Case 3: The New Business Cosmopolitans

Introduction
Cosmopolitans are, by definition, members of the world class. They carry concepts from place to place
and integrate activities spread throughout the world. Globalization requires businesses to become more
cosmopolitan, and the cosmopolitans who rise to leadership in these companies promote further
globalization. As cosmopolitans spread universal ideas and juggle the requirements of diverse places, they
manage resistance to change from locals who see their power eroding. The job of cosmopolitans is to
bridge such differences and resolve them so that companies can operate efficiently on a global basis.
Cosmopolitanism is a mindset that finds commonalities across places
ome cosmopolitan!run corporations integrate all operations on a world or regional basis, li"e Gillette
and Ford Motor Co. ome organize production on a world basis while maintaining strong country
product strategy and mar"eting systems, li"e P&G, Nestl. till others, li"e isne! Consumer Products,
maintain strong country organizations but loo" for synergies across mar"ets. Their organizational
structures may differ, but a world class company is defined by a cosmopolitan mindset that demands a
global culture of management.
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The Gillette Company is the world leader in male grooming, a category that includes blades, razors and
shaving preparations. Gillette also holds the number one position worldwide in selected female grooming
products, such as wet shaving products and hair epilation devices. #n addition, the Company is the world
leader in al"aline batteries, toothbrushes and oral care appliances. Gillette manufacturing operations are
conducted at $$ facilities in %& countries, and products are distributed through wholesalers, retailers and
agents in over '(( countries and territories.
Gillette is a company that believes strongly in continuous product innovation. True to its corporate mantra
of *Inno+ation is Gillette*, the company has introduced some of the most successful and widely
acclaimed products in the consumer products industry. #ts product line, particularly in the razor segment,
is legendary with such brands as %ensor, %ensor #,cel, Mach3 and Gillette for )omen *enus.
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#n the %+,(-s, Gillette discovered the new consumer who "nows about the world-s latest and best and
wants it now. .rior to %+,/ the company operated by 0tone Age theory1 of mar"eting, which dictated a
slow spread of concepts from the home mar"et to the hinterlands. The China failure shows that people in
one place knew about advanced products and services and didn't want products and services. This is
because the information transfer is more efficient and fast nowadays.
%. /e! %trate0ies Followed 1! Gillette to 0i+e a thrust in Cosmopolitism.
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Gillette eAecutives li"en their new global system to operating across 1&(( states,1 the same way
companies operate across &( states in America. This model of the fully globalized company has been
realized only by a handful of giants. ome integrate all operations on a world or regional basis, li"e Ford,
General Motors, and To!ota. etc... whose new 2orth Atlantic unit resembles Gillette-s. ome organize
production on a world basis while maintaining strong country product strategy and mar"eting systems,
li"e Nestle, P&G, 'ec2itt Ben2iser etc... till others, li"e isne! Consumer Products, General
#lectric, Citi Ban2 maintain strong country organizations but loo" for synergies across mar"ets.
8egardless of the shape of the formal organization, the increasingly cosmopolitan outloo" of large
companies li"e Gillette is setting the tone for international competition. Through their leadership, the
cosmopolitans at the helm of Gillette and other international companies are reinforcing a global culture of
management. And by moving state!of!the!art concepts around the world, they are reinforcing the power
of customers, wherever they are, to demand the best of the world-s goods and services.
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Coordinatin0 )cross Borders
6usinesses are becoming more coordinated across borders, not necessarily more centralized. They
transfer ideas across places, even if they do not move facilities or people. And once companies reach for
world!class concepts, the logic of world coordination in other areas follows. )orld coordination then
pushes the development of world standards.
Giant global companies have already lost their national identities and have replaced governmental power.
A few hundred giant 1imperial corporations1 control the flow of money, goods and information across the
worldB %on!, Bertelsmann, Philips, Time -arner, Matsushita and isne! dominating a 1global
cultural bazaar1 for information and entertainmentC Philip Morris, '4' Na1isco, Nestle, %ara (ee and
"ein5 dominating a 1global shopping mall1 for consumer productsC Citi1an2 leading in a 1global
financial networ".1
Globalism leads in information and communication, and that, in turn, supports convergence of tastes.
5ocalism prevails in politics and distribution. 5ocal jurisdictions set the rules. 5ocal distribution channels
require specific, differentiated relationships within a country.
6. Glo1ali5ation %trate0ies o7 %imilar &r0ani5ations
8. Nestle:
2estlD is a global organization. The international strategy is at the heart of their competitive
focus. 9uropean and American food mar"ets are seen by 2estlD to be flat and fiercely
competitive. Therefore, 2estlD is setting is sights on new mar"ets and new business for growth.
a9 FI
2estlDEs competitive strategies are associated mainly with 7orei0n direct in+estment in dairy
and other food businesses. )hen operating in a developed mar"et, 2estlD strives to grow and
gain economies of scale through foreign direct investment in big companies. 8ecently, 2estlD
licensed the 5C% brand to M:ller Fa large German dairy producerG in Germany and Austria.
