Emerging retail formats in india

Emerging retail formats in india Retailing has been defined as business activities involved in selling goods and services to consumers for their personal, family or household use (Berman and Evans, 2001). Although retailing has been around for millennia, the 20th century witnessed a lot of change in the retail sector, especially in the developed countries. Modern formats such as department stores, discount stores, supermarkets, convenience stores, fast food outlets, speciality stores, warehouse retailers and hypermarkets have emerged. Retailing has become more organized and chain stores have been growing at the expense of independent shops. The chains are utilizing sophisticated information technology and communication to manage their operations and have grown rapidly not only within their home countries like US, UK, France, Germany and Holland but to other developed countries. Walmart Stores, the US retailer, was recognized as the largest firm in terms of sales in 2002 in Fortune magazines list of 500 largest globa l firms. Modern retail formats have also spread beyond developed countries and are becoming more important in the NICs and developing countries. 3 The emergence of new formats and the evolution of modern retail in India has attracted attention in recent years. The business press in India has carried several articles and news items in the last three years about the modern formats (Shukla 2001; Anand Rajshekhar, 2001; Bhattacharjee, 2001). The consulting firm KSA Technopak has organized retail meetings or summits in major metros which have witnessed participation from major domestic and international retailers, and also from manufacturers. Venugopal (2001), has discussed the census studies of retail outlets that the market research firm ORG MARG conducted in the 1990s. This census provided data and estimates on a number of parameters relating to Indian retail such as number and type of outlets and growth of outlets over time separately for urban and rural areas. Due to these reports and activities, there is good deal of information available about what is happening in Indian retail. However Indian retailing has received sparse a ttention by way of academic research with the exception of a few articles in academic journals and some case studies. Purpose of the study. The purpose of this report is to develop an understanding of the factors influencing the evolution of modern formats in Indian retailing Objective of the study The report investigates modern retail developments and growth of modern formats in this country. The challenges and opportunities available to the retailers to succeed in this country. Literature review: Indian retailing is undergoing a process of evolution and is poised to undergo dramatic transformation. The retail sector employs over 8% of the national workforce but is characterized by a high degree of fragmentation with over 5 million outlets, 96% of whom are very small with an area of less than 50 m2 (Aggarwal, 2000). The retail universe more than doubled between 1978 and 1996 and the number of outlets per 1000 people at an All India level, increased from 3.7 in 1978 to 5.6 in 1996. For the urban sector alone, the shop density increased from 4 per 1000 people in 1978 to 7.6 per 1000 people in 1996 (Venugopal, 2001). Because of their small size, Indian retailers have very little bargaining power with manufacturers and perform only a few of the flows in marketing channels unlike in the case of retailers in developed countries, ( Sarma , 2000). The corner grocer or the kirana store is a key element in the retail in India due to the housewifes unwillingness to go long distances for purchasing daily needs. An empirical study was carried out by Sinha et al ( 2002) to identify factors that influenced consumers choice of a store. Although convenience and merchandise were the two most important reasons for choosing a store, the choice criteria varied across product categories. Convenience was indicated by consumers as the most important reason in the choice of groceries and fruit outlets, chemists and lifestyle items while merchandise was indicated as the most important in durables, books and apparel. The traditional formats like hawkers, grocers and paan shops co exist with modern formats like supermarkets, and non store retailing channels such as multi level marketing and teleshopping. Example of modern formats include department stores like Akbarallys , supermarkets like Food World, franchise stores like Van Heusen and Lee, discount stores like Subhiksha, shop-in-shops, factory outlets and service retailers ( Nathan , 2001). Modern stores tend to be larger, carry more stock keeping units have a self service format and an experiential ambience. Modern formats also tend to have higher levels of sales per unit of space, stock turnover and gross margin but lower levels of net margin as compared to traditional formats (Radhakrishnan, 2003). Modernisation in retail formats is likely to happen quicker in categories like Dry groceries, electronics, Mens apparel, Books, Music. Some reshaping and adaptation my also happen in Fresh groceries, Womens apparel, fast food, and personal care p roducts (Fernandes et al, 2000). In recent years, there has been a slow spread of retail chains in some formats like supermarkets, department stores, malls and discount stores. Factors facilitating the spread of chains are the availability of quality products at lower prices, improved shopping standards, convenient shopping and display, and blending of shopping withentertainment, and the entry of industrial houses like Goenkas, Rahejas, Piramals and Tatas into retailing ( Ramaswamy and Namakumari, 2002). However formats are not easily scalable across the country. Several companies have found that it is not easy to expand beyond some regions and cities as evident from the examples of Margin Free Market and Foodworld, which are active only in a few states or cities. Affordable real estate prices and availability of sufficient number of economically well off households in the catchment area are critical requirements that will determine new store viability and thus the possibility of further expansion (Anand and Rajashekhar, 2001). According to Rao (2001), foreign direct investment in the retail sector in India, although not yet permitted by government, is desirable, as it would improve productivity and increase competitiveness. New stores will introduce efficiency. Customers also gain as prices in the new stores tend to be lower. The consequences of modernization in India may be somewhat different due to lower purchasing power and the new stores may cater to only to branded products aimed at upper income segments. However it will be wise for old style stores to join together into wholesale and retail groups to improve bargaining power as experience in developed markets such as UK has shown that the modernization in retail has led to the decline of independent mom and pop stores. The need for a fresh perspective while developing theories to explain the new developments has been stressed by Bennett et al (1998). The Indian retail environment is witnessing several changes on the demand side due to increased per capita income, changing lifestyle and increased product availability. Experience of retailing in US shows that existing theories of retail development based on changing consumer needs, are inadequate to explain new developments. In developed markets, there has been a power shift with power moving from manufacturers towards retailers. The strategies used by retailers to wrest power include the development of retailers own brands, and the introduction of slotting allowances which necessitate payments by manufacturers to retailers for providing shelf space for new products. Retailers have also used technology effectively to obtain usable information about consumer buying patterns. The increased power of retailers has led to the introduction of new tactics b y manufacturers such as everyday low pricing, partnerships with retailers and increased use of direct marketing methods. Because of these issues, a supply side perspective needs to be fused with the demand side in developing theories for explaining modernization in retail. Research design: In order to fulfill the objectives of the study primary as well as secondary data have been collected to analyze the trends in modern retail formats meticulously. To analyze the emerging trends in shoppers behavior 30 shop keepers from 6 Malls operating in Ahmedabad will be interviewed. And for the rest part of the country secondary data published by different research institutions like TSMG, CSSO, Future Group, NCAER etc have been considered to draw the key inferences.

