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This artifact helps students visualize the distribution of managerial roles and responsibilities, fostering an understanding of the chain of command and the coordination between different management levels. Module 1 covered the different positions within an organization and the roles that those individuals cover.

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This artifact represents the foundational knowledge required for anyone studying management, providing insights into the roles and skills necessary for effective leadership. This is comprehensive handbook that covers the fundamental principles of management, types of managers, and their roles. It serves as a guide for understanding the various aspects of management and leadership within an organization.

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A comprehensive Corporate Social Responsibility (CSR) report outlines the organization's initiatives, activities, and achievements in areas such as environmental efforts, philanthropy, ethical labor practices, volunteerism, and economic performance. This report serves as a tangible representation of the company's commitment to CSR and provides stakeholders with transparent information on its social and environmental impact.

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Over the past decade, corporate social responsibility reports-also called CSR reports, impact reports, or sustainability reports-have become more common, a trend that's predicted to continue. In fact, 90 percent of companies on the S&P 500 index published CSR reports in 2019-up from 86 percent in 2018, 75 percent in 2014, and only 20 percent in 2011.

So, what is a CSR report? What do quality CSR reports look like, and why do they matter for businesses and society? Here are the answers to these questions and ways you can help craft a CSR report for your organization.

What Is a CSR Report?

According to the online course Sustainable Business Strategy, corporate social responsibility is the idea that a business has a responsibility to the society and environment in which it operates. Many businesses striving to be socially responsible use the triple bottom line-an organization's impact on people and the planet, in addition to its profits-to determine strategic priorities.

A corporate social responsibility (CSR) report is an internal- and external-facing document companies use to communicate CSR efforts and their impact on the environment and community. An organization's CRS efforts can fall into four categories: environmental, ethical, philanthropic, and economic.

In some countries, it's mandatory for corporations to publish CSR reports annually. Although not yet required of companies based in the United States, some predict it will be in the not-so-distant future.

Currently, there isn't a common set of CSR reporting standards in the US. This provides organizations the freedom to report on CSR efforts in whatever format they choose and highlight whatever information they wish. The lack of standards can, however, make it difficult to compare reports across companies. It also enables firms to leave out areas where their efforts failed or harmed people or the environment.

CSR reports are typically presented in a digital format for easy distribution, but they can also be printed and presented to stakeholders in person. A CSR report's layout can range from a straightforward text document to a designed, visually stimulating packet.

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Examples of CSR Reports

To help you envision what your organization's CSR report could look like, here are several examples of recent CSR reports from well-known companies:

Each example begins with a letter from a corporate executive, such as the president, chief executive officer, or chief sustainability officer, has a table of contents, and is visually appealing. These examples range from 42 pages to nearly 180 pages long-a testament to the flexibility of CSR reporting standards.

You may notice that the examples have different wording in the titles. Once again, because there's no set structure for CSR reports, the framing is up to the individual company and what it would like to highlight.

Many companies create specific branding strategies for CSR efforts and reports. For instance, note Warby Parker's clean, personal aesthetic throughout, or General Motors' clever slogan on its report's front page: "driving sustainable value." As seen in Cisco's report, using infographics is an effective way to visualize company data to highlight trends and changes made over time.

Each CSR report is different and highlights the company's strong suits, goals, and plans. Dig into each example to see what aspects you may incorporate in your company's report.

: 5 Examples of Corporate Social Responsibility That Were Successful

Why Are CSR Reports Important?

CSR reports are a way for an organization to communicate its mission, efforts, and outcomes to external and internal stakeholders. In addition to employees, decision-makers, and shareholders, these include customers, the local community, and society at large.

If a company has been bold and successful in its CSR efforts, the release of its CSR report is as much a communication tool as it is a marketing and public relations event. Especially because of the lack of mandatory guidelines, you can use these reports to highlight your organization's achievements and build social responsibility into your brand's identity.

Releasing a CSR report on an annual basis can also create accountability. For example, if your organization publishes its goal to be carbon neutral by 2025 in its 2021 CSR report, chances are employees will feel driven to accomplish that goal so its completion can be noted in the 2025 report. If a goal isn't reached in its intended time frame, the CSR reporting process can prompt an examination of how the project went off track and what can be done to realign and accomplish the goal in a realistic timeframe.

Improving Your Company's CSR Efforts

CSR reports are an effective way to communicate your business's efforts, goals, and plans to help the environment and community, along with the impact it's had so far. If, however, your business hasn't started its social responsibility efforts yet, it's never too late.

