The World is Flat...The World is Lumpy?

Abstract

Suitable for MBA, EMBA, GEMBA, and executive education programs, this note sets the stage to unfold an analysis of popular notions about how the world works. On one hand, some believe that global competition has created a flattened world and that globalization has leveled the playing field. Yet a zest to view the world as flat, others have said, results in an underestimation of the differences between countries—standardization, exact replication, and scale expansion on a global basis could be problematic. In this note, we acknowledge that the flat world has some lumps, but regardless of whether the world is considered to be flat or round, there are certain implications on both sides that business leaders need to be aware of in order to create global efficiency. The note offers three practical examples that students can work through and apply their learning. Excerpt UVA-S-0191 Aug. 12, 2011 THE WORLD IS FLAT…THE WORLD IS LUMPY? Despite the seemingly fresh arrival of the term “globalization,” it is really nothing new. The drive to explore the unknown can be traced back to ancient civilizations and those brave souls who set out to explore the earth—mostly by sea. Trade followed, as did tariff duties. What has changed over the centuries is the amount of contact and the form of engagement. Much of the movement toward a global economy occurred during three different periods. The latter part of the 1800s to the mid-1900s generally marks what historians consider the first wave of globalization when trading goods expanded to investing capital and labor in foreign countries. Immediately following World War II, declining trade barriers between countries set off a second wave. And since 1980, economic policy reform, particularly among developing countries, as well as declining transportation costs and technology advancements allowed more countries to enter global markets and resulted in the third wave of globalization. At first, reaching outside of one's borders was limited to a few industries—mostly consumer-product-driven firms. Incentives included lower production costs, access to resources (either natural or knowledge and skills of local populations), growth into new markets, financial value, and/or a desire to be viewed as a local company as opposed to a foreign-owned one. By the year 2000, service industries started to appreciate the gains from going global. Transportation efficiencies allowed us to produce and deliver resources, products, and services around the world. And the meaning of globalization transformed well beyond the concept of international trade to include increasing worldwide connectivity, integration, and interdependence of cultural, ecological, governmental, high-tech, and social spheres. . . .