The globalization of markets theodore levitt summary

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GLOBALIZATION: A CONSOLIDATION, ELUCIDATION AND APPLICATION OF CONTEXT, THEORY AND STRATEGY

Sean D. Jasso, Ph.D., M.B.A, M.P.P

dx.doi.org/10.18374/JIBE-17-4.10

ABSTRACT

When did all of this prattle about globalization start and why are the perspectives so profoundly different? Why might it seem that many of these diverging viewpoints are frequently driven by globally untested scholars and practitioners alike? What is globalization and how do we best teach this important idea with integrity and objectivity – particularly to the entrepreneur? This paper provides a framework aimed at minimizing scholarly and journalistic bias while also maximizing the entrepreneur’s strategic intent to globalize their firm. Broadly, the paper is an exercise in consolidation of the multitude of ideas contained in the contextual, theoretical and strategic application of globalization. The target reader is the teacher of globalization and the practitioner of enterprise in the global marketplace. At its core, the paper is meant to be insightful to both new and seasoned readers of the topic of globalization as well as instructive to anyone interested in, responsible for, and accountable to globalization – its meaning, methods and consequences. The paper ascends in three stages. Stage one frames the historical context addressing the question – what is globalization? Stage two clarifies the often missing and misguided theoretical framework addressing the question – what explains the rationale for globalization? Stage three solidifies the entrepreneur’s strategic portfolio addressing the question – how to best compete in the market dominated by globalization? The industrious reader might ask, ‘these questions have been answered before, have they not?’ Perhaps, but the swell of disjointed, transdisciplinary, normative academic and journalistic literature leaves the serious thinker with a distorted tool kit by which to understand and practice this widely claimed concept. The paper concludes with a reflection on why a consolidation can be helpful to the entrepreneur by explaining not what globalization ought to be, but what it is.

Keywords: Globalization; Globality; Globalism; Global Theory; Global Philosophy; Global Strategy

1. INTRODUCTION – PROBLEM AND METHODS A critical problem in the social sciences is bias - particularly the steeped mindset in ideology. The bias goes beyond attempts to offer thoughtful theory building from rigorous philosophical and/or development of a given social issue. This problem, however, is not a new phenomenon and persists really from the ‘post-modern’ 1950s when the disciplines of politics and economics began competing for legitimacy with the natural sciences. Natural sciences generally use research methods rooted in empirical discovery and through a wide array of quantitative analyses to produce evidence-based findings. In fact, a trend in the last decade in business school curricula has been to design courses that teach the manager ‘evidence- based decision-making’. This is a good idea when the data and evidence is as unbiased and transparent as can be. Where do we find unbiased data? – this, too, is a problem. It is not unusual for data sets to help produce studies with desired predictions and outcomes for whatever agenda a scholar may have. Perhaps the research questions have become too narrow, minute and opaque; or, conversely, too broad, ambitious and obtuse. Maybe the academic calendar or tenure track confines a scholar to produce what may appear to be clever, but what might in fact be extraneous and undisciplined often completely out of alignment with the demand of the practitioner. This criticism is not a broad brushstroke at academic malpractice, but rather a careful reminder that if the academy is to produce knowledge and deliver teaching lauded as wisdom, a reflection and consolidation are in order – particularly with regards to the oversaturated market of expertise on our specific target, globalization.

Might a consolidation be biased? Yes, but this bias claims partiality that the literary plethora has misplaced a proper methodology and research agenda. Everyone seems to have something to say about globalization, but globalization doesn’t necessarily have direct association with everyone. This

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consolidation is indeed a proponent of transdisciplinary research methods so long as the query is sensible. Globalization isn’t owned by any particular academic discipline, although the science of the matter might be more tangible in the arena of the social sciences and its corresponding traditional methods. These methods include studies supported by primary and secondary analyses rooted in the historical, statistical, comparative, and case study. For example, the general methods driving this paper are historical aimed specifically at consolidating the contextual problem defining globalization and comparative aimed at consolidating the theoretical problem explaining the political economy of globalization and case study aimed at consolidating the strategic implementation of globalization.