In the online course Sustainable Business Strategy, Harvard Business School Professor Rebecca Henderson implores professionals to start with purpose and build the business case from there. What's an issue that impacts your business, customers, or community? Start by identifying a cause that's important to members of your organization, and then brainstorm a quantifiable goal you can set that would help that cause.

To make the business case to skeptical members of your team, consider the publicity value, customer and employee loyalty, and return on investment of committing to a sustainable or socially impactful cause.

If you or your colleagues are looking for a formal foundation in sustainable capitalism and how to be a socially responsible business, explore Sustainable Business Strategy to build the necessary skills to do well as a business while doing good in the world.

Once the ball is rolling, design a CSR report outlining your company's efforts. Even if it's just a few pages long, explaining your efforts, impact, and plans is worth the time. If you're driven by purpose and a clear plan, others may read about it and support your business on its journey toward corporate social responsibility.
Are you interested in making an impact on your community and the planet? Explore our three-week online course Sustainable Business Strategy Business in Society courses to learn how to be a purpose-driven professional. If you aren't sure which course is the right fit, download our free course flowchart to determine which best aligns with your goals.

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What Is a CSR Report & Why Is It Important?

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A corporate social responsibility (CSR) report is a document companies use to communicate CSR efforts and their impact on the environment and community.

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The cycle of inclusive hiring and talent development 

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This photo represents the section in module 2 on culture and diversity and why it matters. This photo is a great example of the cycle of inclusive hiring and talent development, which is mentioned in module 2 on how inclusive hiring affects a company and the growth and success of it.

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This video is shares information on what is organizational culture in an engaging way. This module goes into detail about organizational culture, the key dimensions of it, the influences on it, as well as the founders and industry methods for mailing ting it. All of these are covered within the video and provide a better understanding of this topic within module 2.

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This infographic visually represent the key elements of globalization, including benefits, trade liberalization, the global economy, and a short background. As the title of this module is a management within a global organization, this infographic is a great starting point in a better understanding of globalization.

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This article covers how global companies when out, which seemed fitting for a module that covers the topic of globalization. This article goes into more detail on international competition and provides case studies to help the reader gain a better understanding of global competition.

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International competition. Citizens from most of the older industrialized countries have become obsessed with it since the first Japanese cars started selling well. Vulnerability has replaced invincibility as the word many would use to describe once firmly established international companies. But this disquiet obscures the steady achievements a number of corporations have made against competition from companies based outside their countries.

These companies rely on global strategies to succeed in today's world. That calls on a company to think of the world as one market instead of as a collection of national markets and sometimes requires decisions as unconventional as accepting projects with low ROIs because of their competitive payoff. An organization with such a global focus formulates long-term strategy for the company as a whole and then orchestrates the strategies of local subsidiaries accordingly.

The power of global strategies is illustrated here by the histories of three companies (one American, one European, and one Japanese) that have what the authors think it takes to win the new competitive game. These case studies should help managers decide whether a global strategy is appropriate for their companies.

Hold that obituary on American manufacturers. Some not only refuse to die but even dominate their businesses worldwide. At the same time Ford struggles to keep up with Toyota, Caterpillar thrives in competition with another Japanese powerhouse, Komatsu. Though Zenith has been hurt in consumer electronics, Hewlett-Packard and Tektronix together profitably control 50% of the world's industrial test and measurement instrument market. American forklift truck producers may retreat under Japanese pressure, but two U.S. chemical companies-Du Pont and Dow-dramatically outperform their competitors.

How do these American producers hold and even increase profitability against international competitors? By forging integrated, global strategies to exploit their potential; and by having a long-term outlook, investing aggressively, and managing factories carefully.

The main reason is that today's international competition in many industries is very different from what it has been. To succeed, an international company may need to change from a multidomestic competitor, which allows individual subsidiaries to compete independently in different domestic markets, to a global organization, which pits its entire worldwide system of product and market position against the competition. (For a more complete discussion of this distinction, see the sidebar, "What Is a Global Industry?")

The nature of international competition among multinationals has shifted in a number of industries. Multinational generally denotes a company with significant operations and market interests outside its home country. The universe of these companies is large and varied, encompassing different kinds of organizations operating in different types of industries. From a strategic point of view, however, there are two types of industries in which multinationals compete: multidomestic and global. They differ in their economics and requirements for success.

In multidomestic industries a company pursues separate strategies in each of its foreign markets while viewing the competitive challenge independently from market to market. Each overseas subsidiary is strategically independent, with essentially autonomous operations. The multinational headquarters will coordinate financial controls and marketing (including brand-name) policies worldwide and may centralize some R&D and component production. But strategy and operations are decentralized. Each subsidiary is a profit center and expected to contribute earnings and growth commensurate with market opportunity.