Economic development Essay

Economic development and economic growth are both indicators of the economic position of the country. Economic growth is the growth in gross domestic product and economic development is related to growth in the standard of living and poverty. As you can see economic growth and economic development are not the same thing, economic development is far more than just growth in GDP as it involves indicators that are not purely economically related. However economic growth is an indicator of economic development but there are also several other factors that represent economic development. These indicators are; life expectancy at birth, infant mortality rate, daily calorie supply per capita, adult literacy rate, number of doctors per 1000 people, average years of schooling, availability of clean water, freedom of press, immunisation rates and levels of discrimination. As you can see these are generally not economic indicators but when they are combined they form the economic development figure. There are fifteen barriers to economic development, the first of these being a lack of physical capital. Lack physical capital is a significant barrier to the development of a country for several reasons. There is already a shortage of capital that further leads to less capital being produced; this creates significant problems for developing countries. In these countries the income levels are low leading to low savings and therefore little money for investment in capital. This lack of capital furthers the low productivity therefore the employment remains low. This also leads to a lack of demand for goods and services the low demand means that less needs to be produced therefore less capital needs to be produced. This then forces the country into a cycle of underdevelopment. This consequently creates a barrier for the country to develop. An example of this is in most less developed countries where they are in constant times of war and civil unrest. Their capital is destroyed through war making it difficult for the country to produce more capital. Also, Sierra Leone, the worlds least developed country, as shown by the human development index, has a GDP per capita of US$159 this creates significant problems for the economy and its development. A lack of human capital is the next barrier to development. This barrier is created through a lack of education and training of the population. It also relates to the general heath and wellbeing of the population. If the labour-force are getting sick then they are unable to work and therefore decreasing the labour capital. A current example of this situation is in South Africa. In South Africa the micro-economic impact of AIDS is very serious and is getting worse. Among skilled workers HIV prevalence is expected to peak between a fifth and a quarter percent by the year 2000, which is consequently depleting the number of skilled workers creating the lack of capital development barrier. These problems are also leading to a rise in insurance bills and the costs of health benefits rise. This therefore diverts government savings to pay for health care and as a result the availability of funds for investment will fall. AIDS is predicted to knock 0.3 to 0.4 percent off the annual growth rate. As you can see this is a severe barrier to development in these less developed countries. A strategy to this barrier is human resource development. The next barrier to development is a lack of savings. This also causes low levels of investment due to the low income leading to low savings. This low level of savings is also caused by several other reasons such as; poorly developed financial markets, holding of savings in traditional non-money forms, the purchase of unnecessary luxury items, cheap family labour reducing the incentive to save for investment and the general indebtedness of the population. The low incentive to reinvest profits by businesses also reduces the savings. Budget deficits by the government to make up for the low taxation revenue are also decreasing the amount being saved. When there is a lack of savings caused by any of these causes it forces the need to borrow form overseas that consequently leads to problems with the balance of payments. An example of lack of savings exists in Nigeria. In Nigeria there are severe problems with their currency. These begin with significant fraud problems also the majority of trading is done with cash in which until recently the currency did not exceed the equivalent of 50 cents. The next problem is that they don’t believe in banks, the only use of banks is to exchange foreign currencies for tourists, which leads to a lack of funds for investments. Also, Local traders keep all working capital stuffed in coca jars, as they believe business opportunities will disappear in the time it takes to make a withdrawal. Banks do not allow credit due to the fear of not being repaid. All of these factors contribute to a large barrier to development simply due to a lack of savings. This could be solved through improving the financial system. Another barrier to development is a lack of taxation revenue. A lack of taxation creates barriers as it means the government has little finances to use on economic development. The high unemployment, very low-income levels and difficulties in tax collection cause this lack of tax revenue. The government is then forced to collect tax mainly from customs duties, sales taxes and excises. These taxes can prove to be very inflationary and are also regressive. Another problem with these taxes is that they discourage investment and the creation of employment. Nigeria also has a problem with the collection of taxation. Most Nigerians that can afford to avoid paying taxes, as they believe that their money will be flinched by the corrupt government. This creates severe problems for the country, as there is no money for the government to use in investment to promote economic development. Improving the financial system will also help solve this barrier. The next barrier to entry is a lack of infrastructure. Less developed countries rarely have a sufficient supply of necessities such as roads, ports, sewerage, power schools or water- facilities etc. The main reason that this infrastructure is not being made is that the government simply cannot raise the funds to finance them due to their lack of taxation revenue. Another reason maybe that the government has chosen to finance defence spending or if they are in time of war, in which most LCD’s are. A lack of infrastructure restricts the free flow of goods and services and reduces the productivity of the labour force that further restricts the economic development of the country. In Africa infrastructure is very underdeveloped compared to the other less developed regions. They have 6 phone lines for every 1000 people compared to the average of 54 for other developing regions. Also their power supply is far less