The History of A Strategy Map Balanced Scorecard

A lot of people are intrigued to know what a strategy map balanced scorecard is. But most of them do not even know what it is for. They are only getting attracted to it since it has become a trend where business owners are encouraged to get. For this reason, a number of strategy maps are not working out. If you are a business owner, it is a good to know what this map is before getting one. A short history of the strategy map balanced scorecard can be dated back to 1987, when it was first introduced. In a way, this is a concept wherein the goals of a business are being enlisted with a visual representation. They are no longer limited to the imagination of the business owner as these maps are readily available to all the employees of the company.

Ever since its introduction, the strategy map balanced scorecard has been able to gain much popularity and is currently being used by almost all industries. But the real aim of this concept was due to the needs of its developers, Analog Devices, to determine if their business' goals are being met. Once the company was able to depict their business goals, they were able to determine the factors that were causing delay to achieving them. At the same time, they were able to come up with possible cause and effect methods in order to make sure their goals could be achieved. And this led onto the popularity of the concept.

Sadly though, a lot of companies focus too much on their financial issues instead of looking at the whole issue. They tend to forget that there are other factors that can help affect their business. Among these factors include their human capital, management, resources, and a lot of other things to consider. But thanks to the strategy map balanced scorecard, business owners are able to tackle each of these factors individually. As such, they are able to create plans of action on how these issues can be improved.

Since then, the popularity of the strategy map balanced scorecard has rapidly evolved. Today, it has even come to a point where there are so many different software programs that business owners can use. In addition, these software programs have been improved and made more effective in terms of measuring the business' performance.

Surely, the strategy map balanced scorecard has come a long way since it was first developed in the early 1990s. To what started as a concept, has largely evolved into an actual diagram. But before software programs were introduced, the balanced scorecard was done using various programs such as Word, Excel, and PowerPoint. Even though these programs were already effective, other people still wondered how they could disperse their data quickly and securely. Aside from that, business owners were also thinking of ways they could communicate and connect the strategy map with their employees in a timely manner. Thus, the software program for balanced scorecard was born.

To this day, hundreds and even thousands of companies are using these software programs. For this, they have been able to achieve their business goals that they initially thought was almost impossible to do.

If you are interested in Strategy Map Balanced Scorecard, check this web-site to learn more about BSC Strategy Map.

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Apple Strategy to Beat Microsoft

The Apple strategy to take proven platform technology into what appear to be unrelated industries with more broadly based business and consumer applications in each case usually takes the competition almost completely by surprise. To other Corporations, are these lessons transferable into their respective businesses? Most definitely.

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"Blue Ocean Strategy" Creating Uncontested Market Place [Book Review]

This book will make you think. Powerfully. This book will challenge you to create, yes, "create," as if you are digging it out not merely discovering a new ocean on the globe. And, yes, this is an implementation book, not just a theory book.

The authors give clear steps how to create uncontested market space. After reading this book, it is like a science, this "blue ocean strategy," not merely speculation for only the highly evolved business mind. It's a strategy book that can be applied, albeit with innovative thinking and willingness.

The idea behind a "blue ocean" can first be understood by understanding what is meant by the "red ocean" of today's shark-filled marketplace. The current market could be described that way, for all the red blood spilled, as one company competes with another, produces a similar product to another's, and differentiates based on price, quality, and service, all courting the same customers.

This is the "red ocean" of competition, winners and losers in the market. It's like Coke vs Pepsi multiplied and divided hundreds of times over. This, the Red Ocean.

A "blue ocean" is created by developing a product or service that satisfies a new customer with such innovation and at such a price that you have no real competition. You are not just differentiating, you are offering something unparalleled. The authors suggest practical ways to do this.

At the cornerstone of a blue ocean strategy is what the authors call, "value innovation." It's where your focus is not on beating out your competition but by providing such a unique leap in value for your customers that the competition becomes irrelevant and you gain dominance in this "blue ocean" market you have created.

Several examples of companies that did this are discussed in the book. Cirque du Soleil, a circus in Canada that because of its innovative changes to its format, attracted a whole new audience, gaining heaps in revenue growth while Barnum and all other circuses continue to tough it out in the Red Ocean.