In a multidomestic industry, a company's management tries to operate effectively across a series of worldwide positions, with diverse product requirements, growth rates, competitive environments, and political risks. The company prefers that local managers do whatever is necessary to succeed in R&D, production, marketing, and distribution but holds them responsible for results. In short, the company competes with other multinationals and local competitors on a market-by-market basis. A large number of successful U.S. companies are in multidomestic industries, including Procter & Gamble in household products, Honeywell in controls, Alcoa in aluminum, and General Foods in branded foods.

A global industry, in contrast, pits one multinational's entire worldwide system of product and market positions against another's. Various country subsidiaries are highly interdependent in terms of operations and strategy. A country subsidiary may specialize in manufacturing only part of its product line, exchanging products with others in the system. Country profit targets vary, depending on individual impact on the cost position or effectiveness of the entire worldwide system-or on the subsidiary's position relative to a key global competitor. A company may set prices in one country to have an intended effect in another.

In a global business, management competes worldwide against a small number of other multinationals in the world market. Strategy is centralized, and various aspects of operations are decentralized or centralized as economics and effectiveness dictate. The company seeks to respond to particular local market needs, while avoiding a compromise of efficiency of the overall global system.

A large number of U.S. multinationals are in global industries. Among them, along with their principal competitors, are: Caterpillar and Komatsu in large construction equipment; Timex, Seiko, and Citizen in watches; General Electric, Siemens, and Mitsubishi in heavy electrical equipment.

The multidomestic and global labels apply to distinct industries and industry segments, not necessarily to whole industry groups. For example, within the electrical equipment industry, heavy apparatus such as steam turbine generators and large electric motors is typically global while low-voltage building controls and electrical fittings are multidomestic in nature.

The global company-whatever its nationality-tries to control leverage points, from cross-national production scale economies to the foreign competitors' sources of cash flow. By taking unconventional action, such as lowering prices of an important product or in key markets, the company makes the competitor's response more expensive and difficult. Its main objective is to improve its own effectiveness while eroding that of its competitors.

Not all companies can or should forge a global strategy. While the rewards of competing globally are great, so are the risks. Major policy and operating changes are required. Competing globally demands a number of unconventional approaches to managing a multinational business to sometimes allow:

Major investment projects with zero or even negative ROI.

Financial performance targets that vary widely among foreign subsidiaries.

Product lines deliberately overdesigned or underpriced in some markets.

A view of country-by-country market positions as interdependent and not as independent elements of a worldwide portfolio to be increased or decreased depending on profitability.

Construction of production facilities in both high and low labor-cost countries.

Not all international businesses lend themselves to global competition. Many are multidomestic in nature and are likely to remain so, competing on a domestic-market-by-domestic-market basis. Typically these businesses have products that differ greatly among country markets and have high transportation costs, or their industries lack sufficient scale economies to yield the global competitors a significant competitive edge.

Before entering the global arena, you must first decide whether your company's industry has the right characteristics to favor a global competitor. A careful examination of the economies of the business will highlight its ripeness for global competition. ¹ Simply put, the potential for global competition is greatest when significant benefits are gained from worldwide volume-in terms of either reduced unit costs or superior reputation or service-and are greater than the additional costs of serving that volume.

Identifying potential economies of scale requires considerable insight. Advantages to increased volume may come not only from larger production plants or runs but also from more efficient logistics networks or higher volume distribution networks. Worldwide volume is also particularly advantageous in supporting high levels of investment in research and development; many industries requiring high levels of R&D, such as pharmaceuticals or jet aircraft, are global. The level of transport or importing costs will also influence the business's tendency to become global. Transport is a relatively small portion of highly traded optical goods, for example, while it is a barrier in trading steel reinforcing bars.

Many businesses will not be able to take the global step precisely because their industries lack these characteristics. Economies of scale may be too modest or R&D spending too closely tied to particular markets. Products may differ significantly across country boundaries, or the industry may emphasize distribution, installation, and other local activities. Lead times may be short, as in fashion-oriented businesses and in many service businesses, including printing. Also, transportation costs and government barriers to trade may be high, and distribution may be fragmented and hard to penetrate. Many consumer nondurable businesses or low-technology assembly companies fall into this category, as do many heavy raw-material processing industries and wholesaling and service businesses.

