Globalization:

Trends and How they Affect Organizations

July 2017

Bethany Jones
Crystal Kadakia
Hannah Jones
Isabelle Hertz
Mike Manry
It has been said that arguing
against globalization is like
arguing against the laws of
gravity.
- Kofi Annan, Former Secretary General of the United Nations
 Content Overview
1. Summary of Two Key Texts on Globalization
a. The World is Flat - A macro-view of the ten driving forces behind globalization

b. International Dimensions of an Organizational Behavior - A micro-view of cross-cultural

management and behavior

2. France and Globalization

3. Questions to Consider
The World is Flat by Thomas Friedman
 What is globalization?
The free movement of goods, capital, services, people,
technology and information

The international integration of countries arising from the

convergence of world views products, ideas, and other
aspects of culture

Worldwide production and distribution, international joint

ventures, multinational mergers and acquisitions, global
strategic alliances
How Globalization Happened: The 10 Forces

1. 11/9/89 - The Fall of The Berlin Wall

2. 8/9/95 - The Netscape IPO
3. Workflow Software
4. Uploading
5. Outsourcing
6. Offshoring
7. Supply-Chaining
8. Insourcing
9. In-Forming
10.The Steroids

For more context on these flatteners, see the appendix for

our personal experiences with globalization.
How Globalization Accelerated: The Triple Convergence
Triple Convergence: The coming together of three components of globalization that
accelerated and ignited change

Convergence #1 Convergence #2 Convergence #3

How Globalization Evolves: The Great Sorting Out
The Great Sorting Out: The process the world is going through to evolve given
all the changes brought on by globalization

Growing Global Market

Increasing Efficiency
Continued Opening of Nations
Disagreements about Rules and Regulations
Culture vs Free Market?
Multicultural Challenges
Continued Transformation through Technology
As the world starts to move from a primarily vertical-command and control-system
for creating value to a more horizontal connected and collaborative value
model, and as we blow away more walls, ceilings and floors at the same time,
societies are going to find themselves facing a lot of very profound changes all
at once. But these changes wont just affect how business is conducted. They will
affect how individuals, communities, and companies organize themselves,
where companies and communities stop and start, how individuals balance
their different identities as consumers, employees, shareholders, and citizens,
how people define themselves politically, and what role government plays in
managing all of this flux."

- Thomas Friedman, The World is Flat

Companies are operating in a different world. Globalization is
bringing people together in new and transformative ways.
It is now possible for more people than ever to
collaborate and compete in real time with more other
people on more different kinds of work from more
different corners of the planet and on a more equal
footing than at any previous time in the history of the
world - using computers, e-mail, fiber optic networks,
teleconferencing, and dynamic new software.

- Thomas Friedman, The World is Flat

 Thriving in Globalization: Rules for Organizations
In the era of globalization successful companies will be the ones who can adapt. There
are nine essential rules for organizational success in a globalized world:
1. When the world is flat whatever can be done will be done. The only question is whether it will be done by your or to you.
2. Because we are in a world where whatever can be done will be done, the most important competition today is between you and
your own imagination.
3. The small shall act big. Imagination is necessary but not sufficient. You must be able to implement what you imagine.
4. The big shall act small, and enable customers to act big.
5. The best companies are the best collaborators. More business will be done through collaboration within and between
companies because the next layers of value creation are becoming so complex that no single firm or department is going to be
able to master them alone.
6. In a flat world, the best companies stay healthy by getting regular x-rays and selling the results to their clients. Identifying
strengths and niches outsourcing the stuff that doesnt differentiate them.
7. The best companies outsource to win, not to shrink. They outsource to innovate faster and more cheaply in order to grow
larger, gain market share, and hire more and different specialistsnot to save more money by firing people.
8. How you do things as a company matters more today than ever.
9. When the world goes flat and you are feeling flattenedreach for a shovel and dig inside yourself. Do not build walls.
International Dimensions of Organizational Behavior
by Nancy Adler
CEOs must have an understanding of how
to manage in an international environment
To be trained as an American manager is to
be trained for a world that is no longer
there.

-Lester Thurow, former dean of MITs Sloan School of

Management
Problem: PAROCHIALISM

Viewing the world solely

through ones own
perspective
 Going Global: Phases of Development

Multidomestic Multinational
Domestic Phase Global Phase
Phase Phase
People, Home country Primary market Strategic thinking,
assumptions and representatives becomes global mass customization,
strategies from modify their style and firms benefit and outlearning
HQ dominate to fit with foreign from economies ones competitors
management markets. of scale are keys to success.
Culture becomes
critically important.
Global thinking is whats important for
companies today, not simply international
operations The task is to build a matrix
in the minds of managers.