Or NetJets, which created a hugely profitable blue ocean in the leasing of corporate jets, by pricing down and providing more service. Unbeatable. Unmatchable. In the past seven years, 57 other jet leasing companies have tried and all have failed.

Or Curves, a fitness franchise for women, you probably have seen one in your town, that exploded in growth by tapping into a market for women with the right cost basis, and space and time allotment that satisfied an unserved population of women. They created a blue ocean in the health and fitness arena.

This book not only describes what a blue ocean is but, significantly, this book provides concrete strategies for thinking about how to create one in your industry. Each chapter explains practical, useful steps that require you to deliberately and carefully implement to create for yourself a blue ocean.

It shows how to look beyond the traditional market boundaries to engage "non-customers." It explains how to see beyond the existing demand and touch untapped needs in the market. It walks you through the organizational hurdles to involve properly all levels of a company in successfully strategizing a blue ocean.

This book, indeed, is one you that will urge you to think. It pushes you to imagine. It emphasizes value innovation. Seriously, this is a book for leaders.

Book Review: "Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant" by W. Chan Kim and Renee Mauborgne

by Eugene Harnett

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Toyota Way 2001

Toyota is one of company that implement excellence Human Resource Model with comprehensive pattern in Toyota Way 2001. Every company may benchmark to Toyota to succeed its road to the competition and go out with success.

The insight of how Toyota manage its Human Resources presented below from Toyota website. Basically, Toyota put its Employee as valuable asset to make Toyota Way Happen. Toyota presented that:

"In order to carry out the Guiding Principles at Toyota Motor Corporation, in April 2001 Toyota adopted the Toyota Way 2001, an expression of the values and conduct guidelines that all employees should embrace. In order to promote the development of Global Toyota and the transfer of authority to local entities, Toyota's management philosophies, values and business methods, that previously had been implicit in Toyota's tradition, were codified. Based on the dual pillars of "Respect for People" and "Continuous Improvement," the following five key principles sum up the Toyota employee conduct guidelines: Challenge, Kaizen (improvement), Genchi Genbutsu (go and see), Respect, and Teamwork. In 2002, these policies were advanced further with the adoption of the Toyota Way for individual functions, including overseas sales, domestic sales, human resources, accounting, procurement, etc." (toyota.co.jp)

You can download supporting article here by click Toyota Human Resource Development

How to Deal With Employee's Turnover Rates

Turnover Management

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A turnover rate is the ratio of employees leaving the company (or some specific industry) in a given period. A company or industry has high turnover rate when the workers of that company tend to ditch their jobs more often than the employees of other companies (in the same industry). Some industries and jobs have high turnover rates because of the nature of work, however if your company has a high turnover rate than your competitor and you are not able to sustain your employees with you, there maybe something wrong with your policies. In case you don't pay attention, not only you will be loosing your good employees to your competitors, your business will also suffer from high costs of attracting, recruiting and training the new staff.

Atmosphere and working conditions:

At certain workplaces, you will feel the tense atmosphere as soon as you put your feet in, reason can be strict management or unrealistic targets. Being a manager, it is necessary to maintain some discipline but some managers overdo it by importing rules straight from the books of military. For many individuals (especially fresh graduates) it becomes really hard to adjust in this kind of atmosphere. Working conditions are linked with health related issues. Light, ventilation, air conditioning, heating systems and safety measures are some of the basic requisites. Sometimes, improving your high turnover can be as simple as loosening up some rules or dealing with some unhealthy environment issues.

Salary & Growth Opportunities:

Excessive work, no incentives and low salaries, these are all grounds for a high turnover rate. Employees are here to earn, and their morale is directly related to their income. If you are expecting them to give their 100 %, you should be giving back in form of good enough salaries. Your salary packages should be competitive if not the best in market. A good salary package will make up for many other factors, but if the salaries are low from the market standards, nothing can hold the employees for long. Similarly, motivating employees by providing growth opportunities is also necessary.