1.1 PART ONE: CONTEXT – WHAT IS GLOBALIZATION? To approach this seemingly simple, yet categorically complex question – what is globalization? – let us first assert what is widely, historically and traditionally understood in the mainstream annals of thought, that globalization is best understood as the integration of markets beyond national borders. Stated differently, globalization represents the behavior of cross-border exchange. The drivers of globalization are those who seek (for whatever reason) the creation of or consumption of economic, political, cultural or any meaningful value beyond their nation. Immediately we see that globalization has political roots with regards to what is essentially trade among nations. We know that nations trade for the simple reason to exploit their own advantages - comparative/productive as well competitive/value-added. Should the state own specific industry (socialism) then the mechanism of exchange is likely to be through the output of the state-owned enterprise. The growing norm, however, is that states generally function as the political and policy mechanism to provide overall governance, while privately-owned firms (capitalism) assume the risk associated with most, if not all, elements of cross-border exchange. In summary, our general definition of globalization describes a dynamic environment of competitive industries creating value by way of producing goods and services for consumption both domestically and abroad while governments engage in the politics of creating policies that advance or defend the many complexities associated with the rules of what is essentially international business.

Let us do a quick bias check – are the definitions above biased? Labeled as demonstrably mainstream, these explanations pass the objectivity test in the conventional economics of international trade. However, this leads to a major discrepancy in terminology. Did we define international trade or globalization? Technically, these classifications are aligned with traditional language associated with the studies and rules of international trade (politics) and/or international business (economics). That is to say, trade between two or more nations and not around the world. Specificity is important because what we have learned is that most nations, firms and people engage in economic activity primarily with single (or very few) markets/countries (Ghemawat, 2011). So then, what about globalization as a term – what does this word really mean? The problem historically with this term is one of obfuscation and dogma. Globalization’s etymological roots – that is, the historical use of the word – derives from the first contemporary use of the term in fact from an academic. Here is where our first major contextual cornerstone is placed for our consolidation. It is from the curriculum and writings of Theodore Levitt that we are introduced to the word and modern idea of globalization (1983). Indeed, any serious database search on the topic of ‘when was the word globalization first used’ – Levitt’s name and his prominent article The Globalization of Markets is first in the queue. Levitt’s fame as a Harvard marketing professor, HBR editor and trained economist helps position him as a, if not the, recognized starting point for contemporary thought on globalization and certainly the persistent use, overuse and eventual obfuscation of the word. We will return to Levitt, but for now let us use 1983 or simply the early 1980s as our benchmark for when this talk of globalization really started. It is the 1980s (really 1978) when we see, for example, the opening up of China or the massive foreign direct investment by Japan into the U.S., among the pivotal instances, that provide historical correlation with scholars like Levitt who are witnessing ‘globalization’ of markets.

Prefacing the term’s misuse and outright appropriation from multiple academic disciplines, clarity on globalization’s teleological origins can also be helpful here. Globalization, like many terms or theories used to explain outcomes in the social sciences, has a teleological challenge, that is, a problem with dogma or the associated beliefs about globalization. Teleology aims to explain the purpose or outcome of a phenomenon. For example, we could ask, what is the outcome of globalization? Fair question.

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From our initial definitions above, we might ask what is the outcome of cross-border integration? Answers would be helpful for many related disciplines particularly those measuring economic activity. But what has evolved is that related terms have trespassed or overlapped to confuse not only the study and meaning of globalization, but also its practice and implementation. For example, similar terms in the globalization genre include global, globalism, and globality. Let us bring definitional clarity: globalization – a process that creates an outcome (we’ve said cross-border integration); global – a mindset that recognizes the entire world as a market; globalism – an ideology to support a certain global/world-wide agenda (political, social, economic, policy); globality – the emergence or vision of a single, socio-cultural and political market or environment. With further deconstruction of the language, we define words ending is ism as pertaining to systems, and ity as pertaining to distinctive conditions.

Building on globalization’s contextual heritage of frequently overly used and often misguided terminology, we have defined globalization as a process or method of achieving the outcome of cross-border integration. This terminology is likely to withstand the scrutiny of the objective critic and expert. That said, let us return to the problem of dogma and, more specifically, explaining some of the fallacies of globalization. From the academic’s point of view, the term itself has become quite popular particularly as a broad term to mean all-things international, multi-national, transnational, and/or global. A survey of textbooks, for example, on ‘international business’ (among the more pedagogically customary and lasting disciplines in business school portfolios), introduces the word globalization within the first pages defining, usually correctly, the process and/or outcome of cross-border integration (Ritzer, 2015). To briefly recapitulate and anchor a guiding assertion, cross-border integration can occur for any reason – mainly political or economic – complete with all of the infinite outcomes (opportunities, costs, and consequences). Not once have we indicated that globalization is anything other than this specific process mainly economic exchange, trade, and value creation.