-Rosabeth Kanter, Harvard Professor

 Cross Cultural Management

Describes behaviors within countries and cultures

Compares behaviors across countries and cultures
Seeks to understand and improve the interaction of all
internal and external stakeholders in the organization
The world has entered an era of
unprecedented global economic activity that
includes worldwide production and
distribution, as well as increasingly large
numbers of international joint ventures,
multinational mergers and acquisitions, and
global strategic alliances.
- Nancy Adler
Cross Cultural Management in Action

Royal Dutch Shell requires FOUR

expatriate assignments before it
considers a manager for promotion
into senior management.
 Unique Elements of Global Firms

Geographic Dispersion
Multiculturalism
Values
Attitudes
Behaviors
Global Mindset
 Six Basic Dimensions of Culture

Activity Individual

Space World

Human Relations Time

 Six Basic Dimensions of Culture (as questions)

Who am I?
How do I see the world?
How do I relate to other people?
What do I do?
How do I use time?
How do I use space?
France and Its Response to
Globalization
 French History: Clues For Their Cultural Values

A long history of pursuit of centralized power - Monarchies, Empires, Napoleon,

Robespierre, and more.
French became the mandatory language of the ruling class way back in 1000
AD, and of the English for 400 years
20th century France: WWI, WWII, and post WWII decolonization wars - high
population casualties, economic hardships, and a lingering strong bond with old
colonies.
Focus on enjoying life and being forward-thinking - key player in Renaissance,
Enlightenment, and more.
Today, key member of the EU and has suffered notable terrorist attacks.
France is currently #31 on the Global Happiness Index, thought to be a result of
conflicting cultural values (#14 for the US and #1 for Norway).
1. A fairly high degree of power
Frances Hofstede
inequality is accepted with centralized Dimensions
power. All roads lead to Paris

2. Higher emphasis on individual than

collective contradicts high power
distance. People rely on leadership
on the surface, but keep work
separate from personal and may do
differently than told.

3. More towards collaboration (or

feminine) and this is reflected in their
high emphasis on work/life balance
policies.
4. High uncertainty avoidance. Like
plans, rules, and all the information
prior to meetings.

5. Long Term Orientation. Tend to try

to adapt traditions for current and
future needs

6. Indulgence vs. Restraint (Being vs.

Doing) In the middle. Seek to enjoy
life, but in combination with high
Uncertainty Avoidance, ends up
doing more than desired. (resulting in
the lower happiness score in slide
#3)
A Look at How French Organizations
Are Dealing with Globalization
Corporate efficiency and
enforced culture cannot coexist.
-- belief expressed in the article Culture in Peril? Mais Oui!, illustrating the
difficulty of retaining French culture in the global marketplace
 Case Study: Vivendi SA
A Digital Entertainment Company (brands include Universal Music Group,
Havas Worldwide, and DailyMotion)

"Vivendi SA is considering
making a bid for Ubisoft
Globalization
Entertainment SA by the end of
Tension: Growth
this year as the French media
vs. Legacy
giant presses for a deal despite
resistance from the game makers
founding family."
- Bloomberg (2017)
See speaker notes below for full details
 Case Study: Loreal
A 108 year old French Cosmetic Company

In 2017, L'oreal partners with Google on a

special project, funded from a "special budget
allocated to experimental activities" and is the
Breaking through "first level of collaboration in this category".
uncertainty
avoidance French
Loreal broke international grounds as early as
cultural norms in 1920: There is no single type of beauty; it is a
business strategy multiple-faceted quality framed by different
ethnic origins, aspirations and expectations
that reflect the worlds intrinsic diversity.
See speaker notes below for full details
 Case Study: Air Liquide
A Chemicals Company

Reorganization in In 2013, evolved global network organization -

Paris as a base and Houston, Frankfurt,
response to key Shanghai, and Dubai as hubs - in order to:
global changes:
Strengthen local presence
energy, healthcare,
and digital Accelerate decision-making processes
through less centralized management
transformation Attract new talent at the local level

See speaker notes below for full details

 Case Study: Carrefour
The second largest retailer in the world, with hypermarkets as their foundation

Critics say Carrefour is:

Strategy of France Too reliant on a 1960s business model
market first and Too slow to embrace ecommerce
uncertainty avoidance
Exiting faster-growing emerging markets such as
of less proven tactics Colombia, in favour of a mature market such as
continue to decrease France.
share prices Carrefours devotion to its home market is echoed by
its over-reliance on a format that has lost favour with
consumers and investors.