Choosing the right candidate and the nature of the work:

If your recruitment and hiring process is flawed, you are meant to have a high turnover. Many small businesses, in a hurry to fill out vacant positions, hire some unskilled individuals, thinking that he/she will learn the traits with the passage of time. Such hiring is nothing but wastage of time, both for employee and employer. The interviewee should have complete knowledge of the skills required for some particular job, and the successful candidate should be having most of them, if not all.

Sometimes the reason for high turnover is the nature of work, for example the jobs that require night shifts or excessive late sittings. These types of jobs are not suitable for everyone and they are supposed to have high turnover rates than others. These are some of the common reasons, apart from looking into these areas; you can approach your employees to get the exact idea about their reservations.

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Toyota's 14 Principles : Key Success Factor

Many things to be learnt at Toyota. You can download the toyota 14 principles pdf here and read the analysis below from ezine.

Toyota is clearly a dominate leader in automobile manufacturing today. The principles employed at every level of the company have certainly led to a standard of quality that no one in the automotive industry can argue with. What these principles are and how they are implemented within the Toyota Corporation can certainly help the automakers of the United States and indeed the world achieve the same success.

When these 14 principles are listed and compared with some of the strategies that United States automakers have employed, it becomes clear why Toyota has succeeded as it has.

The 14 principles are known as the "Toyota Way" and are listed below:

1. Base your management decisions on long term philosophies, even at the expense of short term goals

2. Create continuous process flow to bring problems to the surface

3. Use pull systems to avoid over production

4. Level out the workload

5. Build in a method to stop and fix problems when they are discovered, this ensures quality the first time

6. Standardized tasks provide the foundation for continuous improvement and employee empowerment

7. Use visual control so no problems are hidden

8. Use only reliable, thoroughly tested technology that serves you people and processes

9. Grow leaders who thoroughly understand the work, live the philosophy and can and do teach it to others

10. Develop exceptional people and teams who follow your company's philosophy

11. Respect your extended network of partners and suppliers by challenging them and helping them improve

12. Go and see for yourself so that you completely understand the situation

13. Make decisions slowly by consensus, thoroughly consider all options; implement decisions rapidly

14. Become a learning organization through relentless self examination and continuous improvement

Just by a cursory examination of these fourteen principles, it is easy to understand why Toyota has experienced such a high level of success. The overall process does not allow for overlooking, either deliberately or by accident problems that exist anywhere in the chain of production. Every Toyota employee involved in the manufacturing process has the power to stop production if they see an issue developing. Just this one aspect alone works to ensure that quality vehicles are produced along the assembly line. The twelfth principle: go and see supports and encourages management to stay in touch with design and manufacturing concepts so that they stay in touch with what is actually occurring on the production floor. Number 13 inhibits the business as usual style that can strangle even the most creative of companies. By always encouraging employees to thing outside the box and bring the suggestions to upper level management, fresh new ideas are constantly stimulating innovative and original designs. This ensures that the product never goes stale.

By spending more time up front developing the correct process, the long-term goals of producing exciting affordable qualities vehicles is recognized. Unfortunately, for U.S. automakers, it many times seems that that they approach the production concept from the opposite direction. This might explain why Toyota has pulled away from United States as a leader in the car manufacturing industry. The philosophy appears to have worked well so far and one wonders why someone in America has not had the bright idea to adopt these strategies.

Could it possibly be that many Americans have grown fat and lazy with the early successes achieved by our ancestors? Let us hope that our philosophy as a nation changes quickly, for if it does not, we might find ourselves going the same way as our automotive industry. That is a scary thought indeed.

Collaborative Advantage

Alliance between companies is a fact of business today. Even it becomes a key corporate asset and gives potential benefit called collaborative advantage. A well developed ability to create and sustain fruitful collaborations gives companies a significant competitive leg up.

There are five phases into alliances for general. First, courtship-two companies meet, are attracted, and discover their compatibility. The second, engagement-hey draw up plans and close the deal. Phase three, the newly partnered companies discover they different ideas about how business should operate. Phase four, the partners devise mechanisms for bridging those differences and develop techniques for getting along. And finally phase five, each company discovers that it has changed internally as a result of its accommodation to the ongoing collaboration.