Yet, it is the proliferation of globalization in virtually all disciplines of traditional business school curricula, for example, whereby the term has become dogmatically normalized from sweeping assumptions to provocative platitudes permeating the appendices of nearly every subject. For example, the ‘globalization’ of marketing, finance, human resources, accounting, law, operations, to name a few has two objectives. First, authors and editors seem to want to close the gap or catch up to yes, the reality of a prominence of worldwide trade, interdependence and influence. That is correct and fair. The second objective, to the contrary, dilutes and overwhelms the research, publication and teaching of globalization. Examples include a profusion of books, chapters, subchapters and articles from anti to pro-globalization regularly absent of clear argumentation, rigorous empirical evidence and/or thoughtful care to the consequences of academic malpractice – particularly to the entrepreneur needing instruction on entering foreign markets, for example. Dogma may be descriptively punitive, but to achieve contextual transparency and to resolve the problem of terminological obfuscation, clarity (above agreement) is essential here. For scholars and editors alike to suggest that we need to teach students that the labor market for virtually everything will demand a global mindset may be pedagogically astute and ambitious, but in hindsight, the globalization of everything presents unbalanced reality, diluted simplicity, and ideological duplicity. In fact, the driving influence of this essay is to revive and consolidate globalization’s original, or at minimum, moderate roots in political economy.

How do we resolve the problem of terminological obfuscation? A better definitional starting point to the student of international business, for example, might be to expose all of the variations on the theme of global as noted above – global, globalization, globalism, and globality. With clarity of this simple portfolio of terms, the student/practitioner will be better able to filter the bias, forcing authors and scholars, for example, to develop better precision of argument to therefore yield more transparent empirical testing and outcomes. Part two below identifies books written by famous people (even Nobel laureates in economics), but whose arguments suffer from dogmatic normalization. The aim of this essay is to provide an instructive awakening and consolidation of globalization in both its simplicity and influence on so many different schools of thought and practice. This of course requires less bias and agenda-setting when writing about the realities, complexities and opportunities of global integration. The only way to see through platitudes, for example, is to challenge them. This is the job of theory – good theory driven by good research.

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2. PART TWO: THEORY – THE RATIONALE FOR GLOBALIZATION: A PORTFOLIO APPROACH 2.1 The Problem Continues What is the purpose of the university? Conventional reason might – or should – say, to create knowledge and to teach. This section explores the knowledge that explains globalization by way of presenting a medley of leading theories – not all of which are objective, but most that are timeless. The theories are also aimed at serving the educator charged with the task of teaching globalization at any academic level. Where would a student or inquiring mind find globalization? The most likely place would be a class, book or article on issues pertaining to a wider scope of inquiry beyond anything domestic. International business courses are a practical place to find globalization and are taught most often and logically by economists teaching mainly how to compete in foreign markets. As noted above, the term has been diluted, sadly, into the many subfields particularly in business programs – that is, the globalization of everything. Regardless of this phenomenon of transdisciplinary pedagogy, economists seem among the most likely to tackle global issues by way of the unique research methods that study markets – all nations have markets which dominate economists’ research agendas. Of course economists, like all disciplines, can be myopic in their agendas, while other disciplines like politics and policy or sociology and anthropology, for example, are also engaged in the analysis of globalization. Comparative politics, for example, is a direct hit on where we might find globalization as both a process and a theoretical tradition. Additional social sciences include sociology traditionally the scientific inquiry into the behaviors of various groups – from the household, the organization, the city to the nation. In fact, economics and sociology have been quite productive in the study of globalization. It is also these disciplines that have added to the central problem of bias and obfuscation exemplified below.

2.2 The Economic View: The Bias of Ideology For any inquiring mind to learn about globalization, using a simple subject search on Amazon (an undisputed leading source for all genres of books), inserting the term globalization one finds at the top of the search list the many works by Joseph Stiglitz, the Nobel laureate from Columbia University. Similarly, leading academic database search engines such as EBSCO Information Services positions Stiglitz’ more recognized book, Globalization and It’s Discontent (2003), among the first choices (and have been for years). Stiglitz’ book can be very instructive in supporting our bias argument. Under the guise of globalization, Stiglitz takes aim at global institutions, their broken promises and the causes and consequences of the global institutions that govern mainly international banking, monetary policy and economic development (IMF, World Bank, WTO). In essence, it is globalization’s fault that the financial markets were globally integrated, overseen by global policy mechanisms and of course, the consequences upon the regular, innocent folks. Understanding the roots and consequences of income inequality, for example (Stiglitz’ cause celebre), is important. However, globalization – the process by which nations and markets have engaged for centuries – unfortunately becomes the villain. Perhaps a better approach to say, global income inequality, could be to include the dynamic combination of complexities, challenges and rewards of dynamic and global markets. Stiglitz, like many economists, is driven by ideology which can help position and commercialize one’s expertise. Regardless of one’s outlook on economists with clear biases, it is important to identify this influential reality in the educational marketplace for globalization.