See speaker notes below for full details

 Case Study: Campgemini Consulting
A Top 20 Consulting Firm

Capgemini has completed over 40 acquisitions

The French norm of and welcomed over 50 countries and cultures
acceptance of strong because of the [highly decentralized]
leadership figures organizational model invented by Serge Kampf.
He demonstrated that it was possible to build
creates a ready-for-
one of the largest companies in France and
global company
expand it across the world, with only a few key
values serving as his compass.

See speaker notes below for full details

 Case Study: Herms International
A 175 year old family business with royal roots

Family first - A two-tier management structure with family-

owned and slightly less family-owned entities. Nonfamily
executives rarely make strategy or branding decisions
Balancing Tradition without the input of at least one Herms descendant.
The vetted receive high autonomy - Twice a year more than
with Innovation; 1,000 store representatives come to Paris [to] select which
Closed Leadership pieces of merchandise they will carry.
True to craftsmanship roots - Today, every [single] leather
with Autonomy good is made by hand in 12 workshops in France by more
than 3,000 skilled workers.
Innovations in experiential luxury - Including Hermes Ties for
Men subscription service and Hermesmatic, a pop-up
laundromat

See speaker notes below for full details

 Insights From the Ground:
What some French citizens have to say about
France & Globalization
Insights from two citizens from France:
Mary Carey, Executive Education Director at INSEAD
Djemilah Hassani, Marketing at Facebook Advertising
France has historically been very inward focused in terms of culture and way
of life. Globalization and all the different people, ways of life and thinking
that it brings with it, is especially brutal to the way of life of many
French. The concept is definitely not embraced and many consider it evil.
France is a tradition-bound country that is EXTREMELY resistant to
change. They hang very tightly to benefits that their government and systems
have traditionally bestowed and any threat to them is resisted strongly.

Having said all this, France has the vision of itself as being an
exceptional country. They do not want to be perceived as left behind. There
is a strong push to jump on the tech bandwagon [and capacity to do so].

In-Country Perspectives:
Mary Carey, Regional Director, INSEAD Executive Education
[Thinking on] France and Globalization, there are two words that came up to my
mind: Oxymoron and Controversy.

Globalization is still not lived, integrated and understood equally everywhere in

Franceand could create an endless gap between bigger cities and more remote areas.
France is seeing a movement of anti-globalization that favors coming back to mother
earth. Consider also Frances previous colonies across oceans, who may experience
globalization differently, and bring an innate heritage and an acquired culture when
immigrating to France.

What does it means to be French in a globalized world? Has globalization enhanced

the protection of the French culture? How is innovation emerging in such a difficult
environment for creativity?

In-Country Perspectives:
Djmilah Hassani, Account Strategist, Facebook Advertising
Why Globalization Matters to OD
No generation has had the opportunity, as we now have, to build a
global economy that leaves no-one behind. It is a wonderful
opportunity, but also a profound responsibility.

- Former U.S. President Bill Clinton

 Questions to Consider and Discuss
What are some of the impacts of globalization that you have seen in your own life and
career? What are positive impacts? What are negative impacts?

How do you see the future of globalization unfolding in your field or organization?

What are the most important global challenges facing organizations today? Are they
universal challenges, or or do they vary by country?(ie. France, America, China)

How might globalization impact domestic vs. international businesses differently? How might
this specifically play out in France? In the United States?

What are companies doing to develop cross cultural management in their organizations?
How are they taking action to meet this important challenge?
 Questions to Consider and Discuss
How do our own individual cultural dimension scores help us or hurt us when it comes to
globalization challenges? Where might we compare or differ from our French counterparts?

Knowing how complex globalization and multiculturalism are, how do these theories help us
to navigate? How might they hinder us?