than the average of 300kw per 1000 peoples with 80kw this significant ly stops their development. In Nigeria there are serious problems with infrastructure causing business uncertainty. Telephones rarely work and the electric comes in periodic vengeful surges. Nigerian firms, particularly the state-owned ones due to the lack of taxation, devote little effort into maintaining their infrastructure and it therefore ends up breaking down. Reliable firms are so hard to come by that firms barter contacts: we’ll let you share the electricity from our generator if you can help us find spare parts for it. Firms wanting to set up in Nigeria face the problem known locally as BYOI (bring your own infrastructure) this shows how much of a problem infrastructure is in Nigeria. A lack of infrastructure could be solved in many ways such as encouraging enterprise, human resource development or improving the financial system. A lack of entrepreneurs is another barrier to economic development. Enterprise is essential in order for development to occur, as it is one of the key factors to production. In the less developed countries there tens to be a lack of entrepreneurs for several reasons. The first of these is the fact that there is a limited opportunity to make a profit, due to the lack of demand. The next reason is that the businesses not easily financed due to the low level of savings. The lack of infrastructure available also distracts these entrepreneurs. Another reason to the lack of entrepreneurs is that cultural beliefs often place little importance on monetary gain and entrepreneurs are thus given little status. The number of entrepreneurs is also reduced by the lack of education in these countries. The final reason is that it is risky for an entrepreneur due to the political and economic instability. An example of a lack of entrepreneurs is also in Nigeria as it closely relates to the lack of the infrastructure. The lack of infrastructure adds at least 25 percent onto a firms operating costs if it choses to set up in Nigeria, this is a significant deterrent for firms to set up and should be solved if the county wants to achieve economic development. A strategy that could be adopted to help this situation is encouraging enterprise. The next barrier to economic development is a lack of technology. There are several reasons why these less developed countries are not more technologically advanced. The first reason being that most new technology will involve some investment in capital that is lacking in these less developed countries. Also another problem is that the new technology will need skilled labour to operate it but skilled labour is also of shortage in a LCD. The next reason is that companies don’t really want to adopt labour saving technology when they already have cheap labour and there are high unemployment rates. The final reason that there is a lack of technology is that new technology is used to facilitate the achievement of economies of scale and the small markets in LCD’s reduce the incentive to mass-produce. The governments however, have managed to encourage technology into these LCD’s and most currently use modern technology that compliments the labour so workers maintain their jobs. A lot of the modern technology used in these counties is generally used in the foreign owned industries where they mass-produce in order to export to advanced markets. Over population and rapid population growth is another factor that causes a barrier to development. In these less developed countries the birth rates are often five times higher than in the more developed countries. The advances of medicine have also caused a fall in the deaths, which leads to a higher population growth. The growth of these countries is generally around 2 percent and their growth is usually below this figure, which therefore worsens the situation, and the real GNP per capita often falls. In the more advanced countries they generally have population growth of around 0.5 percent and their economic growth will usually be higher than that. This is where the widening gap occurs pushing less developed countries further away from more advanced countries. This high growth of the population also has the effect of increasing the labour force, but as there is little demand for labour the unemployment rate will tend to rise. Also, most of this population is below 15 or above 65 meaning they are unable to contribute o production but still need things such as food, water, clothing and shelter. This creates a problem known as dependency burden making development even harder. Governments in these LDC’s fight a tough battle with a rapid growing population and are always trying to slow this rate but they face several problems such as poor education, communication, lack of contraception and cultural attitudes. Africa is currently the fastest growing of all the developing regions with a growth rate of 3 percent over the past decade but with this high growth rate comes several associated problems. Africa has one doctor for every 20,000 people compared to an average 5000 people in developing countries and its infant mortality rate is the highest at 96 per thousand births almost double the developing countries average. Africans also have a life expectancy of 52 years where the average for developing countries is 64. As you can see that the effects of a high population are not beneficial to a developing country. This barrier to development can be solved with the population control strategy. The next barrier to development is inflation. Inflation in these countries is caused by the scare amounts of goods and services relative to the high population consequently causing demand pull inflation. The domestic supply is unable to match the domestic demand. The inflation rates in many of these countries gets above 200 percent compared to that of around 5 percent in most advanced countries. This high inflation has many unwanted effects such as decreased living standards and a reduction in real income, it also tends to redistribute the income from the poor to the wealthy therefore increasing the income inequality that already exists. A high inflation rate also causes the investment of non-productive assets such as antiques or gold, this money is therefore taken out of the economy reducing the funds available for investment. These high inflation rates also cause a reduction in the competitiveness of exporters and import competing firms that therefore leads to an increase in the countries current account deficit. Another effect that inflation will lead to is a falling exchange rate, which if the country has a large foreign debt will make it even harder to pay. Inflation is very high in most of the African countries and causes severe problems to their economy and development progress. Balance of payments problems is also another barrier to development of these less developed countries. The majority of LCD’s have problems