2.3 The Sociological View: The Study of Global Group Dynamics Let us turn to sociology as an example of transdisciplinary expertise and an active noted discipline productive in the scholarship of globalization. Interested in group theory, sociology pursues methods rooted in history, statistics, comparison and case study – the customary toolkit for the social scientist. Where the contemporary economist and political scientist might create theories in the quantitative arena rich in data analysis, other areas of inquiry might be steeped in the qualitative arena of philosophy. Sociology is a close partner to politics and economics and shares the same diverse methodological tools that study people in groups. Indeed, globalization has benefited from sociological contributions to the political and policy domains such as helping explain the reasons and outcomes of complex group dynamics in inner-city households, or regional poverty among certain segments in developing nations, to name a few. Using the Amazon approach to learning about globalization, should one’s search include something as simple as ‘understanding globalization’, at the top of the list for many years and five editions is Robert Schaeffer’s Understanding Globalization, 5th Ed. (2016) with the important subtitle The Social Consequences of Political, Economic, and Environmental Change. Like Stiglitz’ agenda approach to

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globalization, Schaeffer, too, hits the subject with the drumbeat of the boom and bust economy – mainly driven by the United States. The book is quite good at teaching history to a reader at all levels about economic and global crises caused by global institutions such as the IMF, or corporations and their impact on domestic and ultimately global housing markets, or the ever-popular (and necessary) expansion of China. But woven into the historical analysis of selected events that indeed have worldwide impact, is that globalization is the independent variable and cause. Not once does the book ‘understanding globalization’ identify how firms really work, their interests, their contributions to economic growth throughout the world, the creation of wealth from all levels of society influenced by global market integration and so on. We must, therefore, understand globalization through a better, more transparent set of tools that help explain globalization theoretically thus answering the question of rationale for cross- border integration and of course, the consequences that ensue.

The tone above is contemptuously critical aimed strictly at highlighting just a small snapshot of ideological and agenda-driven bias among thought leaders of globalization. This is not a new phenomenon when world issues are the target of analysis. As noted earlier, globalization has been quite popular as a catch all for many areas of inquiry. Beyond the trend in higher education that we must have a global component to virtually every discipline (business schools in particular), or the other widespread vision in the global expertise industry of the normative ideal of cosmopolitanism, for example, is that globalization, the process of cross-border integration, is something beyond what it is. Agendas whose primary focus is on the outcomes of globalization are among the most prevalent in the wide array of global literature. I call this the globalization of discipline using the oldest research method in the book – cause and effect. The problem, however, is that the cause (globalization), as opposed to the process, is too often the independent variable that is underdeveloped particularly the importance of the rationale for the globalization in the first place. The favorite defaults include corporate greed, international finance, and national hegemony. We need better rationale or explanations of the phenomenon of globalization - the answer to the question – why globalize?

Earlier we asked how does a university create knowledge? Intellectual curiosity coupled with meaningful and rigorous research agendas are supported and funded to answer big questions and the output is expectantly good theory. For our topic, there is quite a bounty of globalization theory and what follows is a portfolio of effective theories that can provide the objectively curious an intellectual tool kit for understanding the rationale for globalization. The portfolio identifies the importance of history as a means of understanding perhaps the most important question of rationale, how do we classify the when of globalization?

2.4 The Historical View: Periodization and Classification of Globalization Mindful of the enduring problem of both the normative and ideological underpinnings influencing thought leaders, something that most might agree are the central research questions of most concerned with globalization. They include: What is and is not globalization? Does globalization deliver massive and disjunctive social change? Are changes in world politics part of history’s natural flow? Is the world becoming one ‘place’ a serious inquiry? (Axford, 2013). Whether the scholar answers these questions with objective fortitude is not the point, but rather, these questions can be a starting point for inquiries about globalization. History, perhaps the broadest of them all, is a discipline whose sole aim is to explain the past and why it matters to the present. The purpose here is not to explain the infinite history of world events, but rather to consolidate helpful theoretical tools that can simplify history through an effort of segmentation. Following are some theoretical traditions that stand the test of bias and time.

