unemployed. The trend toward globalization is now widely recognized, and customers, not industry competitors, decide when a market is global. The key question for the firm in a global industry is not whether to globalize, but how, how fast, and how to measure progress over time.

In response to these questions, we have developed the first self-assessment diagnostic instrument, in the form of a questionnaire, to measure a firm's globalization practices in six key result areas: global management team, global strategy, global operations, global technology and R&D, global financing, and global marketing.

After a discussion of how this instrument was developed, we will explain how to measure the globalization of the organization you work for by answering the questions in the questionnaire. Upon completion of the self-assessment, you will better understand how your company compares with its competitors.

Finally, we will discuss the practices of leading global companies in selecting worldwide strategies. Managers may adapt the most successful international practices as they develop and implement their company's global strategies through the 1990s.

DEVELOPMENT OF THE INSTRUMENT

To date, we have not found any methods of measuring a firm's global practices. The six headings on the questionnaire correspond to the six key result areas, identified by Corman, Lussier, and Baeder (1991). We took the practices of leading transnational companies and developed the questions, then mailed the questionnaire to a dozen Fortune 100 executives responsible for managing the globalization of their firms. These 12 executives, members of the Planning Forum, were asked to evaluate the questionnaire and offer input into refining it. Based on their suggestions for improvements, and after three rounds of changes, the questionnaire was finalized.

Like Michael E. Porter's Competitive Strategy (1980) and Competitive Advantage (1985) models, this instrument is not designed to give a precise measurement to meet rigid empirical statistical validity and reliability testing. It is designed as a self-assessing diagnostic instrument, to be used by itself or as part of a broad SWOT (strength, weakness, opportunity, and threat) competitive analysis. It is not designed to compare companies in different industries, nor to be a means of simply ranking companies based on scores.

MEASURING GLOBAL PRACTICES: COMPANY SITUATIONAL ANALYSIS

The major drivers in each key result area leading to a truly global company are shown in Figure 1. This provides an overview of the factore covered in the diagnostic questionnaire. With the total picture in mind, one can complete the company situational analysis by answering the questions in Figure 2.

Understanding a firm's situation versus its competitors' is the first step in transforming a company to compete more effectively in the global market. There is no absolute right or wrong score. Review the profile across the six key result areas. How does your company compare to its competitors in each area? What are its strengths and weaknesses, its opportunities and threats?

PRACTICES OF LEADING GLOBAL COMPANIES

The practices of some of the most successful multinational companies are presented in this section. The numbers and headings match those in the instrument for easy identification of the areas in need of improvement. As you read, think about which strategies your company should adapt to compete more effectively in the global market.

Global Management Team

Transnational companies have global management teams because they realize the need for a world view at the level of top management. A management team too heavily dominated by one country will not have a true global view. Input from top managers from all triad countriess-- North America, Western Europe, and Japan--is needed. A good example is Imperial Chemical Industries (ICI), whose 16-person board was all British until 1982. It now includes two Americans, one Canadian, one Japanese, and one German; 35 percent of the top 180 people are non-British.

Global management training. Transnariohal companies realize that a global culture is needed to compete around the world. A company cannot attain such a culture without integrating managers from other countries into the system. Cross-country training and travel are necessary to allow managers and employees to be comfortable in the triad cultures. GE adapted what it calls a Global Leadership Program. Over a period of ten months, the top 55 people from its U.S., European, and Japanese medical equipment businesses met once on each continent and in Japan for several days at a time.

Global travel and assignments. The key to becoming a global power is to manage by walking around (MBWA) the world. Top managers cannot understand other cultures unless they spend substantial time in those countries regularly. Too many companies have top managers travel abroad, or bring managers to headquarters, only as a ceremonial show. To develop global products, designers and product managers cannot rely on market research data alone. American designers will have limited ability to create innovatNe home and office furniture for sale in Europe and Japan if they have never seen homes and offices in these countries. Another way to train people to think globally is to move them across national boundaries.