Group 8, Team 7: Jolter Metz, Ben Ploehn

19.10.2011

Havard Business Review: The Cosmopolitan Corporation By Jolter Pieter Metz and Ben Jakob Ploehn
Teacher: A. Kiss

Introduction:
Ben Ploehn: S2150441 Jolter Metz: S1923986

Group 8, Team 7: Jolter Metz, Ben Ploehn

19.10.2011

The article The Cosmopolitan Corporation by Pankaj Ghemawat is about multinational enterprise behaviour. Furthermore, Ghemawat explains the elements and exigencies a corporation has to consider in international business. The article was published on May 2011 in the Harvard Business Review. Summary: Firstly Ghemawat begins with explaining the most common business behaviour of US companies. Stuck between national boundaries and an open globalized most US companies prefer to do businesses in their home market. The few companies, which decide to go abroad favour choosing countries, which are geographically close or culturally or linguistically related to the home country. He supports his statement with three trade maps showing Indias main export destinations for goods and IT services. The reason for this common behaviour is the facilitated adaption of the company in the host country. Only companies from small attempt to overcome cultural differences by considering the characteristics of the host countrys market. Ghemawat then goes over to describe the ways companies can create value abroad. These ways are described as the AAA strategies* of adaption, aggregation and arbitrage. At this juncture he emphasizes te importance of adaption. In his view, companies have to consider diversity of foreign markets in order to be successful internationally. In addition, Ghemawat describes the decisions a cosmopolitan corporation has to make. These decisions refer to the creation of an appropriate supply chain, the location of innovation centres and choosing managers of different nationalities. Making a wrong decision may cause serious problems for the corporation. Moreover, Ghemawat describes the creation and skills of an effective cosmopolitan leader. The characteristics of a skilled international manager should be the understanding about the a host countrys culture, experience in working and living abroad and knowledge about intercultural networks. Lastly assessment tools should be available to measure a managers skills and knowledge. Finally Ghemawat ends wit the conclusion that we live in a semi globalized world*. In this world the current system of rooted cosmopolitism* is the more useful and effective than living in a world without borders.

Evaluation: In his article Pankaj Ghemawat describes the the challenges of international business and how MNEs handle the current situation. The report is very well structured. By the right order and a perfect linking of the subtopics the reader gets a good orientation in this complex topic and .

Ben Ploehn: S2150441

Jolter Metz: S1923986

Group 8, Team 7: Jolter Metz, Ben Ploehn

19.10.2011

Another plus of the article is the the explanation of the three strategies through which a company can create value in a foreign market. After rather getting the impression that the current trade and busniness bahaviour is characterized by protectionism this suptopic stays as an encouragement for companies to go abroad. Moreover, with emphazising adaption as the most important strategy Ghemawat underlines the meaning of cultural diversity and indirectly encourages CEOs of MNEs to go away from their old strategy to just invest in countries with similar culture. Finally with describing the characteristics for international managers Ghemawat clariefies the necessity of the required skills in order to be successful in a foreign country. However, the article also has some critical points. To begin with Ghemawat describes the business behaviour of US companies as operating mostly just on the own local market. Then he goes over explaining that border crossing activities of American MNEs mostly take place in culturally or linguistically related countries. To illustrate his assumption, however, Ghemawat uses a trade map of India which leads the reader to doubt his statement. Moreover, a comparison to the trade actives and business behaviour of a small industrial nation, such as the Netherlands, is missing. It is just briefly mentioned that small countries try to adapt to cultural differences. Detailed facts, though, are missing, leading to a fractional view of the whole topic. However, the article is related to international business because it describes the challenge of working in foreign markets and the required skills for a manager to be successful in a foreign country. Conclusion: In summary the article gives a very detailed overview about the challenges cosmopolitan corporations are currently facing very well. Moreover, it describes necessities that have to be considered to overcome a host countrys diversity and the required conditions and skills to achieve this very detailed. The only downside of the article is the sometimes displeased acquisition of information in form of numbers and the comparison to business behaviour in small countries. Finally we have three questions to the author: 1. 2. 3. What is the futures tendency of business behaviour? What of the AAA-Strategy is mostly used by MNEs? Will upcoming financial crisis lead to total protectionism? Quoting and references: *Ghemawat, P. 2011. The Cosmopolitan Corporation. Harvard Business Review : 97-99
Ben Ploehn: S2150441 Jolter Metz: S1923986

Group 8, Team 7: Jolter Metz, Ben Ploehn

19.10.2011

Ben Ploehn: S2150441

Jolter Metz: S1923986