10 Part 1: Strategic Management Inputs
Thus, managers have to learn how to operate effectively in a “multi-polar” world with
many important countries having unique interests and environments.^39 Firms must learn
how to deal with the reality that in the competitive landscape of the twenty-first century,
only companies capable of meeting, if not exceeding, global standards typically have the
capability to earn above-average returns.
Although globalization offers potential benefits to firms, it is not without risks.
Collectively, the risks of participating outside of a firm’s domestic markets in the global
economy are labeled a “liability of foreignness.”^40 One risk of entering the global market
is the amount of time typically required for firms to learn how to compete in markets that
are new to them. A firm’s performance can suffer until this knowledge is either developed
locally or transferred from the home market to the newly established global location.^41
Additionally, a firm’s performance may suffer with substantial amounts of globalization.
In this instance, firms may over diversify internationally beyond their ability to manage
these extended operations.^42 Over diversification can have strong negative effects on a
firm’s overall performance.
A major factor in the global economy in recent years has been the growth in
the influence of emerging economies. The important emerging economies include
not only the BRIC countries (Brazil, Russia, India, and China) but also the VISTA
countries (Vietnam, Indonesia, South Africa, Turkey, and Argentina). Mexico and
Thailand have also become increasingly important markets.^43 Obviously, as these econ-
omies have grown, their markets have become targets for entry by large multinational
firms. Emerging economy firms have also began to compete in global markets, some
with increasing success.^44 For example, there are now more than 1,000 multinational
firms home-based in emerging economies with more than $1 billion in annual sales.^45
In fact, the emergence of emerging-market MNCs in international markets has forced
large MNCs based in developed markets to enrich their own capabilities to compete
effectively in global markets.^46
Thus, entry into international markets, even for firms with substantial experience in
the global economy, requires effective use of the strategic management process. It is also
important to note that even though global markets are an attractive strategic option for
some companies, they are not the only source of strategic competitiveness. In fact, for
most companies, even for those capable of competing successfully in global markets, it is
critical to remain committed to and strategically competitive in both domestic and inter-
national markets by staying attuned to technological opportunities and potential compet-
itive disruptions that innovations create.^47 As illustrated in the Strategic Focus, Starbucks
has increased its revenue per store through an emphasis on innovation in addition to its
international expansion.1-1b Technology and Technological Changes
Technology-related trends and conditions can be placed into three categories: technology
diffusion and disruptive technologies, the information age, and increasing knowledge
intensity. These categories are significantly altering the nature of competition and as a
result contributing to highly dynamic competitive environments.Technology Diffusion and Disruptive Technologies
The rate of technology diffusion, which is the speed at which new technologies become
available and are used, has increased substantially over the past 15 to 20 years. Consider
the following rates of technology diffusion:
It took the telephone 35 years to get into 25 percent of all homes in the United States. It took
TV 26 years. It took radio 22 years. It took PCs 16 years. It took the Internet 7 years.^48