Free Essay

Global vs Regional Geographic Diversification

In: Business and Management

Words 980
Pages 4
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 remaining MNEs in the Fortune Global 500 are actually home region oriented (or in essence ‘regional’) – signaling the mislabeling of ‘global’ attributed to these firms. Having established that many ‘regional’ MNEs are incorrectly labeled ‘global’, the empirical evidence for regionalization suggests two important implications. First, much of the international activity of MNEs is conducted at the intra-regional rather than the inter-regional (in other words, ‘global’) level (Rugman and Verbeke 2008; Schlegelmilch 2007). Second, Current debates in global strategy 56 © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Ltd and British Academy of Management many MNE operations are organized at the regional level as opposed to the global level (Rugman and Verbeke 2007). Guided by the fact that liability of foreignness (Zaheer 1995) does exist, one of the main reasons we see more activity at the intra-regional level is due to the lower liability of foreignness within a region than between regions (Rugman and Verbeke 2004). Additionally, one of the reasons international operations continue to organize regionally is due to the difficulty in managing an internal network spanning more than one region – the cultural and/or institutional distance remains substantial (Rugman and Verbeke 2007). Supporting this view, a recent study on regional diversification and firm performance suggests that firms that are regionally focused are more likely to maximize their performance (Qian et al. 2008). While Rugman and Verbeke’s (2004) findings are based on a global sample of MNEs based in all three regions of the Triad, supportive evidence on the regional character of Asia-based MNEs is reported by Collinson and Rugman (2007, 2008) and Oh and Rugman (2007). However, despite the widespread acknowledgement and interest in these findings, the Rugman and Verbeke perspective is not without critics. Critics make two points. First, while overall, Dunning et al. (2007) supported Rugman and Verbeke’s (2004) findings, Dunning et al. found that the regional concentration of MNE activity is more reflective of GDP and trade than of a distinctive MNE strategy. Additionally, Osegowitsch and Sammartino (2008) called into question the classification criteria used by Rugman and Verbeke (2004) and in an empirical study demonstrate that, in using different schema, a significant proportion of firms attain global status. Thus, the main criticism seems to be one of measurement and taxonomy. Second, the data supporting the ‘regional’ view only capture a snapshot in time (Osegowitsch and Sammartino 2008). Considering this, while it is true that most MNEs may be more correctly labeled ‘regional’ as opposed to ‘global’, how do we correctly classify MNE international strategies? Is it a relative measure? If we look at it longitudinally, are there different levels of regional diversification? Moreover, how do we define a region? There are multiple ways to define a region. While Rugman and Verbeke (2004, 2007) stand by their use of the broadTriad (Asia, EU and NAFTA), which is fairly geographic in nature, regions can also be defined through cultural or institutional similarities or through the World Value Survey. In discussing the global economy, recent research suggests a lingering trend towards forms of interregionalism (Aggarwal and Fogarty 2004). Specifically, these authors identify a rise of bilateralism, regional agreement, sectoral accords and interregionalism taking place across the globe. Given the political realities of the world, it is plausible to support the argument that MNEs compete within a multiplex of regions, most of which are not integrated (Ghemawat 2007). Of course, there is an issue as to whether the definition of a region is economically, politically or culturally driven.6 For example, in considering a politically defined region, it may be the case that MNEs are able to take advantage of and use political resources that rest between the home and host country, despite a large cultural or institutional distance (Frynas et al. 2006). Therefore, regions defined politically may provide a different explanation in understanding the geographical patterns of diversification of MNEs. Interestingly, since this debate arose due to the increased pace of globalization, it has reopened the debate on globalization and how poorly it is understood. This leads us to the next ongoing debate: whether we are witnessing convergence or divergence in corporate governance.…...