Building a successful alliance depends on maintaining a careful balance between personal and the institutional. Like a family, alliance gives way to each partner to live together in day-to-day operation include its uncertainty and unanticipated condition. Thus, each partner should adjust its cultural and operational differences, learn about the differences early and take them into account as events unfold. Active collaborations need for bridging organizational and interpersonal differences and achieving real value from the partnership. Management must be sensitive to political, cultural, organizational and human issues.

Several criteria to meet best relationships are: 1. Strong and something value of each partners. 2. Fit major strategic objectives of the partners. 3. Complementary of assets and skills. 4. Invest each other, means tangible signs of long term commitment. 5. Share information each other. 6. Linkages and shared ways of operating so they can work together smoothly. 7. Formal status, clear responsibilities and decision process. 8. The partners behave toward each other in honorable ways that justify and enhance mutual trust.

Environmental Management: A New Industrial Revolution

The need to protect environment and conserve natural resources has driven industrial to create environmental sustainability. Environmental effects is now become primary concern of many business of how to manage them effectively and efficiently. Companies are now shifting rapidly from a strategy of regulatory compliance to one of proactive environmental management. This kind of thinking has gone through three stages: 1. the widespread business practice in the 1960s and 1970s of coping with environmental crises as they occurred and of attempting to control the resulting damage. 2. The reactive mode of government environmental regulations and minimizing the cost of compliance. 3. The proactive environment strategy through which corporations began to anticipate the environmental effects of their operations.

Proactive environmental management includes combination of five major approaches:

1. Waste minimization and prevention. It requires the prevention of pollution rather than the control of wastes at the end of the pipeline, through new approaches of production or technology.
2. Demand side management. It is an approach to pollution prevention that originated in the utility industry.
3. Design for environment. The objective is reducing reprocessing costs and returns products to market more quickly and economically.
4. Product stewardship. It is a practice that reduces environmental risks or problems resulting from design, manufacturing, distribution, use, or disposal of products.
5. Full-cost (environmental) accounting. This method identifies and quantifies environmental performance costs for the product, process, or project.

Corporations that do not adopt proactive approaches to environmental management will simply not be competitive in the global economy of 21^st century. Thus, pollution prevention must be adopted for all-small, medium, large corporations, to satisfy customers’ needs, saves money, and profitable business opportunities. Governments, universities, environmental partnerships, and industry association must also work together to seek solutions for the environment problems.

Beyond Greening: Strategies for a sustainable World

The ways companies do their business create great impact on environment. This problems challenge every player on business to develop a sustainable global economy: an economy that the planet is capable of supporting indefinitely. Strict government regulations are issued, and more and more companies are “going green” as they realize that they can reduce pollution and increase profits simultaneously.

There are three stages of environmental strategy that guide companies into sustainability:

a. Pollution prevention. This first step is to make the shift from pollution control to pollution prevention. Pollution control means cleaning up waste after it has been created. Pollution prevention focuses on minimizing or eliminating waste before it is created.

b. Product stewardship. Product stewardship focuses on minimizing not only pollution from manufacturing but also all environmental impacts associated with the full life cycle of a product. In this stage, companies need to examine all the effect that a product could have on the environment, includes full assessment of all inputs to the product and how customers use and dispose of it.

c. Clean technology. The next stage is plan for and invests technology that is environmentally sustainable.

Overall strategies for sustainable environment needs clear framework to give direction to those activities. Thus, companies need to create a vision of a sustainability showing the way products and services must evolve and what new competencies will be needed to get there. Moreover, companies’ clear and fully integrated environmental strategies should also shape the companies’ relationship to customers, suppliers, other companies, policymakers, and all its stakeholders.

Companies must educate customers to prefer products and services that are consistent with sustainability, not just to market its product. The reason is the responsibility for ensuring a sustainable world falls largely on the shoulders of world’s enterprise, public policy, and individual consumption patterns by consumer. Corporations then can and should lead the way to helping to shape public policy maker and driving changes in consumers’ behavior.

