What kind of global organization should you build?

September 2001
Business2.0 2001
By Mohanbir Sawhney and
Sumant Mandal, Pricincipal
Clearstone Venture Partners

A cliche of international business states that as you build your global organization, you "think globally, and act locally." The thinking goes that "glocal" corporations should strike a balance between locating expertise close to markets and centralizing other aspects of the business in one global organization.

One way to organize your thinking is to separately consider each aspect of your business, and to determine the degree of localization each aspect demands. Good candidates for centralization include technology, product development, marketing, and IT infrastructure. Other divisions such as sales, business development, and supply-chain management need to be local, because these are closest to the markets, require local market expertise, and are most subject to regional variations. For instance, a B-to-B market-maker, such as DirectAg.com in the agricultural market, can never penetrate the opaque veil of business relationships and local business practices in India or China without real humans there, nor without the help of strong local partners.

Although most ecommerce players think about entering one market at a time, piecemeal globalization may leave you with a mess of poorly integrated regional businesses. It pays to think architecturally about the eventual structure of your global business. An emerging organizational model for the global e-corporation contains three-layers (see eCorporation chart, p180).

The innermost layer is the global core , which provides vision, leadership, and strategy. The core also includes corporate versions of marketing, administration and business development. The middle layer is a set of shared services that are provided to all the regional market units. These services include procurement, human resource management, marketing services, and partner management. The outermost layer is the local market units. These units are rich in local expertise on customers, regulation, partnerships, and supply-chain management.

Separating the global core from the local market units becomes an excellent way to manage the paradox of thinking globally, but acting locally. And the shared services layer allows the firm to standardize infrastructure and to gain economies of scale across the market units.

Shift your thinking
Some of the biggest barriers to creating a global ecommerce business are the lack of physical, information, and payment infrastructures. But infrastructure constraints can be overcome by thinking creatively as you localize a business model. The trick is to shift your thinking from what is missing to what is available locally.

Consider the following examples: Credit cards are not widely used for ecommerce in Japan — less than 10 percent of transactions are conducted using credit cards. Bank transfers and COD are the most popular payment mechanisms. But many consumers in Japan regularly use convenience stores to pay utility and other bills. Thus, 7-Eleven Japan has a payment acceptance service for products and services purchased from Web merchants. Consumers can select "Payment at a 7-Eleven Store" as one of the payment options, and print out a payment slip that they present at their nearest 7-Eleven store.

Now, 7-Eleven Japan is going one step further to allow consumers to pick up and pay for merchandise bought on the Web at any of its 8,000 7-Eleven stores in Japan. This venture, called 7dream.com, may become the dominant fulfillment and payment infrastructure for ecommerce in Japan.

7-Eleven stores may become ecommerce kiosks, payment centers, and fulfillment centers. Similar opportunities await operators of public call office (PCO) booths in India, which can be converted into combination Internet cafes and collection centers for ecommerce shipments.

Consider an even more basic problem with B-to-B ecommerce in countries like India. Many small businesses in India do not have Internet access or even personal computers. So, how can a U.S.-based B-to-B firm connect with Indian suppliers? Limited Internet penetration seems to be a fatal constraint, until you realize that what India does have is abundant cheap labor. So a B-to-B ecommerce venture can afford to have real people visiting each small supplier in India, manually collecting orders, invoices, and payments. This information can be entered into an Net-based transaction system that can communicate with the U.S.-based buyers. At the Indian end of the network, "humanware" can substitute for hardware and software. The insight is to substitute capital for labor.

The Net has made the world smaller, but ecommerce is far from global. Islands of ecommerce activity thrive in the United States, Asia, and Europe, but the time is not far off when the marketplace will welcome the creation of the truly global ecommerce company. The world will soon be your factory, and the world will be your market.
  Back to News