Similar Documents

Free Essay

Diversification and Capital Structure

...Journal of Multinational Financial Management 11 (2001) 17 – 37 Diversification strategy and capital structure of multinational corporations Imed Eddine Chkir a,1, Jean-Claude Cosset b,* Faculty of administration, Uni6ersity of Ottawa, 136 Jean-Jacques Lussier Street, Ottawa, Ont., Canada K1N 6N5 b Departement de finance et assurance, Faculte des sciences de l’administration, Uni6ersite La6al, ´ ´ ´ Quebec, P.Q., Canada G1K7P4 ´ Received 3 April 1999; accepted 22 October 1999 a Abstract This study examines the relationship between the capital structure of multinational corporations (MNCs) and their diversification strategy. Both the international market (multi-country operations) and the product (multi-industry operations) dimension of diversification are integrated into the analysis and a switching of regression regimes methodology is employed that accounts for the bi-dimensional nature of the diversification strategy pursued by MNCs. The model identifies four types of diversification regimes. The results suggest that leverage increases with both international and product diversification. It is also found that the combination of both types of diversification leads to lower levels of bankruptcy risk. Although the role of the determinants of MNC capital structure varies with the diversification strategy, there seem to be common determinants. In particular, profitability and bankruptcy risks are negatively related to the debt ratio of MNCs. © 2001......

Words: 10717 - Pages: 43

Premium Essay

Global Leadership Mindset

...The Global Leadership Mindset BY EILEEN M. ROGERS The integration of multiple geographies, cultures, nationalities, ages and styles in enterprises around the world is having an enormous impact on business relationships. Leaders today need a new, specialized set of skills if they are to be successful. 18 Chief Learning Officer • June 2010 • ueled by social networks and technology, universal collaboration is becoming a daily business reality. Global data and knowledge are now accessed on devices that people can hold in the palms of their hands. Jim Kouzes, renowned leadership expert, recently described this shift by stating that “while the content of leadership has remained the same over the past 20 years, the context has not.” Leaders striving for success today must be able to master three new levels of competence: • Global business acumen: The new financial, industry, functional and technical skills needed to navigate a market characterized by rapid evolution of business models, markets, products, and mergers and acquisitions. • Global mindset: The capacity to engage in a boundaryless and synthesizing cognitive process that identifies opportunity and innovation in complexity. • Global citizenship: A potent combination of geographic, political, economic, governmental, legal, cultural, technological and environmental savvy that informs business strategy formulation and execution. Global Mindset vs. Global Citizenship A global mindset includes the......

Words: 1923 - Pages: 8

Free Essay

Circuit City vs. Canon with Diversification

...Within this paper two companies will be discussed concerning their business decisions of diversification. The first company, Circuit City, was unsuccessful at broadening their business, and eventually had to shut down the business. The other company, Canon, was successful at broadening their brand and scope of the business. This paper will compare and contrast their businesses, outcomes and reasons for the differences. Circuit City was established by Samuel S. Wurtzel in 1949 as the Wards Co. that sold Televisions and home appliances. Over the course of time, it expanded into a national retail powerhouse that rebranded itself Circuit City in 1984. When the store was still operating, it was the “nation’s second-largest consumer electronic retailer” (Mui, 2008, p.D1). When it closed in January 16, 2009, it had 567 stores to close and 34,000 employees out of work. (Haynes, 2009, p.D1). In 2007, the company “posted nearly $320 million in losses, its second consecutive annual shortfall. (Mui, 2008, p.D.1) In 2008, the companies “most recent quarterly showed that it had assets of $3.4 billion with $2.3 billion in liabilities.” (Mui, 2008, p.D1). Circuit City did not have much of an international presence, but it did have stores in Canada which did not account for much of its business. In the economic downturn, “Circuit City neglected to improve its web presence, just as other on-line retailers like were hitting their stride” (Hamilton, 2008). The Circuit......

Words: 2019 - Pages: 9

Premium Essay


...This article was downloaded by: [University of Glasgow] On: 06 August 2013, At: 08:28 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Journal of Transnational Management Publication details, including instructions for authors and subscription information: Diversification, Strategy, and Stability of Lebanese Banks: A Non-Parametric DEA Approach Rock-Antoine Mehanna & Youssef Yazbeck a b a b Sagesse University, Furn el Shebak, Lebanon Saint Joseph University, Beirut, Lebanon Published online: 14 Jun 2012. To cite this article: Rock-Antoine Mehanna & Youssef Yazbeck (2012) Diversification, Strategy, and Stability of Lebanese Banks: A Non-Parametric DEA Approach, Journal of Transnational Management, 17:2, 155-166, DOI: 10.1080/15475778.2012.676939 To link to this article: PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or......