with their external balance as the little income they do earn is used on imports and used to pay off interest on their foreign debts. As these countries are in deficit they are continually forced to borrow from overseas to finance their payments worsening their current account deficit even more. Many of these countries are also suffering from worsening terms of trade that also decreases their export revenue and thus further worsening their balance of payments. The WTO worldwide reduction of tariffs will help to assist this but government policies need to be implemented to seriously boost export revenue and turn the consumers away from imports. The strategy to help the balance of payments is import replacement. The next barrier to development that LCD’s face is a depletion of their natural resources. Many of these countries are highly dependent on one major export to create export revenue, create growth, employment and income and the reduction in the current account deficit. This creates problems as they may deplete natural resources without considering future production. This reduces the potential for further future development and growth. In Mauritius, they have cleared 25 percent of their forests in the last 19 years purely for export. This causes massive environmental effects and also is a serious concern, as when the resources run out the country’s economy will fail to stay afloat. This is the same in many less developed countries including many African counties and their dependency on oil. It can be helped with export development to have a wider range of exports and less dependency on one major export. Another significant barrier to economic development in these less developed countries is corruption and poor administration by the government. Corruption is a very common problem in LDC’s. The problem associated with this is that aid and government revenue is not all used in promoting growth, corrupt leaders and government officials take most of it. When a government is corrupt it causes most of their aid to be withdrawn forcing them to reform their political structures. This withdrawal of overseas assistance causes depletions in general living standards of the country. Another problem with these governments is that they know little or nothing about economics. These leads to several problems including poor administration and efficiency these lead to a poor ability to promote development. An example of this is in Nigeria where it has been estimated that in the last twenty years over two billion dollars of oil revenue from the country has been embezzled. This is mainly due to their last dictator who ordered the Nigerian Central Bank to deposit 15 million dollars a day into his own Swiss bank account. This works out to twenty percent of GDP and when you take into consideration that their NFD is over 40 percent of GDP, the country is not left with much money. A strategy that has been put into place for this specific barrier is the refusal to lend money to Nigeria from IMF. Natural disasters are another barrier to development in less developed countries. The effects of natural disasters such as floods or droughts have a much greater impact on less developed countries compared to that of advanced countries. Most LCD’s are prone to these natural disasters, which is a significant factor to their underdevelopment. In India they have times of severe droughts and flooding where 80 million people were affected. This has severely decreased their agriculture production and is consequently creating a barrier to their development. There is not much that can be done about natural disasters but do adjust to them and to adopt new ways to cope with them. Another significant factor preventing the development of less developed countries is war and civil unrest. Many LCD’s are in constant war and civil unrest, this causes several problems with development. The first of these problems is that entrepreneurs are discouraged by the countries instability also important infrastructure is destroyed and governments spend their little taxation revenue on maintaining order or producing weapons. Economies in war torn countries are unlikely to be operating at full capacity making it hard for development to occur. In Rwanda civil wars in the nineties have claimed the lives of almost 1,000,000 Rwandans. Most of the aid to the country was invested in weaponry and therefore not used in promoting economic development, as it should have been. This is how civil wars can create barriers to development. The only solution to this is to end the wars and focus the spending into promoting economic development. The final barrier to development is a lack of press freedom. Press freedom involves the exchange of ideas, criticism of government and increased awareness of world events and developments. This is something that most LCD’s do not have and therefore their economic development is limited. In Mexico the government allowed Televisa to have a monopoly in the television market if they didn’t play any anti-government shows and supported the government. In the eighties journalists were killed by the police in Mexico City if they published any anti-government articles. This is serious problem in these less developed countries and is usually the result of government corruption. The first strategy to promote economic development in these less developed countries is export development. This strategy involves assisting those producers who export to overseas markets. An increase in export development will earn foreign exchange and create unemployment and income and also help to solve problems with the balance of payments. The next strategy to promoting development is import replacement. Import replacement involves the shifting of demand away from imports and towards the domestically produced products. This can be done in several ways including the induction of tariffs on imports making them more expensive relative to the domestic product. This also encourages foreign investment as the foreign firms wish to have the same protection. Assisting domestic producers financially is another way of promoting this economic development, by subsidising and offering tax incentives to local producers it will increase their competitiveness with imports by the lower costs of production. However, replacing imports is only a short-term solution and therefore policies promoting long-term development must be applied. Human resource development is the next strategy to development. This development involves improving the size of the labour force and also the skills of the labour force. The labour force can be increased through improved health care and skills can be attained through things such as training and education. In Nigeria the World Bank is currently funding an $80 million project into their education as well as building a better and more consistent water supply. Also In Malaysia education investment has been