Our investigation into the strategies of successful global companies leads us to believe that a large group of international companies have global potential, even though they may not know it. Almost every industry that is now global-automobiles and TV sets, for example-was not at one time. A company must see the potential for changing competitive interaction in its favor to trigger a shift from multidomestic to global competition. And because there is no guarantee that the business can become global, the company must be willing to risk the heavy investment that global competition requires.

A company that recognizes its business as potentially global but not yet so must ask itself whether it can innovate effectively and must understand its impact on the competition to find the best answers to these three questions:

What kind of strategic innovation might trigger global competition?

Is it in the best position among all competitors to establish and defend the advantages of global strategy?

What kind of resources-over how long a period-will be required to establish the leading position?

The Successful Global Competitor

If your industry profile fits the picture we've drawn, you can better judge your ability to make these kinds of unconventional decisions by looking at the way three global companies have succeeded. These organizations (American, European, and Japanese) exemplify the global competitor. They all perceive competition as global and formulate strategy on an integrated, worldwide basis. Each has developed a strategic innovation to change the rules of the competitive game in its particular industry. The innovation acts as a lever to support the development of an integrated global system but demands a market position strong enough to implement it.

Finally, the three companies have executed their strategies more aggressively and effectively than their competitors. They have built barriers to competitive responses based on careful assessment of competitors' behavior. All three have the financial resources and commitment needed to compete unconventionally and the organizational structure to manage an integrated system.

We will take a careful look at each of these three and how they developed the strategic innovation that led, on the one hand, to the globalization of their industries and, on the other, to their own phenomenal success. The first company's innovation was in manufacturing; the second, in technology; and the third, in marketing.

The Caterpillar case: warring with Komatsu

Caterpillar Tractor Company turned large-scale construction equipment into a global business and achieved world leadership in that business even when faced with an able Japanese competitor. This accomplishment was difficult for a variety of reasons. For one thing, specifications of construction equipment varied widely across countries. Also, machines are expensive to transport, and field distribution-including user financing, spare parts inventories, and repair facilities-is demanding and best managed locally.

Navy Seabees who left their Caterpillar equipment in other countries following World War II planted the seeds of globalization. The company established independent dealerships to service these fleets, and this base of units provided a highly profitable flow of revenue from spare parts, which paid for inventorying new units. The Caterpillar dealers quickly became self-sustaining and to this day are larger, better financed, and do a more profitable parts business than their competitors. This global distribution system is one of Cat's two major barriers against competition.

The company used its worldwide production scale to create its other barrier. Two-thirds of the total product cost of construction equipment is in heavy components-engines, axles, transmissions, and hydraulics-whose manufacturing costs are capital intensive and highly sensitive to economies of scale. Caterpillar turned its network of sales in different countries into a cost advantage by designing product lines that use identical components and by investing heavily in a few large-scale, state-of-the-art component manufacturing facilities to fill worldwide demand.

The company then augmented the centralized production with assembly plants in each of its major markets-Europe, Japan, Brazil, Australia, and so on. At these plants Cat added local product features, avoiding the high transportation cost of end products. Most important, Cat became a direct participant in local economies. The company achieved lower costs without sacrificing local product flexibility and became a friend rather than a threat to local governments. No single "world model" was forced on the customer, yet no competitor could match Caterpillar's production and distribution cost.

Not that they haven't tried. The most recent-and greatest-challenge to Caterpillar has come from Komatsu (see Exhibit I for a financial comparison). Japan's leading construction equipment producer forged its own global strategy based on exporting high-quality products from centralized facilities with labor and steel cost advantages. Over the last decade Komatsu has gained some 15% of the world construction-equipment market, with a significant share of sales in nearly every product line in competition with Cat.

Caterpillar has maintained its position against Komatsu and gained world share. The two companies increasingly dominate the market vis-à-vis their competitors, who compete on a domestic or regional basis. What makes Caterpillar's strategy so potent? The company has fostered the development of four characteristics essential to defending a leading world position against a determined competitor.

1. A global strategy of its own.

Caterpillar's integrated global strategy yields a competitive advantage in cost and effectiveness. Komatsu simply plays catch-up ball rather than pulling ahead. Facing a competitor that has consciously devised a global strategy, Komatsu is in a much weaker position than were Japanese TV and automobile manufacturers when they took off.

2. Willingness to invest in manufacturing.

Caterpillar's top management appears committed to the kind of flexible automated manufacturing systems that allow full exploitation of the economies of scale from its worldwide sales volume.

3. Willingness to commit financial resources.

Caterpillar is the only Western company that matches Komatsu in capital spending per employee; in fact, its overall capital spending is more than three times that of the Japanese company. Caterpillar does not divert resources into other businesses or dissipate the financial advantage against Komatsu by paying out excessive dividends. Because Komatsu's profitability is lower than Caterpillar's, it must exhaust debt capacity in trying to match Cat's high investment rates.