Strategy, Value Innovation, and the Knowledge Economy

Competition has occupied the center of strategic thinking for the past twenty years. This approach results an unintended effects, that are: imitative approach to the market, the companies act reactively, and understanding of emerging mass markets and changing customer demands becomes bazy. But high growth and successful companies view this approach was irrelevant. They pursue value innovation which is not about striving to out perform the competition. These companies offer fundamentally new and superior buyer value in existing markets and by enabling quantum leap in buyer value to create new markets. They went beyond competing in existing markets to expanding the demand side of the economy.

Value innovation links innovation to what the mass of buyers value. High growth companies offer customers with radically superior value at accessible price level to the mass buyers.

Successful value innovators using two different approaches. First, strategic pricing for demand creation, leads to high volume and rapidly establishes a powerful brand reputation. Second, target costing for profit creation, leads to attractive profit margins and a cost structure that is hard for potential followers to match.

To make value innovation happen, top management must clearly communicate the company’s commitment to value innovation as the key strategic component by articulating its underlying logic. Then, when putting value innovation strategies into action, companies must cultivate a corporate culture conducive to willing collaboration. Companies must pursue its individuals to share their best ideas and knowledge, because these are the primary inputs for value innovation. Fairness in the process of making and executing decisions must also be engaged, because fair process and value innovation create a positively reinforcing cycle.

Value innovation is the essence of strategy in the knowledge economy. By implementing value innovation, strategies of cost leadership and differentiation are likely to succeed. But, it is also important to note that value innovators must shifting their strategy focus, from conventional to value innovation focus.

Maximizing Regional Opportunities

Going global is now popular strategies among companies. For many national companies’ executives, they should include global strategies among their strategic choice. But it is not easy to set up global strategies especially for our national companies. Companies need smart strategy which has considered deep understanding of their own product categories and the geographic arenas they operate in.

Indonesian manufacturers were already facing the prospect of a more difficult environment due to globalization of manufacturing production and liberalization. In addition, low competitiveness applies to Indonesian condition since the slow-down of the manufacturing sector in 1993-1997. This challenge creates difficulties for national manufacturers to compete in the global arena.

How successful a company is depends crucially on how intelligent it is at observing and interpreting the dynamic world in which it operates (Gupta and Govindarajan, 2002). It makes companies need to take rigorous look at where they stand relative in the industry. It has several purposes, first, take a different view of companies in the industry and rigorous understanding about interdependencies with other sector. Second, it would provide potential opportunities and weaknesses which could be the evident later. Companies can used their understanding to creates strategic choice for the companies.

Economic experts have predicted that the 21^st century will be the Asia-Pacific century: forecasts say that in 2020, the year the total free trade begins, almost 70 percent of the world’s GNP will be circulating in the Asia-Pacific region (Ciptono, 2005). For local champion, it is the time to expand their market, creating early competitive advantage in regional first. In other word, global strategy may start at a regional level.

But the definition of "region" often changes in response to market conditions and, indeed, to a company's own strategic decisions (Ghemawat, 2003). Thus, companies need to consider what they mean by region. According to Indonesia, common understanding of region is based on geographic view, that is ASEAN-south east continent and Asia Pacific region in which Indonesia take an important roles inside.

Maximizing regional opportunities has several benefits for Indonesian companies. First, it has many similarities with national condition in cultural, economic, political, and administrative. Thus, expanding into regional market become achievable and easier than going global directly. Companies would not confuse to decide whether standardize or localize product because regional market is much more similar. Regional expansion creates business model easier—how much to standardize from country to country versus how much to localize to respond to local differences.

Second, starting regional market as the early step for global strategy is supported with the free trade arrangement. As we know, by the time AFTA is implemented, South East Asian market will be integrated. The opportunities create here if the companies start to expand the markets now.

In many if not most cases, companies see globalization as a matter of taking a superior (by assumption) business model and extending it geographically, with necessary modifications, to maximize the firm's economies of scale (Ghemawat, 2003). There are several national companies that create success in expanding into regional market. They are even have new motto in facing globalization challenge, that is “go regional, act local”. This success story is expected to inspire other local champion to start enter the global market through regional strategy.