amongst their highest priorities for decades, they have spent $731 million on improving their education levels to the level they are currently at Another way to promote economic development in these less developed countries is through encouraging enterprise. In most LDC’s there is a lack of entrepreneurs, in order to increase the quantity there are several solutions such as improving management and leadership training and tax incentives, subsidies and free loans. Cuba has introduced a group of people called the cuentapropistas, 170,000 entrepreneurs marking the arrival of a new business sector in the islands socialist economy. They account for 8% of the labour force and manage to put food on the table for one in ten Cuban’s. These new small businesses have been a result of reduced subsidies to state enterprises, increased foreign investment, and introduction of incentives in the agricultural sector and the legalisation of dealings in foreign currency. This has already had positive signs on the Cuban economy with growth in 1998 at 8 percent some 31percent higher than two years previous. Population control is another strategy to economic development. Rapid population growth is unwanted as it creates problems such as inflation and scarcity and therefore more poverty. There are plenty of methods that can be put into place to slow population growth. Some of these methods include maximum children policy such as China’s one child policy and free supplies of contraception. The Grameen bank is another contributor to helping population control in Bangladesh. The bank issue loans to woman and as part of the conditions to borrowing the money they must agree to have small families. This has proved to be a successful program all across the world and has helped to promote the small-scale development of many less developed countries. The next strategy to promote economic development is increasing the agricultural productivity. Agriculture is usually a major sector in the less developed countries and thus improving its productivity will significantly promote development. Improving the agriculture productivity can be done in many ways. Some of these include merging small farms to create larger more efficient ones and encouraging owner operators to increase the incentive to improve productivity there also several other ways in which these countries can improve their agricultural productivity. With 75 percent of the population living in rural areas, improving the efficiency of India’s agriculture is the key to attaining high growth and reducing poverty. Accelerating rural development and poverty reduction requires cutting spending on input subsidies; investing in rural infrastructure; providing more effective rural services, especially to the poor and socially excluded; improving management of water, forests, and other natural resources; liberalizing the rural economy, including the rural financial system. In the heart of India’s poorest region, the Bihar Plateau Development Project is increasing access to much-needed irrigation and safe drinking water by tribal communities and raising their incomes through the diversification of rural livelihoods. The project aims to reach 4.5 million people through a variety of institutional mechanisms, including water and sanitation committees, water user associations, and income generation schemes, all aiming to transfer skills and enhance people’s capabilities so that the benefits may be sustained once the project ends. This is one way in which India is proving to increase its agr icultural productivity. Another strategy to promoting economic development is by adopting intermediate technology. If a less developed country invested in new technology it may be forgiving employment possibilities, as most new technology is very labour intensive, this will consequently lead to a fall in employment. As these countries have an abundance of labour it is much easier, cost effective and better for the economy if they use intermediate technology that still requires high levels of labour. An example of this is Fred Hollows, Hollows uses local resources to create employment income and economic growth through the training of people to perform the medical tasks and also employment in the factories where the lens are created. The final strategy to promote economic development is to improve the financial system. In these economies there is a lack of savings and an insufficient financial system, this creates major barriers to development. Thus policies need to be adopted to improve this situation that promote growth and employment without generating high levels of inflation. The World Bank’s Executive Board approved a $506 million loan to support financial sector adjustment and reform in Colombia. The loan is part of a revised World Bank strategy for Colombia that includes intensified lending to help the country promote peace, ease the impact of the recession on the poor, and rebuild after their earthquake. It is also part of a $1.4 billion package to help bolster Colombia’s economy. â€Å"This financial sector adjustment loan reflects the World Bank’s confidence in Colombia’s wide-ranging reform strategy, which is critical to its effort to overcome the recession,† said An dres Solimano, director of the Bank’s program in Colombia. The financing of many of these strategies is usually funded through institutions such as the World Bank and the International Monetary Fund institutions. The World Bank is a major force behind the development of less developed countries as it gives issues discounted loans to most of these countries. Another way that these countries can fund their development is through overseas aid. The are large amounts of money flowing out of the developed countries from governments and other aid organizations as aid into the less developed countries hoping to achieve economic development. For all of these less developed countries to achieve economic development, an effort from all developed countries with aid and advice must be contributed, but until then the world will not have any chance of abolishing poverty. References: – IFC – Building the private sector in Africa – The Economist January 15th 2000 – survey Nigeria – World bank – Rwanda development project – The Economist May 27th – Aids impact in South Africa – World Bank – Cuba’s Cuentapropistas – World Bank – India’s development – The Grameen Bank – Economic Development in Bangladesh – The Economist May 27th – Growth is good – The Economist Feb 22nd – Televista – World Bank press release, 11th June 1998

How Managing with a Global Mindset

