Global vs Regional Geographic Diversification

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Global vs Regional Geographic Diversification
The geographic scope of the firm is an important dimension in global strategy (Peng and Delios 2006). Determining the ‘global-ness’ of a firm is not a new ambition. Perlmutter (1969) attempted to tackle a similar challenge 40 years ago, when he looked at the multinationality of a multinational firm. At that time, being multinational was seen as prestigious – just as being considered a ‘global’ firm is today. Interestingly, Perlmutter found that the ‘difficulty in defining the degree of multinationality comes from the variety of parameters along which a firm doing business overseas can be described’ (1969, 11). Rather than focusing on the locations of subsidiaries, headquarters or location of sales in addressing the issue of multinationality, Perlmutter built on his three concepts that international business scholars are now very familiar with – ethnocentric, polycentric and geocentric – by turning inward and examining the internal attributes of the firm that may attribute to its classification as a multinational. In part thanks to Levitt (1983), the term ‘global’ became mainstream in the 1980s, as firms were encouraged to ‘go global’ by both media and academics. However, in 1985, Hamel and Prahalad noted that the perspective on global competition and globalization of markets was incomplete and misleading. Hamel and Prahalad (1985) found that neither executives nor analysts fully understood what global competition entailed, and they subsequently developed a global competitive framework.4 Recent debate centers on an interesting and somewhat surprising finding first presented by Rugman and Verbeke (2004). They found that even among the largest Fortune Global 500 MNEs, few are truly ‘global’. In their study, Rugman and Verbeke found only nine MNEs to be ‘global’ and only 25 to be ‘bi-regional’.5 The majority of the…...

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