A classification or typological approach to history and globalization is the principal work of Tony Hopkins (2002, 2006). For example, the four categories of history of archaic, proto, modern and post-colonial help explain the periods of integration of markets and nations. Archaic-globalization represents pre- industrialization before 1500, proto-globalization refers to industrialization and the solidification of territorial state sovereignty from about 1600 to 1800, modern globalization refers the period of national hegemony and economic capitalism from about 1800 to 1950, and post-colonial refers to the period of transformative and consequential outcomes to the preceding eras.

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Among the seminal works on segmenting, is Roland Robertson’s (1992) work on ‘global mapping’. Robertson’s phases are quite famous in the sociological discipline of historical analysis. Like Hopkins’ typologies above, Robertson’s phases provide us with an important timeline of essentially not only what happened and when, but also the contextual depth. The details are consolidated in earlier works on globalization (Jasso, 2008, 2010), but the phases are presented here to substantiate the importance of classifying when globalization has evolved. Robertson’s famous phases include: phase one – the germinal phase from the 1400s to the mid-1700s where we see the emerging growth of national communities; phase two – the incipient phase from the mid-1700s to the 1870s where we see the international relations among unitary states; phase three – the take-off phase from the 1870s to the 1920s where we see international integration of socio-cultural institutions culminating in World War One; phase four – the struggle for hegemony phase from the mid-1920s to the late 1960s where we see the struggle for power among nations punctuated by and the lasting consequences of World War Two; phase five – the uncertainty phase from the 1960s to the present (or at least of the time of Robertson’s writing) where we see the problems and opportunities of global integration even the idea of global citizenship. Robertson’s and Hopkins’ studies on historical classification are among a wide scholarship aimed to contextualize time and events.

2.5 The Political View: The Ambition of the Nation State What writes the history of globalization are the decisions of the many actors engaged in cross border integration. Of course in a competitive, market-based economy, individual entrepreneurs and firms are the real drivers of economic activity, but the rules of trade are determined by governments and other influencers. The international political system is vast, deep, complex and unbalanced. Where constitutional democracies might be present in the global north, there are dictatorships and single-party states in the global south and east. Certainly the politics of nations are central variables from the many theories associated with international relations, for example. In fact, international relations remains an important academic discipline whose aim is to analyze the international political order by way of the aims and rationale of sovereign nations. For example, the constructionist perspective of international relations sees political outcomes constructed by individuals – for better or worse – and not by the natural and material flow of markets (Wendt, 2004). Institutionalism, on the other hand, is an international relations theory that examines the role of institutional norms, conventions, and the many other structures that explain national governance (Skocpol, 1979).

Politics is simply the struggle for power (Laswell, 1936/1990) to accomplish national interests. A nation’s interests ought to be moral and just, but of course power can also be very good at exuding incompetence. That said, if we reach back to the original thinkers on the matter of politics such as Aristotle’s assertion that political science is our highest science (2013) by which a nation/state/society flourishes as citizens aiming at their highest good/potential/excellence, we can affirm that studying political institutions and the actors, decisions and outcomes should indeed be an important and noble endeavor. The political science of globalization is rich in multi or transdisciplinary methods aimed at understanding the big questions of how nations behave, engage, grow, flourish or decline. Aristotle also argues that a nation’s identity is embodied in its constitution – the social contract that governs not only a people, but restrains those who govern. To consolidate the contextual and theoretical of the politics of globalization, objectivity is essential for it is the very nature of politics where we veer almost immediately to the ideological. Ideology, the simple classification of ideas that explains one political perspective over another (liberal or conservative for example) is an important dynamic in understanding the behaviors and aims of those who shape the economic conditions by way of shaping the political and policy decisions.

2.6 Toward a Strategic Application In this section the aim has been to offer a portfolio approach to the many theories of globalization. The overarching aim of the paper is in fact to consolidate the many theories of thought leaders in order to filter out bias and ultimately help the practitioner. No matter how dominant political and economic theory may be in the broad discourse of globalization, it is really the entrepreneur who deserves the most attention for it is he or she who is truly driving economic productivity. Public policy may be inevitable in today’s global political economy, but at the heart of economic value creation are those individual business owners, managers, and workers pushing living standards forward. In part three, we aim to consolidate a strategic

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tool kit for those – like it or not – who must engage the global economy whether for survival, prosperity, or both.