Global market is a very big opportunities. Maximizing its potential need smart approach in choosing what’s the first move. Regional strategy is one of the right choices for national companies which possess some benefits.

Gupta and Govindarajan, 2002. Converting Global Presence into Global Competitive Advantage. Academy of Management Executive. Vol. 15 No. 2

Ciptono, 2005. Towards A New Indonesia: Total Quality of Indonesian Management-The Red and White Management. Paper on International Seminar, 50 Anniversary Faculty of Economics, Gadjah Mada University.

Ghemawat, Pankaj. 2003. "The Forgotten Strategy," Harvard Business Review, Vol. 81, No. 11, November

Ghemawat, Pankaj. 2005. "Regional Strategies for Global Leadership," Harvard Business Review, Vol. 83, No. 12, December 2005

National Cultural Strategy

Globalization brings Indonesia the need to set up national strategy which leads us toward competitive advantage rather than comparative advantage. The strategy includes cultural aspect. Culture becomes important attention in national strategy because it is the glue of Indonesia effort toward competitiveness. It can link many dimensions of Indonesian’s lives. In addition, Cultural strategy is important because it is about how Indonesia is perceived abroad. Cultural development contributes to the image of Indonesia, thus supports the overall development program. It both reflects and shapes our society. Cultural strategy is also needed because we should build capability to our culture to adopt, adapt, and innovate the international influences.

Competitive strategy is about being different (Porter, 1996). Developing cultural strategy needs framework of action, which will underpin the expected cultural life in the future. Thus, to strategize our culture, we need to explore our unique value and heritage to set up national cultural strategy which fosters national innovation and creativity. The blue print of national cultural strategy should embrace all people, inclusive, and belongs to everyone.

There are several elements to be considered as core objectives in arranging Indonesian cultural strategy. First, we should consider innovation and creativity. We could develop the conditions in which creativity and innovation can flourish in all sectors of our life, including business, schools, and daily lives.

Innovation is the creativity in action. Creativity could become our national resource, vital to the individual's quality of life and to society's well being. Fostering creativity among people would give potential growth into creative industry. Creative industry is industrial sector which contains creativity as the concept.

Second, we should maximize the role of educational institution as the key for cultural enhancement. Schools are the center of creativity. Having educated people, we would realize culture’s potential contribution to Indonesian economy. Reflecting Indonesia’s present condition, education doesn’t become priority of government budget. Government even neglects the law which regulates 20% minimum allocation of the budget.

Culture is still needed to be included in the educational curriculum. Arts and other cultural expressions could enrich everybody’s lives, thus should be embedded in the daily teaching process.

The next attention is partnership among parties in national lives to strategizing cultural aspect. The parties are government, culture practitioner, and public. Blue print for national cultural strategy should declare clearly what is the role of each party.

The essence of government’s role is creating conducive environment to support and encourage the development of desired culture. National cultural treasures and traditions must be conserved and promoted both locally and globally. Government commitment

Local authorities held important roles here. Indonesia has 33 provinces that possess its own culture. Local authorities, means “Gubernur” and “Bupati/Wali Kota” must be engaged in the national cultural development. They are also hold strategic roles in initiating any cooperation with private sector.

Cultural practitioners must also view culture as one of national potential to be enhanced in the global era. They must also realize that international influences could become big threats to the existence of national culture.

Finally, public engagement is the edge for cultural strategy. Indonesian efforts to conserve, enhance, and promote national culture is depend also in the public hand. Lack of participation from public would not makes the objectives couldn’t be reached. The expected role of public is also controlling the implementation of the blue print for national cultural strategy.

Read also: Porter, Michael E.1996. What is Strategy?. Harvard Business Review

Global Strategy: Conceptual Framework

Global strategy is the way a business competes in the global market. The strategy plays vital role in determining the performance of a business in the global market. There are numerous prescriptions for business facing global competition. These prescription describe what is global strategy, why, and how the global strategy be implemented.

The general framework for global strategy concepts are: first, a global strategy is required whenever there are important interdependencies among a business’s competitive position in different countries. Second, the sources of these interdependencies can be identified.