How managing with a global mindset adequately addresses some challenges raised by managing in a globalising world. ABSTRACT The globalising world has impacted and raised new challenges for organisations and leaders. Thinking about new perspectives and reframe old paradigms are required and fundamental to leaders succeed in the global competitive environment. This essay will explore how managing with a global mindset are becoming an important competence across boundaries and how it can open doors for thriving businesses worldwide. Table of contents 1.Challenges of managing in a globalising world †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 3 2. Competencies of global leaders †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 4 3. Global versus Local †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 6 4. Global mobility †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 5. Conclusion†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 9 6. Bibliography †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 10 2 Managing with a global mindset 1. Challenges of managing in a globalising world The globalisation process promoted significant changes in the businesses environment.In this context, global organisations have been the target of constant and intense transformations, which affect and require redefinitions of the leadership style adopted. These companies need global leaders, who are able to face the demands of a competitive and internationalised market (Adler, Brody and Osland 2001). Many multinational companies are facing a common challenge: the development of leaders able to manage global companies and take advantage of strategic opportunities. But do the global leaders require a set of capacities totally different from those required for national companies?What would be the main difficulties faced by global leaders when they extend their activities outside the domestic market? How does global companies can act in order to promote a global mindset among their leaders and employees? Some key traits of a leader, which can be carried out independently of the position or hierarchical level, has been considered as essential such as integrity, self-confidence, drive, desire to lead, communication, selfconfidence, and the potential to stimulate and capacitate its collaborators in the search for creative solutions and innovative alternatives, besides knowing the business (Kirkpatrick and Locke, 1991).On the other hand, global leadership, in addition to the above-mentioned characteristics, presents differentiated traits like the capacity to appreciate and deal with different cultures, as it is in direct or indirect contact with subsidiaries in other countries and even with main offices located in the same country, but with cultural differences. Additionally, inquisitiveness, self-awareness, capacity to embrace duality among others has been considered as core characteristics to lead global companies (Gregersen, Morrison and Black, 1998).The increased diversity that leaders in global roles need to confront and the challenges of operating over long distances and multiple time zones, often remotely, were seen to have particular significance for the leadership approaches and behaviours required. Higher risks, complexity and uncertainty due to constant changes in 3 Managing with a global mindset political and economic conditions are considered additional challenges that global organisations and leaders must deal with in developing th eir strategy.They need to maximise the benefits and opportunities of operating globally, manage the increased scale and scope that international operations require, build alliances across boundaries and understand international disciplines such as regulations, finance and human resources management that differ from those who operates only nationally. Furthermore, understand the business as a whole in a global context; the competition and market trends are essential for making well-informed business decisions and to stay ahead of the competitors.Managing in a globalising world also requires being innovative and having the courage to challenge the status quo (Gregersen, Morrison and Black, 1998). 2. Competencies of Global Leaders According results of a research carried out among global company leaders, successful leaders had a remarkable global mentality and they see and think about the world in a different way from those who let themselves be discouraged and disheartened in the face of global enterprise challenge. And what would be the essential trait that defines that remarkable mentality?According to Black (2006), it is curiosity and inquisitiveness. â€Å"They seek to try the local food and not international food at some five star hotels. They read the local newspaper, talk to the local residents. † Although this trend in search of new experiences may be an innate trait, and not something that is learnt, nothing prevents the companies from looking for this characteristic at the time of selecting its potential leaders and sending them to an international assignment. Although individual personality traits mould leadership capacities, the company’s culture has an equally vital role.Black (2006) describes what John Pepper, one of the leaders of Procter & Gamble who helped to make the company a global company in the 80s and 90s, did when he arrived in a country where he had never been before: he visited five local families and learned with them how the families washed their clothes, cleaned the house and dealt with the children’s hygiene in that culture. Pepper believed that the experience and real contact with local cultures makes the difference in becoming a global leader. 4 Managing with a global mindsetAccording to Manning (2003), most of the companies admit that technical competencies and organizational experience alone are insufficient criteria for the choice of a global leader. Pursuant to the studies developed by Black and Gregersen (1999), the crucial characteristic for leadership is linked to relationship skills and opening of new perspectives. The process of developing global leaders becomes a challenge, because the understanding of this movement experienced by them collides with personality traits that differentiate them from the rest.And such characteristics directly affect the work relationships and the effectiveness of the cross cultural leadership, the elements of which should be taken into consideration by the organisations for the selection and development of global leadership programs. It is indispensable for the leaders to know that in a scenario of connection and exchange of knowledge and of new management practices, functional and geographic mobility requires a global leader capable of enduring the pressures, constant uncertainties and resisting to the disruption of pre-set standards in order to adapt himself to a new reality.The global leader must have strategic worldwide vision in order to promote changes and capture the market opportunities. Additionally, they need to be adaptable, have capacity for managing uncertainty, ability to balance tensions and to understand people and fundamentally have open-mindedness, which is key for them succeed (Gregersen, Morrison and Black 1998). As Jeff Bezos, founder and CEO of Amazon. com, affirmed: