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'Globalfocusing': the next stage in the development of globalization – University of Reading

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'Globalfocusing': the next stage in the development of globalization

Release Date 12 July 2006

In recent years, globalization has changed the competitive terrain on which companies develop their corporate strategy. In the 21st century, so many companies operate at a worldwide level that, for a firm to be successful in certain industries, it needs to internationalize and reduce its product diversity, according to research at the University of Reading. The phenomenon of 'globalfocusing' – where diversified conglomerates are converting to global specialists in narrower niche markets and competing with a small number of multinational enterprises – is the focus of a paper (1) by Professor Klaus Meyer of the University's Business School in the July edition of the Journal of Management Studies. For Professor Meyer, this new trend is having dramatic implications for the management of companies. "Two decades ago, companies had a choice between being a big fish in a small pond or being a small fish in a big pond," said Professor Meyer. "They no longer have that choice, at least not in Europe, as globalisation has created one big ocean and so to succeed they must become global specialists selling a core product worldwide. "In the EU, it is the outcome of cumulative changes in both the regulatory institutional framework and in the industrial structure. In the 1970s, this led to companies branching out in related or unrelated industries within a domestic market, which could then be followed by internationalization. However, there are limits to globalization and to managers' ambitions to become world leaders, and so globalfocusing is necessary." Professor Meyer studied two large Danish businesses; food industry conglomerate Danisco and telecom conglomerate GN Great Nordic. Both firms have expanded their core business to establish a worldwide market presence and integrated global operations. "These two companies are typical of how more and more European businesses are now acting," said Professor Meyer. "They have accelerated their internationalization, but also increased their focus on core competencies. Firms are under pressure to lose peripheral activities in which they cannot attain industry leadership and focus on the industry in which they are best. In this core business, they may aim for worldwide market leadership, and optimise their operations and supply chain on the global stage." The process of change from one type of strategy to another has a profound impact on management, according to Professor Meyer. "In this new era, firms must develop new business models that create comparative advantage through operations at different locations worldwide. This means new organisational structures, new management profiles, and capabilities throughout the organisation such that interaction across borders becomes a way of life for everyone in sales, management or R&D functions." End Notes for editors 1. Klaus Meyer (2006): 'Globalfocusing: From Domestic Conglomerate to Global Specialist', Journal of Management Studies, 43, no. 5 2. Media contacts: Professor Klaus Meyer, Centre for International Business and Strategy, University of Reading. Tel: +44 (0) 118 378 6034 Email: k.meyer@rdg.ac.uk Craig Hillsley, Press Officer, University of Reading Tel: +44 (0) 118 378 7388 Email: c.hillsley@rdg.ac.uk

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