Third, the critical issues that a global strategy must address include the configuration and coordination of the business’s world activities. Fourth, the organization structure should be aligned with and derived from the global strategy.

There are two theoretical approaches to global strategy. Industrial organization-based theory describe that competitive advantage is viewed as a position of superior performance that a business attains through offering undifferentiated products at low prices or differentiated products for customers are willing to pay a price premium.

Second is resource-based theory, which said that competitive advantage is residing in the inherent heterogeneity of the immobile strategic resources which business control. The two theoretical perspectives must be linked together to provide a solid theoretical foundation to study global strategy and performance.

Global strategy is not a simple choice of product standardization, standardized marketing or concentrated manufacturing. Rather, it is multifaceted course of action involving six major dimensions; include global market participation, product standardization, uniform marketing, integrated competitive moves, co-ordination of value adding activities, and concentration of value adding activities.

To implement global strategy, as managerial implications, managers must formulate the multidimensional and coherent set of actions. Specifically, managers must develop an organization-wide market orientation, be committed to global markets, nurture a kind of organization culture that is conducive to global strategy conception and implementation, create organizational capabilities, and accumulate international experience.

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Global Mindset

The economic landscape of the world is changing rapidly. It is becoming increasingly global.

In the world which is going flat, companies need to adjust its mindset into what we call global mindset. Global mindset means high differentiation and high integration in knowledge structure. Global mindset is one that combines an openness to and awareness of diversity across cultures and markets with a propensity and ability to synthesize across this diversity.

The value of a global mindset lies in enabling the company to combine speed with accurate response, and the benefit of global mindset derives from the fact that, while the company has a grasp of and insight into the needs of the local market, it is also able to build cognitive bridges across these needs between these needs and the company’s own global experience and capabilities. The key word of global mindset is cultivation, and the shape of mindset is our interpretations of the world around us.

Then, how an individual or team of managers cultivates self-consciousness regarding their current market? The first approach is to ask managers or teams to articulate their beliefs about the subject domain. Second approach is to conduct a comparative analysis of how different people or companies appear to interpret the same reality.

In other side, companies can cultivate exposure to and increase knowledge of diverse cultures and markets in two ways. First, facilitate such knowledge building at the level of individuals. Second, companies should build diversity in the composition of the people making up the company.

Both approaches are essential for every company, and complement each other. The first focuses on building cognitive diversity inside the mindsets of individuals, and the next focuses on assembling a diverse knowledge base across the organization’s members.

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Converting Global Presence into Global Competitive Advantage

Global presence doesn’t ensure companies into global competitive advantage. Thus, companies need to transform global presence into global competitive advantage. It requires systematic analysis, purposeful thinking, and careful orchestration, and is never ending process. Companies must exploit five value creation opportunities, which are:

1. Adapting to local market differences. By responding to country-level heterogeneity, companies can reap benefits in three fundamental areas: Increased market share, improved price realization, and neutralizing local competitors.

2. Exploiting economies of global scale. The potential benefits of economies of scale can appear in various ways: spreading fixed costs, pooling purchasing power, and creating critical mass.

3. Exploiting economies of global scope. Global scope refers to the multiplicity of regions and countries in which company markets its products or services. In fulfilling the needs of multilocation global customers, companies have two potential avenues through which to turn global scope into global competitive advantage: providing coordinated services and leveraging their market power.

Tapping he optimal locations for activities and resources. By optimizing the location for every activity in the value chain, companies can yield one or more of three strategic benefits: performance enhancement, cost reduction, and risk reduction.

Maximizing knowledge transfer across locations. Locally created knowledge can yield strategic benefits to the global enterprise, ranging from faster product and process innovation, lower cost of innovation, and reduced risk of competitive preemption.

Creating global competitive advantage requires several actions as implication. They must evaluate the optimality of the global network for each activity in the value chain along three dimensions: activity architecture, world-class competencies for each facility, and frictionless coordination between similar activities; between complimentary activities. Based on this evaluation, firms should then design and execute actions to eliminate or at least reduce the suboptimalities.

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