â€Å"We cannot let short term investors and specialists frighten us and prevent us from experimenting†.One of the most redeeming fea tures of the culture of Amazon according to its CEO is the fact that it values experimentation. Bezos believes that it is an important attitude to learn and to innovate as a global company (Business Harvard Review, 2007). Experimentation is also a fundamental competence for global leaders that should explore new ideas, products and markets without fear, even when the return is not immediate. In the past, companies entrusted innovation to a few geniuses at the main office and simply appropriated it.Today, in a globalising world multinationals value and reap the fruits of the inventiveness of their employees wherever they are. 5 Managing with a global mindset 3. Global versus Local Global leadership â€Å"is not about doing business abroad. It's about managing an integrated enterprise across borders where you encounter different cultural, legal, regulatory and economic systems,† says Stephen Kobrin (2007), a Wharton professor of Multinational Management. â€Å"It's about opera ting in multiple environments trying to achieve a common objective. â€Å"No matter what the challenges may be many observers draw the attention to the fact that managing a global company is something very different from managing a domestic company. A German company that operates solely in Germany can be managed in a certain way. However, those in charge of an international company, depending on where it operates, have to review several of their assumptions regarding many things, from the development of the marketing strategies, regulatory framework to the human resources policies. Despite globalisation, â€Å"the world is not flat†.There are many variations in basic things that require adaptations, when leaders ignore them there is a high risk of compromising the company’s performance (Kobrin, 2007). A very good strategy for the company in Germany, based on an absolute understanding of the German market, may not work in Japan. Organisations and global leaders deal wi th the challenge of determining when a global and when a local solution is the most effective way to deliver to market. They need to determine where standards, products and processes need to adhere to worldwide frameworks and where local standards are more appropriate.Kobrin (2007) formulates the question of global leadership and interprets it as a clash with a basic paradigm: the exchange between integration and fragmentation. According his experience it is important to ask: Do the company react in a different way according to the market? Or do they operate the same way no matter where? The way each one reacts to individual markets depends on the common elements to those markets, he adds. In regard to technology, for example, the environment is less important. People use computer chips in the 6 Managing with a global mindset ame way, independently from which culture they belong or the language they speak. Therefore, the problem faced by the global leader is related to the pressure of the balance to be attained when the company has to answer to different markets in a different way, benefiting from the efficiencies of scale. Sometimes tension arouse between the managers from the country of origin and the local professionals. Lack of flexibility in dealing with local demands partly explains why some companies face a series of crisis in their global expansion.The global leaders need to be able to find a balance between the extremes. Believe that the countries are so different that any type of local intervention is impossible, and leave the management totally in the hands of local professionals is not a global strategy. It is crucial to find a balance and understand that there are differences to be respected, but might there are similarities and possible learning on both sides of the border. Empower local subsidiaries and local teams and at same time implement strategies that are globally effective is a huge challenge for global companies and leaders. . Global Mob ility Samsung Electronics, of South Korea, often mentioned as one of the most successful emerging companies, is an example of how a company can transfer world-class resources overseas. The company initially amassed solid experience in the development of products and operations globally. Being one of the most efficient electronics companies in the world used its capacities in large-scale manufacturing and its experience in innovation to launch the brand in new markets like USA and Europe.Next, Samsung invested heavily in research and development and in the global production, increasing even more its participation within the world marketplace. To make this possible, Samsung recruits people from different nationalities from different universities in the world. The company institutionalised its training and development, when it created an internal training centre and implementing a systematic approach to performance management. Moreover, Samsung encourage 7 Managing with a global mindse t transfer of capacities that requires executives who know how to apply tandard practices in diverse countries, contexts and cultures. This integration of markets, resources and talents – an essential element for global growth – does not yet occur in most of the companies, even among those who already do business around the world (McKinsey, 2007). Like Samsung, Shell re-allocates high potential managers placing them in various different positions in distinct sectors of the company, including overseas. To work in various positions overseas during several years is an indispensable part of Shell’s culture, states Mathilde de Boer, consultant of Leadership Development of Shell Learning.Though the employees are sometimes reluctant towards this policy of constant relocation — â€Å"when it comes to couples with each one having their own career, the challenge is even greater†, notes de Boer —, since willingness to travel and live overseas is a fund amental requirement for someone who wants to progress his career. â€Å"When someone decides to move into a higher position, he or she will have to face a job that implies moving to different locations†. The benefits of overseas experience are visible at the time the executives meet for more formal leadership training.As they have experience in many different situations, they quickly pick up new ways of doing things (McKinsey, 2007). According to McCall and Hollenbeck (2002), although global executives should be flexible people, sensitive to cultural differences, capable of dealing with complexities and willing to think globally, they need to develop or improve these competencies through travelling overseas, uniting with international teams, adhering to training programs focused on globalisation and or transfers to other subsidiaries. Training can contribute to global leader’s development and with the process of opening to