Words: 5163 - Pages: 21

Free Essay

Global Wine War: Old vs. New Country

...Problem/Issue The global wine war between France, the United States, and Australia has caused problems for all three sectors and each are in need or recommendations for strategic play in the wine market. France faces the problem that their wine is too expensive and they lack diversification in their products. Their marketing strategies are lackluster leaving their wine to be seen globally as one product instead of many individual products. The United States has issues with the high-cost of their production, along with the decrease in demand, and high substitute competition from other countries. Australia’s problems revolve around their late entrance into the New World’s opening markets. Recommendation It is recommended that France allows growers who have low sales to go out of business, relax their rules on the classification system, and market the local brands. It is recommended that the Central Valley vineyard should expand their development, and improve brand image by producing higher quality wine with better differentiation. It is recommended that Australia continues with the Strategy 2025 plan, reposition their wines into the premium market and continue with the innovation in their brands, packaging and image. Discussion The recommendation for France are to have the government wean their growerd off subsidiaries and stop bailing out poor growers. Too many french growers have poor quality wine, and these recommendations will boost the quality and......

Words: 483 - Pages: 2

Premium Essay

One Global Gaap: Ifrs vs. Us Gaap

...One Global GAAP: IFRS vs. US GAAP Acct 522 Current Topics in Financial Reporting Zhipeng Cao CIN: 300443421 Introduction The most influential accounting reporting criteria today is the International Financial Reporting Standards (IFRS) by and U.S Generally Accepted Accounting Principles (U.S. GAAP). These two different accounting standards have various emphases. In short, IFRS states principles and it leaves the decision-making in everyday questions for accountants, while US GAAP consists of very detailed measures. Under the globalization environment, many companies are operating under a global scale; however, each country has its own accounting standard which makes the translation more difficulty. So the demand for the convergence of the two most important standards comes out. (Accounting Reporting Criteria, 2009, March 23). In this paper, I will put more emphasis on the comparison of the detail differences between International Financial Reporting Standards (IFRS) and U.S Generally Accepted Accounting Principles (U.S. GAAP). I will also pay attention to the convergence of the two accounting principles. Body 1 In this part, I will mainly discuss the difference between IFRS vs. US GAAP; the table below shows the brief summary of the major differences between IFRS vs. US GAAP. I would like to discuss some of them. General approach The most significant difference between IFRS and U.S. GAAP exist in the general approach. IFRS mostly provides the basic......

Words: 2150 - Pages: 9

Premium Essay

Centralized vs. Decentralized Organizational Structure

...Centralized Vs. Decentralized Organizational Structure Many multinational corporations are increasing in all around the world rapidly. Besides, multinational corporations play a common significant role in globalization. However, the way the corporations are managed is very dissimilar. In this essay, the distinctness of how the multinational corporations are managed, especially the differences between organizational structures of Ford and Honda will be discussed. The background of a multinational corporation is an organization doing business in more than one country. In other words it is an organization or enterprise carrying on business in not only the country where it is registered but also in several other countries. It may also be termed as an international corporation, global giant and worldwide corporation (Shyam Soni, 2012). Ford is one of the earliest international companies in the world. They organize their company with a really wise way – decentralized decision-making. It is generally seen that there are more and more plus points of decentralization for decision-making. It is said by Kuldeep (2012) that decentralized decision-making helps to reduce burden of top executives and they can concentrate to another important tasks of policy-making, coor­dination and control. He also states that prompt and more accurate decisions can be made near the point of action without consulting higher levels and without waiting for approval of top executives. In the other side,...

Words: 1335 - Pages: 6

Free Essay

Rural and Regional Development

...REGIONAL AND RURAL DEVELOPMENT Since the early 1990’s consecutive Australian governments have recognised the importance of regional development to relieve the effects of urban sprawl and to bridge the gap between metropolitan and non-metropolitan areas. In Australia, the role of regional development has traditionally been driven by both state and local governments. This said, the Commonwealth Government has consistently offered support and leadership in addressing regional challenges and promoting economic development. While Commonwealth intervention makes sense in terms of financial capacity, this intervention has often resulted in unnecessary and costly overlap and duplication between national, state and local governments. A national framework adequately funded, resourced and linked specifically to each local government would provide a more sensible approach to achieving long-term sustainable outcomes for regional communities. In 2008 the Commonwealth Government set up 55 Regional Development Australia (RDA) Committees to bring together national, state and local bodies and provide a united and consistent approach to regional Australia. This assignment will review the role and effectiveness of RDA Committees in addressing economic, environmental and social change in regional Australia and thereby question the effectiveness of government in the delivery of regional development. In doing so, the assignment highlights the importance of local programs (based on......