Globalization introduces many complexities into our lives including multiculturalism, changing
economic conditions, increasing interdependencies, etc. How do you experience these
global complexities in your life? How do they shape your career and your perspective as a
global citizen?
Appendix
 GLOBAL CORPORATE EVOLUTION
Domestic Multidomestic Multinational Global
Competitive Strategy Domestic Multidomestic Multinational Global

Importance of world business Marginal Important Extremely important Dominant

Primary Orientation Product/Service Market Price/Cost Strategy

Product/Service New/Unique More Standardized Completely Standardized Mass-Customized

Type of development Product Engineering Process Engineering Engineering not emphasized Product and Process Engineering
emphasized
Technology Proprietary Limited Sharing Widely Shared Instantly and extensively shared

R&D/Sales High Decreasing Very low Very High

Profit Margin High Decreasing Very low Initially high, yet decreasing in time

Competitors None Few Many Significant (few or many)

Market Small and Domestic Large and multidomestic Larger and multinational Largest and global

Production Location Domestic Domestic and primary foreign Multinational, based on least cost Global, least cost and best quality
markets
Exports None Growing, high potential Large, saturated Imports, exports, and transports

Structure Functional divisions Functional with International Division Multinational lines of business Global Alliances, flattened heterarchy
Centralized Decentralized Centralized Coordinated and decentralized
Group Stories

As I reflect on the content of Thomas Friedmans The World is Flat, the evolution of my current employer, SABIC (Saudi Arabian Basic
Industries Corporation), provides a clear example of how a developing nation has matured and globalized over the course of its 40 year
organizational lifespan. Today, SABIC operates in more than 50 countries and has 62 world class manufacturing and compounding plants in
locations across the Middle East, Asia, Europe, and the Americas. It is owned 70% by the Saudi government and 30% by Saudi investors.
SABIC was created by royal decree in September of 1976 with 6 employees total. Through the early 80s, much of the growth was propelled
by technology acquisitions and joint ventures. A large global footprint was created in the decade of 2000 with global expansion through
acquiring multiple companies outside of the Kingdom in 2002 (DSM Petrochemicals), 2006 (Huntsman Petrochemicals), and 2997 (GE
Plastics). In the span of 40 years, SABIC now occupies a prominent position among the worlds largest petrochemical companies. Net
profits in 2016 were SR 17.8 billion (US$4.8 billion) and SABIC continues to grow.

As an employee and leader at SABIC, I currently work from home and have felt just how flat the world of SABIC has become. Options
such as Telepresence (video-collaboration technology with high definition video and sound) create the formal feeling of a meeting in one
location, despite sometimes more than 10 TP locations. Streaming all of our global company-wide Town Hall meetings, including
transitioning to various regions during Q&A, ensures the connectivity and engagement required to successfully run our business with more
than 40,000 employees. Most recently, I completed a reorganization of one of our business units, executing the 6 month project 90%
virtually. The Steroids, as Friedman refers to them, enabled us to move 4300 people into a new operating model and propel our global
business strategy forward at an accelerated pace.

SABIC, as well as the Kingdom of Saudi Arabia in its entirety, are now entering a new economic era. Saudi is the largest economy in the
Persian Gulf and has the largest Arab population. King Abdullah bin Abdulaziz Al-Saud is in the process of reforming the kingdoms stock
market and opening it to direct foreign investment as part of a series of liberal reforms aligned with National transformation program, Saudi
Vision 2020. This concept directly relates to the new free-market oriented governance that was also created through the fall of the Berlin Wall. This
effort will inevitably create additional flattening by generating non-oil revenue that will enable the nation to invest in economic and social
programs domestically and other economic opportunities globally. Although we do not yet know the impact of this change, this new force will
present both opportunities and challenges for SABIC.

-Bethany

 The World Is Flat has great themes, but also can be a bit outdated and lean too heavily on system/process/infrastructural
impacts of technology. Technology also had incredible impacts politically and socioculturally on a global scale. From my
current travel experiences, an important story that comes to mind is globalized civil wars that result in refugee immigration, and
the rise of terrorism. Many Western European countries (including France) have a burden and responsibility of managing,
supporting, and solving other nations conflicts due to globalization. Most recently, I had the opportunity to learn the impact of
refugee immigration and terrorism for Norwegian companies. Norway has one of the worlds most giving social welfare
systems. Refugees, due to Norways inclusion in the Schengen area, can enter the country with no passport. Once in country,
they can simply go to the government office, state they are refugees and be provided an independent apartment, a wage of
~$2,000 USD/month, and employment if desired. For Norwegian organizations and general economy, this represents an influx
of non-Norwegian speaking talent in a typically very close, homogenous culture. Norway is currently under growing pressure to
integrate these newcomers in a way that goes beyond social welfare, amongst growing crime. In comparison, France is
located geographically much closer to various sources of conflict and has seen a rise in terrorism, which impacts the economy
through tourism sectors as well as increasing safety concerns in organizations.