3. PART THREE: STRATEGY – THE ENTPREPRENEUR’S PLAYBOOK 3.1 The Truth About International Value Creation Where does one begin to answer the question – what is globalization or international business? This of course is where the expertise culture pounces into action and where the entrepreneur whether novice or skilled needs to know that the essence of doing business in foreign markets is the same as it is in local markets – to create value. Here we consolidate a playbook for the entrepreneur building from all of the gains made above and putting context and theory into practice. Globalization can best be applied in the pursuit of international business which, by no surprise, is an arena of extremes – from the excitement of engaging with foreign markets and cultures, to the thrill of creating new customers, to the pressures of managing cultural sensitivity to the stress of raising capital to the pains of not getting paid. This is the reality of doing business outside of one’s domestic market, but with objective oversight, these extremes are very much part of doing business whether at home or abroad – this is simply doing business. Creating value for exchange in a market is the lifeblood of prosperity and to remain competitive, sustainable, and relevant, the entrepreneur requires a strategy – that is, a plan, based on analysis to accomplish a noble, worthy and difficult goal. Business is not a theoretical exercise it is a natural phenomenon with one purpose – to create value. What follows is a consolidation of best practices.

3.2 The Globalization of Markets Throughout this paper a foundational definition of globalization has remained consistent – simply, the integration of markets across international borders. What does this mean – really? We begin with a few economic truths: first, industrialization and urbanization are a constant; second, markets demonstrate the most effective way to produce economic activity; third, competition is the ingredient for industrial advancement; fourth, markets have reached across borders for a very long time; fifth, prosperity through increased living standards is a broad, universal norm. Are there other truths of human, corporate and national endeavor? Certainly, but let us embark on these norms that would pass the broad, sweeping majority of what most of humanity really wants – added value.

Earlier we introduced Theodore Levitt (1983) among the original thinkers on the idea of globalization. Most mainstream, reasonable, applied thinkers look to Levitt’s 1983 famous HBR article The Globalization of Markets as the first, contemporary perspective of globalization. In the article, Levitt so boldly asserts that not only are ‘multinational corporations obsolete and global corporations absolute,’ but also that firms must see the world as one large market – ‘ignoring superficial regional and national differences’. From a strategic perspective, firms must not only have a global mindset, but moreover, they must approach the single world market with a standardized business model. Localization, of course, is important and possible, but customization for a global market is usually seen on the margin while the general business model is that which remains standardized. McDonalds, Starbucks and Apple customize marginally, but the business model is unchangeable – the economics simply do not allow. Contextually, the 1980s is a historical benchmark as this is the decade when foreign factor markets begin to open from low-cost labor to low-cost steel and where foreign consumer markets begin to open with access to growing capital and disposable incomes. To meet growing demand from nations with rising incomes and living standards, the suppliers throughout the word demonstrate Levitt’s theory that standardization is unconditional if and only if a firm wants to grow and to remain competitive.

Levitt’s ideas do not escape controversy particularly the culturally sensitive and economically skeptical of the virtues of integrating markets. Indeed, as markets collide, just as corporations merge, important norms can and sometimes do blend or sunset making room for more dominant, or perhaps more efficient norms. The battle lines and the long debate over economic efficiency and cultural identity is regularly pointed to Levitt as both culprit and genius. Of course culture matters and of course prosperity matters – so what is the objective perspective? A consolidation of strategic methods can help provide clarity on how best to engage in the reality of global markets. What appears to be constant is that standardization

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provides the widest reach for globalization to be value-added in foreign markets as well as value-added for firms seeking more lasting profitability.

3.3 A Tested Took Kit of Theory and Strategy To learn about doing business in foreign markets, a course in international business might be a good place to start. A pedagogical challenge is the course delivery which should include a successful balance between the applied expertise of the instructor and the best combination of theory and practice. Textbooks as starting points are central to teaching not only what matters most in learning international business, but also developing a global mindset, that is, seeing the entire world as one point of reference – one market of opportunities and risks. An endless list of good and bad textbooks permeates the education market, most of them are simply too long and make the learning more about learning terms and less about the rationale and methodology for engaging in cross border integration in the first place. What follows is a series of best practices based on the components of a tested curriculum – one that has served both students and clients.