Words: 2380 - Pages: 10

Free Essay

Cultural Diversification Japan vs Bangladesh

...CULTURAL DIVERSIFICATION JAPANJapan officially the State of Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south. The characters that make up Japan's name mean "sun-origin" which is why Japan is sometimes referred to as the "Land of the Rising Sun". | BANGLADESHBangladesh officially the People's Republic of Bangladesh is a country in South Asia, located on the fertile Bengal delta. It is bordered by the Republic of India to its north, west and east, by the Union of Myanmar (Burma) to its south-east and by the Bay of Bengal to its south. It is separated from the Democratic Republic of Nepal and the Kingdom of Bhutan by the narrow Indian Siliguri Corridor. Together with the neighboring Indian state of West Bengal, it makes up the ethno-linguistic region of Bengal. The name Bangladesh means "Country of Bengal" in the official Bengali language. | * POLITICAL FACTORS JAPAN | FORM OF GOVERNMENT | Japan has a constitutional monarchy as its current form of government. However the Emperor is only a ceremonial figurehead and his powers are very limited. He is defined by the constitution as "the symbol of the state and of the unity of the people". The Prime Minister holds the power with the elected members of the Diet (Japan’s parliament). Akihito is the current Emperor of......

Words: 4685 - Pages: 19

Free Essay

Embraer: the Global Leader in Regional Jets

...Embraer: The Global Leader in Regional Jets 1. Embraer’s success as a global competitor can be separated into two distinct periods – pre-privatisation and post-privatisation. Pre-privatisation, Embraer was founded on the back of the Brazilian government’s push for developing aeronautics and as such it was given special treatment due to its position as a symbol of Brazilian nationalism. As such, it was able to achieve success initially due to many initiatives set up to promote aeronautic research by the government. Of particular importance is the subsidies received by Embraer, which helped it to achieve the majority market share in the commuter turboprop market with its ‘Bandeirante’ aircraft. The subsidies were believed to be in the region of 39-44% as claimed by their competitor Fairchild, which undoubtedly played a huge role in their early success. However, Embraer began to falter when a series of negative events began to hurt its profits when budgetary pressures as a result of macroeconomic difficulty in Brazil meant that they could no longer depend on subsidies to help boost sales. In addition, their political ties led to the development of CBA 123, which ultimately turned out to be a huge failure. To help examine Embraer’s post-privatisation success, we can use an adapted version of ‘The Four-Tiered Structure of Markets’ found in Khanna & Palepu (2006). In this adapted version of the regional aircraft manufacturing industry (Apendix 1), there are only three tiers......

Words: 1276 - Pages: 6

Premium Essay

Diversification be quoted Strategy for Export Diversification 2015-2020 Breaking into new markets with new products Dr. Zaidi Sattar Policy Research Institute of Bangladesh Prepared as a Background paper for the Seventh Five Year Plan 1 Table of Contents List of Tables .............................................................................................................................ii List of Figures ...........................................................................................................................ii List of Boxes .............................................................................................................................iii Acronyms .................................................................................................................................. iv I. INTRODUCTION ................................................................................................................ 1 II. CHALLENGE OF EXPORT DIVERSIFICATION ....................................................... 1 III. EXPORT PERFORMANCE AND PROGRESS OR LACK IN DIVERSIFICATION .................................................................................................... 3 Exploiting Non-traditional Markets for Exports ............................................................................... 14 IV. INTERNATIONAL EXPERIENCE AND LESSONS LEARNT ............................... 18 V. CONSTRAINTS TO EXPORT DIVERSIFICATION IN BANGLADESH .....................