19 'is2 Balance
2estlD aims to 1alance sales between low ris" but low growth countries of the developed world
and high ris" and potentially high growth mar"ets of Africa and 5atin America. 2estlD
recognizes the profitability possibilities in these high!ris" countries, but pledges not to ta"e
unnecessary ris"s for the sa"e of growth. This process of hedging "eeps growth steady and
shareholders happy.
c9 )daptation
#n the developing mar"ets, 2estlD grows by manipulating ingredients or processing technology
for local conditions, and employ the appropriate brand. For e,ample, in many 9uropean
countries most chilled dairy products contain sometimes two to three times the fat content of
American 2estlD products and are released under the %+eltesse brand name.
d9 %trate0ic partnerships
Another strategy that has been successful for 2estlD involves stri"ing strategic partnerships with
other large companies. #n the early %++(s, 2estlD entered into an alliance with Coca Cola in
ready!to!drin" teas and coffees in order to benefit from Coca ColaEs worldwide bottling system
and eApertise in prepared beverages.
e9 )c;uisition
#n Asia, 2estlDEs strategy has been to acquire local companies in order to form a group of
autonomous regional managers who "now more about the culture of the local mar"ets than
Americans or 9uropeans. 2estlDEs strong cash flow and comfortable debt!equity ratio leave it
with ample muscle for ta"eovers. 8ecently, 2estlD acquired Indo7ood, #ndonesiaEs largest noodle
producer. Their focus will be primarily on eApanding sales in the Indonesian mar2et, and in
time will loo" to eAport #ndonesian food products to other countries.
79 Producin0 di77erent products in each countr!
2estlD has employed a wide!area strategy for Asia that involves producing different products in
each country to supply the region with a given product from one country. :or eAample, 2estlD
produces so! mil2 in Indonesia, co77ee creamers in Thailand, so!1ean 7lour in %in0apore,
cand! in Mala!sia, and cereal in the Philippines, all for regional distribution.
6. $nile+er
6efore %+,;, as the world advanced toward further globalization and centralization, =nilever, a
multinational and multi!cultural corporation failed to control the disadvantages of its eAcessive
decentralization and fragmentation in corporate management, corporate identity and corresponding
image, and the lac" of centralized mar"eting practices. =nilever started to realize that a new systematic
corporate approach and consolidated corporate identity and image were crucial in order to survive and
compete in the global mar"et C and indeed the company embar"ed on a new strategic program in the
spring of %+,;. This revolutionary corporate change, over the following siA years of its inception,
narrowed the gap between =nilever-s capabilities and its performance a great deal.
The new strategy also included various power7ul ac;uisitions. :or instance, the acquisition of
Chesebrough!.ond-s enabled =nilever to become a world leader in personal care just as the industry was
globalizing and consolidatingC such a step contributed substantially to the further renewal of =nilever-s
business in the =. 3ther strategies include distinct creati+e 1rands, inspirational mission, +ision that
continuall! adapts to the time etc<
)dapt
As =nilever-s reputation largely depended upon its success to adapt with such strategic corporate
communication, the corporation analyzed its constituencies FArgenti $$G and carefully tailored its new
messages to match them
%trate0ic corporate communication became an important target on its own right FArgenti ',G in order to
achieve coherence in corporate image and create a winning identity.
3. P&G
Procter & Gamble is a global company that provides consumer products in the areas of pharmaceuticals,
cleaning supplies, personal care, and pet supplies. .rocter H Gamble Co. is a :ortune &(( American
multinational corporation headquartered in 4owntown Cincinnati, 3hio that manufactures a wide range
of consumer goods. #t is >th in :ortune-s <ost Admired Companies '(%( list. .HG is credited with many
business innovations including brand management and the soap opera.
trategies
4iverse products popular all over the world
Continuous development of patent items
4igital information of global companies
6rand management
.roducts adjustment for local needs
Advertisement adjustment for local needs
6enefitsB
To enhance the sales volume
To eAchange management eAperiences
To enhance industrial competitiveness
5imitations
4ivergence in .rices
Communication barriers of a 04inosaur CompanyI
Creating the
superior value


Advertising
5earning
Adaptability and fleAibility are the most important factors a company must have to globalize its business.
3ther factors must be custom made according to the situation. .atience belief and innovation are trhe "ey
imperatives.
Globalization has various aspects which affect the world in several different ways
Industrial
Financial
Economic
Job Market
Health Policy
Political
Informational
Competition
Ecological
Cultural
echnical
!egal"Ethical.
#eligious
#ndia, Globalization and :irms
The question of J#ndia in globalizationE is relevant in a fundamental manner. #t is important in
itself on account of its billion!strong population, its enterprises and its development model.
