Today's globalizing economy rose out of the previous international trading system. As the world economy developed, it moved through different phases, progressing from a trading economy based upon exporting in the 19th century towards an economy that made it easy for companies to set up operations in many countries. At each turn of the economic development, the type of companies that dominated the scene changed. Earlier, it was the international trading firms that dominated. Then we saw the rise of the exporters, eventually giving way to the multinational firms of the 1960s and 1970s which dotted the world map with plants. With the emerging global imperative fueled by the liberalization of the world economy in the 1980s, the dominating organizational paradigm changed from the multinational firm to the global firm.
The globalizing economy has had a tremendous influence on firms, forcing them to adapt to new realities. Expanded competition meant that firms would be able to enter many markets, and local or domestic firms were increasingly faced with competitors from far away. A relentless pursuit of efficiency, partially driven by new realities among investors and capital markets, forced companies to adopt new ways of management. Management in firms faced with global competition cannot expect to cope using the managerial philosophy from the past.
The Global Mindset as a New Managerial Paradigm
Managers can be categorized into different type of mandates, ranging from domestic to international, regional, and multi-domestic. Each of these mindsets represents a particular point of view and is the result of different type of experiences. For the new merging competition in the globalizing economy, the old mindsets will not suffice and a global mind will become necessary. The capabilities of this new type of mindset are the main concerns for this book. But first, let us look at how managerial mindsets progressed over time.
The domestic mindset is characterized by a reliance on one market as the key reference and is the mindset most managers are born with. Domestic mindsets rely on a single reference point, their domestic markets, for judgments. For successful managers, who need to act in a globalizing economy, working with a domestic mindset tends to limit the point of view.
Representing the next level up is the international mindset characterized by one or few experiences in another country. The international mindset might come with different levels of international experience, ranging from casual international exposure through travel all the way to extensive foreign stay resulting in a capacity to integrate in a foreign country or environment. The international mindset, with a limited, but in-depth exposure, is, however, not identical to the more extensive global mindset.
A manager with extensive regional experience, such as throughout Latin America, or across Europe, may possess a regional mindset. The regional mindset is of interest because it includes experiences across a score of countries. Still further up the scale is the multinational mindset typical of executives who have been on successive international assignments in different countries. Although representing the backbone of the executive pool of many of our largest multinational firms today, executives with multinational mindsets are still not necessarily possessing true global mindsets.
For the purpose of this book, the global mindset is defined as a state of mind able to understand a business, an industry sector, or a particular market on a global basis. The executive with a global mindset has the ability to see across multiple territories and focuses on commonalities across many markets rather than emphasizing the differences among countries. Companies which find themselves engulfed by extensive global pressures will need to acquire a large pool of executives who possess a global mindset and who are able to view business opportunities from a global perspective. Part of this global mindset is an entire set of new and different analytical tools that would not be needed by the previous domestic or multinational mindset. New strategies, resulting from responding to new market opportunities, are another part of this toolkit.
This global perspective differs substantially from the more traditional single-country, or domestic, and multinational perspective so much more typical today. Much of this book is devoted to explaining the abilities of the global mindset, both in terms of conceptual or analytical skills, as well as in terms of knowledge and organizational abilities.
