To the ancient Greeks, an apocalypse was the revelation to a privileged few of something hidden from the masses. In biblical writings, the term came to denote an abrupt transition from the present age to a future age, accompanied by great upheaval and extreme outcomes.
Much of the classic literature about globalization was apocalyptic in both senses of the term. The notion of an apocalypse due to globalization can be traced at least as far back as 1983, to the late Ted Levitt’s article “The Globalization of Markets” in Harvard Business Review. But with the profusion of new books on globalization—from 2000 to 2005, more than 5,000 were published, compared with fewer than 500 in the 1990s—the apocalypse has become the stuff of best sellers.
Is the globalization apocalypse upon us? Visions of the apocalypse generally evoke the disappearance of borders and the integration of markets and assume or predict internationalization levels close to 100%. But such predictions of complete cross-border integration are way off the mark: Most types of economic activity that might cross borders are still largely concentrated domestically. Levels of internationalization of phone calls, management research, charitable giving, investment, and even trade (as a fraction of economic activity) cluster much closer to 10% than to 100%. (See the exhibit “The 10% Surprise” for a closer look at the numbers.)
The 10% Surprise
The slow growth and limited extent of internationalization point up the substantial national differences with which border-crossing strategies must still contend. Fascination with the globalization apocalypse is only one of the reasons such differences seem to be underplayed in international strategy. Others include companies’ tendency to uncritically accept visions of borderlessness out of a desire to seem to “get it”; incentives that encourage headlong international growth; the inability of most executives to grasp how different the conditions in foreign countries truly are; and the fact that firms that are successful at home are disproportionately likely to venture abroad—and to be overly enamored of their domestic business models.
Predictions of a globalization apocalypse are way off the mark: Most types of economic activity that might cross borders are still largely concentrated domestically.
How should managers incorporate national differences into their international strategies?
- Determine which of a range of national differences—cultural, administrative, geographic, and economic—matter the most in your industry. This will tell you which ones are particularly important for your international strategy to address.
- Analyze differences within differences: Don’t just distinguish between home and abroad. Categorize foreign countries as similar to yours along the dimensions that matter most or as relatively different. This will help you decide where to compete.
- Stretch your responses to differences beyond tweaking the domestic business model—and also consider ways to profit from differences, rather than treating them all as constraints on value creation. The objective here is to foster creativity in thinking about how to compete.
If this simply sounds like additional hard work with an uncertain payoff, remember that at its core, the message here is an optimistic one. From a managerial perspective, differences afford room for distinctively international strategic thinking—and the prospect of significant improvements in performance. And from a social perspective, differences supply some reassurance that increasing global integration will not inevitably lead to the triumph of the bigger and blander.