First and foremost in any strategy formulation process is clarity of a firm’s strategic intent (Hamel and Prahalad, 1989/2005) that is, the readily grasped declaration (by all stakeholders) of where the organization must be going in the future. With strategic intent in place, the strategy process becomes more tangible, effective and inspiring. In fact, among the very best textbooks are those whose aims are to teach from a strategic point of view. As defined earlier, strategy is a plan based on analysis to accomplish something very difficult. If an endeavor isn’t a challenge, then a strategy isn’t required – just do it. Globalization is very difficult simply do to the nature of uncertainty and risk, therefore, strategy is essential. Alain Verbeke’s International Business Strategy (2013) offers the instructor and student a rigorous theoretical foundation as the starting point to successfully engage international markets. What is unique about Verbeke’s approach is his illustrative model based on seven unifying principles – each depicting the movement of value creation from a home country, to crossing the international border, and entering a host country. The seven principles have become mainstream among serious entrepreneurs beginning or sustaining international business operations. These principles are: 1) non-location bound firm-specific advantages (FSAs) (certain technologies that can transfer); 2) location-bound FSAs (certain technologies that can’t transfer); 3) domestic location advantages (from property rights to a skilled workforce); 4) investment in and value creation through recombination (the ability for a firm to innovate and diversify); 5) complementary resources of external factors (the ability to gain access to resources needed abroad); 6) bounded rationality (the challenge of gaining and processing information); and 7) bounded reliability (the challenge of ensuring intentions).

Verbeke rigorously takes the student of international business through multiple case studies of each of the unifying principles helping to create effective analytics of the opportunities and risks of real cross- border endeavors. Good international business theory explains the rationale of a given firm’s endeavor – why are we needing or wanting to globalize? Clarity of Verbeke’s seven principles ideally can lead to building effective corporate strategy addressing opportunities such as growth of the firm and business strategy addressing areas of market competitiveness. From theory we can progress to strategy – the actual plan of action. Within the canon of textbooks on international business strategy, of which Verbeke’s is one, the serious entrepreneur will find great clarity in Cornelis de Klyuver’s Fundamentals of Global Strategy: A Business Model Approach (2010). De Klyuver provides a concise overview of the basics of preparing for and supporting a move into international markets.

The business model approach is a fundamental tool often ignored as the term alone is either too simplistic or assumed. As noted above, value creation is a firm’s central aim and a firm’s business model defines how the company intends to create value through explicit knowledge of its revenue and cost drivers. The international arena is no different than the domestic arena whereby the business model is indispensable to know how a firm makes and spends money, but also how this model can navigate the many avenues of risk and uncertainty. Model fundamentals include the precise alignment of four pillars: the value proposition; the value chain infrastructure; the market participation; and the management model. De Kluyver drives the model further by developing the universal standard of the last two decades, Pankaj Ghemawat’s ‘AAA Triangle’ – or the ‘AAA Framework’. Strategic decisions on how and why to engage a foreign market are either by or a combination of adaptation (tailoring the business model to

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local demands), aggregation (seeking economies of scale and scope through exploiting efficiencies), or arbitrage (exploiting differences in the foreign market such as low cost labor). More advanced firms often combine all three or a version of the three.

A management team responsible for globalizing the business model must indeed know the foreign market to the best of their abilities. Rarely if ever can international business be delegated – direct engagement is vital. That said, knowing the risks associated with a host country are among the top responsibilities of global strategic management. Among the first and lasting frameworks to help understand the complexities of the foreign host market is Michael Porter’s national diamond model (2008). As Porter so famously states that the purpose of strategy is alignment, imagine the risk reduction when the following points of the ‘diamond’ are aligned: firm strategy, structure and rivalry (the analysis of the industry); demand conditions (the analysis of the consumer market); factor conditions (the analysis of the means of production); related and supporting industries (the analysis of clusters); government (the analysis of public policy); and chance (the likelihood of luck). Porter’s perspective has traditionally been that a firm’s success in any market, foreign or domestic, is how effectively it positions its competitive advantage – that is, the combination of how the firm exploits its capabilities while also minimizing risk.

A final consolidation of enduring strategies to help the firm pursue the globalization of their firm is to build upon Porter’s model of understanding the host market and broadening the vetting process by fully understanding the nation as a whole. Introduced above, Pankaj Ghemawat is among the leading scholars in global business strategy and his models, like the AAA model, are now standards. A portfolio of strategies would be incomplete without Ghemawat’s CAGE framework introduced in 2001 in HBR’s Distance Still Matters and driven further in his book, World 3.0: Global Prosperity and How to Achieve It (2011). CAGE is an acronym for measuring the distance between the domestic and foreign markets: Cultural Distance (such as language, ethnicities, and norms); Administrative Distance (such as government structures, political institutions, and historical ties); Geographic Distance (such as physical remoteness, lack of common border, and size of country); and Economic Distance (such as living standards, costs of resources, and human capital).