<odern #ndia nurses the ambitions of a continent and has the potential of a double gambleB The
emergence of world!class #ndian companies busy developing specific strategies to see"
realignments and strategic partnerships in world networ" capitalism and aiming at becoming
Jprice!ma"ersE in their niche mar"ets. etting up a new development model for JemergingE
countries, is not only designed to compete.
2o doubt a narrow pathB #ndia has the necessary industrial assets, the capacity to test its products
in situ, the intellectual and human capital needed to entertain such an ambition, while it has to
handle the issues of economic redistribution and social cohesion, with their strong and
structuring #ndian specificities. 9conomic globalisation of #ndia has materialised as major
changes in trade Fimports of equipment as well as opening of opening of the domestic mar"etG,
has combined with new regulatory and industrial policies, been accompanied by new )orld
Trade 3rganisation F)T3G agreements and recent evolution on :oreign 4irect #nvestment F:4#G
policies
'e7erences
Kones, $=nileverB Transformation and Tradition1
Kones, Geoffrey. 1=nileverLA Case tudy.1 H%&'edu. + 4ec. '(('. Har(ard %usiness &chool. )eb. %/
:eb. '((+.
C)%# 8: )nal!5in0 the s!stem o7 Choice
%!stem under stud!: )ccountin0 %!stem
8. -hat is the e,istin0 %!stem=
Accountancy is the process of communicating financial information about a business entity
to users such as shareholders and managers. The communication is generally in the form of
financial statements that show in money terms the economic resources under the control of
managementC the art lies in selecting the information that is relevant to the user and is reliable.
Today, accounting is called 1the language of business1 because it is the vehicle for reporting
financial information about a business entity to many different groups of people. Accounting
that concentrates on reporting to people inside the business entity is called management
accounting. #t is used to provide information to employees, managers, owner!managers and
auditors. <anagement accounting is concerned primarily with providing a basis for ma"ing
management or operating decisions. Accounting that provides information to people outside the
business entity is called financial accounting and provides information to present and potential
shareholders, creditors such as ban"s or vendors, financial analysts, economists, and
government agencies. 6ecause these users have different needs, the presentation of financial
accounts is very structured and subject to many more rules than management accounting. The
body of rules that governs financial accounting is called Generally Accepted Accounting
.rinciples, or GAA.. GAA. is not a single accounting rule, but rather the aggregate of many rules on
how to account for various transactions. The basic principles underlying GAA. accounting are set forth
below.
9Aisting system is a rigid system. 4ifferent countries have different laws.
6. Mappin0 o7 the %!stem
A. :ramewor"
%ituation > The 4ourne!
5aws are rigid.
4ifferent countries have different standards.
4ifficult to understand for investors in other countries
8igid laws help both local govt and domestic investors
)ctors
Government
Corporates
Process
Corporates reports financial status every quarter
#nvestors analyze and ta"e decisions accordingly
Govt analyzes and audit the results
3. -hat are the ma?or draw1ac2s=
Corporates cannot customize the standards for their advantage
Cost factor is high to have two separate boo"s of accounts
:oreign #nvestors find it difficult to understand the local standards
@. -hat is the de0ree o7 customer orientation=
?ere the customers are usually the investors. There is a high degree of customer
orientation for the domestic investors as the standards are to be strictly followed. This
helps the investors to understand the financial position of the companies and invest
accordingly. Government also find it easy to audit the boo"s because of these standards.
To some eAtent it helps to prevent frauds.
6ut for the foreign investors these standards are very difficult to understand
because they follow different standards. The will have to hire other consultants to
understand the financial status. ?ence it is a paradoA. 0In the process o7 1ecomin0
customer oriented 7or domestic customers, the s!stem 1ecame e,tremel!
discoura0in0 7or 7orei0n in+estors.A
B. -hat are the areas o7 Fle,i1ilit!=
The company has the provision to "eep two or more different boo"s based on the investor potential.
#t can even customize the standards for the company and present in a different way for their internal
purpose. #t can use these standards to plan their internal functions. They can benchmar" easily the
competitors and change accordingly. The accounting standards can be changed according to the
situation by a central authority. Amendments can be added to the eAisting systems by the
government.
C. (earnin0 Issues and su00ested impro+ements.
The standards have to be very rigid and flawless. 9lse it affects the basic purpose of standards.
#t must not allow any loopholes for other companies to fudge their accounts
The whole world must follow the same standards. The #:8 standards are followed by a number
of countries li"e 9urope =nion, Australia, #ndiaM
3ther countries must follow these standards as early as possible
The system must continuously update in order to incorporate the changing mar"et demands and
situation.
The changes must be done by a central authority.
The amendments must be added proactively and quic"ly by these authorities and they must
ma"e sure that everyone is informed and is following these changes.