Another big theme that created more globalized linkages is the emergence of the EU. Countries that adopted the Euro are
economically linked to one another unlike previous years. Countries that are politically linked enable Europeans the ability to
work and live in any other EU nation, without becoming a citizen or otherwise. In essence, countries within the EU act similar
to states within the US. This creates a much greater level of multicultural diversity in the workplace than before, with differing
languages and customs represented from various European countries. On a global scale, the countries within the EU have

collective bargaining power, financially and politically, that they would not have had otherwise.

-Crystal

My company, Great Place to Work (GPTW), has made recent investments and changes that provide a great example of work in
the flat world. The owner of our company, Dan, made a significant amount of money through the development and sale of his
previous company. This allowed him to invest in various philanthropic endeavors, one of which took him to Serbia in the early 90s.
Disturbed by the devastation in the region after the Yugoslav Wars, Dan decided to support young people in the recovering
communities with education, and offered some the chance to attend university in the U.S. on scholarship. One of the young men
he sponsored returned to Serbia after his time in university and started a technology company, HTech. Though continued
mentorship from Dan, the company thrived and their ties remained close. When Dan bought GPTW, and we began developing a
new software for our survey platform, HTech became our partner in the work. In less than a month the project had grown in scope
and it was clear that we at GPTW did not have the technical capacity to develop the platform in-house, so we joined forces with
HTech as our extended IT team. Because both companies are whole or partly owned by Dan, the relationship was simple, and
both sides dove into the work right away, with three people on the US side, two in San Francisco and one in L.A., and eleven
engineers in Belgrade, Serbia. The three in the U.S served strategic roles, designing the platform, creating visuals, gathering
customer feedback, and the Serbian team brought everything to life digitally on the platform. Daily huddles occurred at 7:30am
PT, when the U.S. team was just getting to the office, and when the Serbian team was getting ready for bed after a full day of
work. The U.S. team would review the work done the night before, engage other members of the U.S. team with needed
expertise, and when the Serbian team came back to work in the morning the needed changes were ready for them to get to work
on. By working in this fashion we have created an instant self-service platform for enterprise-wide employee surveys in less than
six months.
Outsourcing: This is an example of my company outsourcing its software development to another group in a different country
that is lower cost
11/9/89: This is an example of how the world transformed after the fall of the Berlin Wall because our Serbian team came
together out of the transformation that occurred after the Yugoslav Wars. While Yugoslavia had not been part of the USSR
for quite some time at the point that the wall fell, there were parallels in the two nations as their closed, communist

governments fell and people opened up to the rest of the world.

-Hannah
 When the 2016 USA elections took place, I was anxiously watching the results from
Canada. When the republican party took the lead, it was surprising to me and
everyone who is a part of my social circle. Although I do not get all my news from
social media, following stories and events through channels such as Facebook is a
way to get information quickly. What Ive observed from this large political event
and the information that was available to me is how easily my personal supply
chain of information can influence my opinions and those around me. Today as I
continue to view news and watch what is taking place in the United States as well
as in France, I am more aware than ever how easy it is to create my own personal
network of information and how this can create poisonous effects, this is called in-
forming and is #9 of Friedmans 10 Forces.

-Isabelle
 My former company, San Diego Gas & Electric is comfortably nestled in the Southwest corner of the U.S. and while bordered
by Mexico traditionally conducts limited business internationally - until now. The company embarked on the single largest
electric transmission construction project in its history - a $1B project to build 120 mile electric line or electronic-
superhighway from the east into San Diego. There were 10 of us on the up-front engineering and construction team. After
some vetting the team agreed to utilize a firm in Houston to engineer and design the steel structures or towers that were to be
strategically placed and keep the line overhead. A naive assumption by our team was the Houston engineering firm was
adequately resourced domestically to handle the engineering and design requirements. It was on one of the very early phone
calls that we learned our Houston based partners outsourced 75% of their services abroad and that our project would be
engineered and designed by folks in India. In retrospect our team learned (that morning) that world is flat. In the subsequent
weeks many of us were assigned small tasks to learn what we could about conducting business with likes of India. As the
project unfolded many from our team visited India several times and brought back and shared stories around cultural
observations and local rituals for all us to hear. It was a great experience.
Outsourcing: This is an example of my company outsourcing selected services to another group in a different country at a
lower cost.
Uploading: the connection to India created a need to our team to learn better ways to translate language into shared terms
and move large and complex data files to other international communities
Supply-Chaining: while the group in India provided engineering and design they also served as our steel manufacturer
however, they outsourced connection hardware like bolts, washers, nuts and other connection hardware. What spawned
from there were 30-40 different relationships for services and equipment.
-Mike