Words: 28195 - Pages: 113

Free Essay

Specialization vs. Diversification

...Specialization-1 vs. Diversification-0 There is an ongoing debate in the business world between specialization and diversification. Companies like Fitbit and Lululemon benefit from their expertise and innovation in niche markets, whereas companies like PepsiCo and Koch Industries benefit from their diverse product and service lines that appeal to a wide variety of customers in several unrelated markets. So which business strategy is more effective in creating value for the company and its shareholders? While this question is not entirely answered by a quantitative analysis, given that businesses are dictated by more than the numbers, this research report addresses the underlying question by analyzing the conglomerate discount using ten company examples. The Conglomerate Discount The general idea behind the conglomerate discount is that companies with multiple unrelated business segments are unfairly valued in the market place as a result of rolling up the various divisions under one, larger parent company. Proponents of the conglomerate discount theory argue that the market essentially penalizes companies that diversify their portfolio of businesses by valuing the conglomerate company at a market value that is less than what the sum of the values of unrelated segments would imply. Because the operations of the business units vary tremendously, an investor that wants to generate a return on one division of the conglomerate must also invest in the multiple other unrelated...

Words: 1886 - Pages: 8

Premium Essay


...#2 Diversify across asset class variants. Within each asset class, you can practice further diversification. For instance, equities have many representations in the mutual fund world. Variants or subclasses refer to more granular characteristics of the asset class. Here are some examples: Equities can vary according to: * the size of companies represented in a “basket” (e.g. large vs medium vs small cap stocks) * the way the stocks’ prices move as the stocks chart their growth (e.g. growth vs value stocks) * the geographical market in which the stock moves (e.g. domestic vs international) Bonds can vary according to: * their maturity dates (e.g. short term vs long term bonds) * their level of risk (e.g. junk bonds, anyone?) * who issues the bond (e.g. government vs corporate) * how they pay out Cash vehicles vary mostly according to rates of return and level of security offered, which are usually characteristics that are inversely proportional to each other. Generally, within the investment world, the higher the rate of return, the less stable the fund value is expected to be. Tip: You can find additional diversification down to the class variant level from mutual fund institutitions, Treasury Direct, or online stock brokers who can assist with giving you more information. Try Morningstar as well to help you with more details on this topic. Note though that most of the time, you don’t really need to seek this kind...

Words: 588 - Pages: 3

Premium Essay

Diversification Strategies

...Diversification BUS 508: Contemporary Business Dr. Micky Mouse Assignment2: Diversification Strategies Submitted by Minnie Mouse Research two corporations that have had different outcomes (one successful and one unsuccessful) with their diversification strategies. Compare and contrast each corporation’s diversification strategy and evaluate the reasons for each one’s success or failure in the venture. Compare and contrast the two businesses—core business, their size, financials, global presence, use of e-business (marketing, sales, etc.). A great example of companies that utilized completely opposite paths in the business world is Wal-Mart and Kmart. Recently, Kmart is on an endless downhill spiral while Wal-Mart has risen to the top of the retail industry and is their financial strength is strong. Wal-Mart is the largest business enterprise in the world as well as the nation’s biggest employer and the number one retailer in the U.S. There are over 5000 Wal-Mart stores and they report sales over three-hundred billion dollars. Two million people are employed by Wal-Mart in twenty-eight countries in the world. Fortune magazine’s 2010 Most Admired Companies Survey ranks Wal-Mart among the top ten retailers. Kmart is now the #3 discount retailer behind Wal-Mart and Target. There are 1,300 Kmart stores located in 49 US States as well as Puerto Rico, Guam, and the US Virgin......

Words: 1410 - Pages: 6

Premium Essay

Business Diversification

...Business Diversification Thomas Wilson Dr. Browder Coates Contemporary Business 29 January 2012 was founded in 1994 and the site went online in 1995. Since then it is the leading online book selling retailer in the USA. In 1997 it diversified from solely a bookstore into selling music, video, downloads, general electronics, apparel, furniture, food, and toys. In addition, Amazon has established separate websites in Canada, the United Kingdom, Germany, France, Italy, Japan, and China. It also provides international shipping to certain countries for some of its products. The growth and diversification is part of the strategic planning of which aims to provide a “one stop shop” for their customers. established that there are three areas that are of great significance to the customers: selection, convenience and price. Nothing epitomizes this better than their landmark e-book product Kindle which has by far the biggest available electronic library; instant downloads globally and it is considerably cheaper than traditional products. There are two strong values that are practiced by; these are customer satisfaction and operational efficiency. These two values complement’s operational strategies in achieving and maintaining an effective competitive advantage and encouraging employee and corporate performance. While the diversification of the Amazon brand has merit, I would suggest that globalization is a......

Words: 1431 - Pages: 6