the new.Aiming to extend the boundaries and re frame the actual mental map. Thus, training should confront the participants with the contrasts found in the world that engage most of their senses for a significant period of time (Black, Gregersen, 1999). Meanwhile, the process of global leaders’ training does not consider only their capacities and qualifications, but also the experiences lived and the lessons learn from their practical day-to-day. 8 Managing with a global mindset Diversify and amplify the leader’s cultural backgrounds may be essential for large multinational organisations that aim to keep or develop their competitive advantage.Manoeuvring across the global environment, spanning diverse countries, cultures and customers’ preferences and expectations, presents significant challenges but also opportunities. For this reason promote global mindset among the leaders through international assignments or rotations through different functions it is important to develop the leaders’ ability to d eal with uncertainty and change, gain a greater understanding of the organisation, develop networks and facilitate the transfer of knowledge across the company and beyond the borders. 5. ConclusionIt is not adequate to define a company as global based on the amount of offices it has overseas. The real measurement to define a company as global is the way in which it perceives the world. It is not only a question of the number of employees working around the world. What is important is the extent of their connection and collaboration with people in other countries. In reviewing the literature it becomes clear that there is a greater understanding about the importance of the strategic role that an effective global leadership plays in facilitating organisations’ ability to compete effectively in a very competitive globalising market.As a consequence many organisations are making particular efforts to tailor development programs to address leaders’ needs, such as encouragin g knowledge sharing and mobilising individuals and teams who have experience and expertise around the world to participate on projects where skills and best practice are transferred. Promoting multicultural training and how to manage international and virtual teams and rotating people through different functions.These methods have been applied to develop leaders’ ability to deal with ambiguity, uncertainty and change. Moreover, develop a global mindset and gain a greater understanding of the organisation to facilitate the transfer of knowledge. 9 Managing with a global mindset As companies are increasingly spreading around the world, it becomes very difficult to build an organisational culture of equally shared knowledge. Organisations need to take a proactive and integrated approach in developing global leaders.They need to be clear about the capabilities required of their global leaders, ensure that development initiatives are appropriate for their needs through regular eva luation and review, and support effective leadership practices and behaviours through all their human resources processes. On the other hand, leaders also need to focus on building their global mindset through an understanding of their own needs and focusing on self-development efforts. They need constantly practice the watching and listening attitude to able to manage potential dilemmas that arise from cultural differences.And make efforts to do not stereotype, recognising and valuing the benefits that differences bring through an open-minded approach. Seeking to bring diverging opinions together and make efforts to promote news ways of doing things. 10 Managing with a global mindset 6. Bibliography Adler, NJ, Brody, LW and Osland, JS 2001, Going Beyond Twentieth Century Leadership: A CEO Develops his Company’s Global Competitiveness Cross Cultural Management, Vol 8. Black, JS, Morrison, AJ and Gregersen, HB 1999, Global Explorers: The next Generation of Leaders, Routledge, New York, NY.Black, JS 2006, The mindset of global leaders: Inquisitiveness and duality. Advances in global leadership, Stamford, CT: JAI Press. Black, JS and Gregersen, HB 1999, The right way to manage expats. Harvard Business Review. Business Harvard Review, 2007, The institutional yes. An interview with Jeff Bezos, viewed on 10/11/11 . Gregersen, HB, Morrison, AJ and Black, JS 1998, Developing leaders for the global frontier, Sloan Management Review. Kirkpatrick, S and Locke, E 1991, Leadership: do Traits Matter, Academy of Management Executive.Kobrin, SJ 2007, What Makes a Global Leader? , The Wharton School, viewed 09/11/11, . Manning, T 2003, Leadership Across Cultures: Attachment Style Influences. Journal of Leadership an Organizational Studies, Winter. McCall, MW, and Hollenbeck, GP 2002, Developing global executives: The lessons of international experience. Boston: Harvard Business School Press. McKinsey 2007, Developing Global Leaders in Latin America, McKinsey Quarterly, viewed 09/11/11, . 11 Managing with a global mindset

Slave Trade and Colonialism - 1306 Words

The Atlantic Slave Trade and Colonialism The Trans-Atlantic Slave Trade began when Portuguese interests in Africa moved away from the legendary deposits of gold to a much more readily available commodity – slaves, around the mid-fifteenth century. The plantation economies of the New World were built on slave labour. Seventy percent of the slaves brought to the new world were used to produce sugar, the most labour-intensive crop. The rest were employed harvesting coffee, cotton, and tobacco, and in some cases in mining. By the seventeenth century the trade was in full swing, and at its height towards the end of the eighteenth century. It was a trade which was especially fruitful, since every stage of the journey could be profitable for†¦show more content†¦Nearly all the leading people in Liverpool, including many of the town s mayors, were involved with the slave trade. Several Liverpool MPs invested money and supported the trade in Parliament. It was highly unpopular to speak out against the slave trade. William Roscoe and William Rathbone were two of the few who did. Roscoe went further and joined with the Quakers, and the political leaders like Fox and the political reformer, William Wilberforce, to challenge the slavery laws. In 1787 and 1788 he published tracts and poems attacking the inhumanity and evil of slavery. In his poem The Wrongs of Africa are lines which retain their strength and poignancy to this day: ‘Blush ye not, to boast your equal laws, Your just restraints, your rights defended, your liberties secured, Whilst with an iron hand ye crushed to earth the helpless African; And bid him drink that cup of sorrow, Which yourselves have dashed, indignant, From Oppression’s fainting grasp? (Chandler, 1992) African’s didn’t just sit back and simply watch the horror which was unfolding there was great resistance. 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