3.4 China – A Brief Analysis in Global Strategy To conclude our discussion on the strategic elements of globalization, the following analysis demonstrates how global markets evolve and that effective strategic planning is simply nonnegotiable. As stated above, there are just too many risks, unknowns and ‘distances’ that make doing business of any kind – from manufacturing to sales – in foreign markets complicated, sometimes dangerous, and always uncertain. Understanding the elements of effective strategy formulation can reduce all of the negative variables and increase the probability of sustainability and, with good planning and luck, success.

Why China? Any serious entrepreneur will need to know, see, and understand the ever-changing dynamics of China. Like it or not, China must now be seen as an economic norm – in essence, you must have a China strategy no matter what. China’s markets for resources, manufacturing and now consumers are staggering in size and to ignore this phenomenon is simply business incompetence. What follows is a brief ‘old way versus new way’ of engaging the Chinese market achieved by using all of the frameworks in our portfolio above and with sustainable measures of success.

This example is taken from the point of view of an entrepreneur aiming to sell to the Chinese market. The ‘old’ approach (mid 2000s and earlier) was to obtain a joint venture where the emphasis was on the negotiation of the partnership and not the actual value of the product. The ‘new’ approach (current day) is a wholly-owned foreign enterprise and what value the firm can bring to the country – and not just the negotiated deal. China’s markets for consumers and resources are maturing suggesting that the points of the ‘diamond’ are more aligned and that the ‘distances’ are closer. China is no longer seen only as a source for low-cost manufacturing (aggregation), but rather a market for consumers (arbitrage and adaptation). For example, the ‘old’ way of seeing China is the world’s source for manufacturing to achieve scale. The ‘new’ is to see China as the great consumer with a growing upper-middle class of young and sophisticated consumers with spending power combined with the powerful role of e- commerce. Exporting to China is no longer envisioned from the container ship terminals, but rather

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through the applications on mobile phones. To know the best practices of international business is to use China as a benchmark for global strategic intent, analysis, formulation and ultimately, implementation.

In summary, the good news for the future of globalization is that although national markets may evolve quickly and drastically, like China, there does exist a set of fundamentals that remain constant in a playbook for entrepreneurs. What drives the entrepreneur is constant as well – either by fear or force – foreign markets present opportunities to create and add new value from the present all the way to the beginning of international trade. Fundamentals by design are lasting, tested, and reliable and the portfolio of thought leaders and their models presented have the practitioner in mind. Globalization requires the arduous balance of value creation amidst the uncertain forces of risk. The aim here is to provide the entrepreneur with the right tools to not only compete, but also to prosper – otherwise, why globalize?

4. REFLECTION AND CONCLUSION The aim of this paper is to bring accountability to the oversaturated market of expertise on the important idea and practice of globalization by way of explaining what globalization actually is. We have confronted the problems of bias, ideology, obfuscation, and dogma by consolidating the contextual (when), theoretical (why) and strategic (how) of globalization. Our findings assert that globalization has been diluted into too many intellectual disciplines with too many theories and too many methodologies. The fact that globalization is everything is not only misguided, but also harmful to the entrepreneurs, managers, and policy makers who must confront the realities, risks and opportunities in foreign markets. We have argued from the beginning that globalization is a process for creating value, and not a culprit of when or how markets or civilizations decline.

What is the future of globalization – how do we proceed? For the instructor what matters most is teaching correct terminology, eliminating platitudes, excluding bias and agendas – teach what globalization is. By no means does globalization get a free pass from scrutiny, but the focus of criticism might be better served on the objectives and outcomes of decision makers and their gamble with or management of risk. The expert on globalization, or the globalization of markets, or the strategic planning of cross-border integration must experience globalization first-hand. Globalization is an experiential discipline requiring on-the ground observation, consulting and actual engagement with foreign markets. For example, has the so-called expert in globalization ever actually designed and/or sold a product for a foreign market – or negotiated any type of trade – or transferred domestic and foreign capital? In essence, to teach art, one must stand in the Sistine Chapel and know what it smells like, sounds like and to what angle you must bend your neck to see the greatness in that room. Similarly, to teach globalization, one must experience the market and all of its senses to then provide the truths our students so desperately deserve and entrepreneurs so rightly demand.

REFERENCES: (2013). Aristotle's Politics, 2nd Ed. (C. Lord, Trans.). Chicago, IL: University of Chicago Press