4. Blocking position in the Japanese market.

In 1963, Caterpillar formed a joint venture in Japan with Komatsu's long-standing but weaker competitor, Mitsubishi. Operationally, the venture serves the Japanese market. Strategically, it acts as a check on the market share and cash flow of Komatsu. Japan accounts for less than 20% of the world market but yields over 80% of Komatsu's worldwide cash flow. The joint venture is number two in market position, serving to limit Komatsu's profits. Japanese tax records indicate that the Cat-Mitsubishi joint venture has earned only modest profits, but it is of great strategic value to Caterpillar. ²

L.M. Ericsson: Can small be beautiful?

L.M. Ericsson of Sweden has become a successful global competitor by developing and exploiting a technological niche. Most major international telephone-equipment producers operated first in large, protected home markets that allowed the most efficient economies of scale. The additional profits helped underwrite R&D and provided good competitive leverage. Sweden's home market is relatively small, yet Ericsson translated the advent of electronic switching technology into a powerful global lever that befuddled competitors in its international market niche. In the electromechanical era of the 1960s, the telephone switching equipment business was hardly global. Switching systems combine hardware and software. In the electromechanical stage, 70% of total installed costs lay in hardware and 70% of hardware cost was direct labor, manufacturing overhead, and installation of the equipment.

Each country's telephone system was unique, economies of scale were low, and the wage rate was more important than the impact of volume on costs. In the late 1960s, major international companies (including Ericsson) responded by moving electro-switching production to LDCs not only to take advantage of cheaper labor but also to respond to the desire of government telephone companies to source locally.

Eventually, each parent company centrally sourced only the core software and critical components and competed on a domestic-market-by-domestic-market basis. For its part, Ericsson concentrated investment in developing countries without colonial ties to Europe and in smaller European markets that lacked national suppliers and that used the same switching systems as the Swedish market.

The telecommunications industry became global when, in the 1970s, electronic switching technology emerged, radically shifting cost structures and threatening the market position Ericsson had carved for itself. Software is now 60% of total cost; 55% of hardware cost is in sophisticated electronic components whose production is highly scale sensitive. The initial R&D investment required to develop a system has jumped to more than $100 million, which major international companies could have amortized more easily than Ericsson. In addition, the move to electronics promised to destroy the long-standing relationships Ericsson enjoyed with smaller government telephone companies. And it appeared that individual electronic switching systems would require a large fixed-cost software investment for each country, making the new technology too expensive for the smaller telephone systems, on which Ericsson thrived.

Ericsson knew that the electronic technology would eventually be adapted to small systems. In the meantime, it faced the possibility of losing its position in smaller markets because of its inability to meet the ante for the new global competition.

The company responded with a preemptive strategic innovation-a modular technology that introduced electronics to small telephone systems. The company developed a series of modular software packages that could be used in different combinations to meet the needs of diverse telephone systems at an acceptable cost. Moreover, each successive system required fewer new modules. As Exhibit II shows, the first system-Sodertalje in Sweden-required all new modules, but by the third year, the Abo system in Finland required none at all. Thus the company rapidly amortized development costs and enjoyed economies of scale that steepened as the number of software systems sold increased. As a result, Ericsson was able to compete globally in small systems.

Ericsson's growth is accelerating as small telephone systems convert to electronics. The company now enjoys an advantage in software cost and variety that continually reinforces itself. Through this technology Ericsson has raised a significant entry barrier against other companies in the small-system market.

Honda's marketing genius

Before Honda became a global company, two distinct motorcycle industries existed in the world. In Asia and other developing countries, large numbers of people rode small, simple motorcycles to work. In Europe and America, smaller numbers of people drove big, elaborate machines for play. Since the Asian motorcycle was popular as an inexpensive means of transportation, companies competed on the basis of price. In the West, manufacturers used styling and brand image to differentiate their products. No Western market exceeded 100,000 units; wide product lines and small volumes meant slight opportunities for economies of scale. Major motorcycle producers such as Harley-Davidson of the United States, BMW of West Germany, and Triumph and BSA of the United Kingdom traded internationally but in only modest volumes.

Honda made its industry global by convincing middle-class Americans that riding motorcycles could be fun. Because of the company's marketing innovations, Honda's annual growth rate was greater than 20% from the late 1950s to the late 1960s. The company then turned its attention to Europe, with a similar outcome. Honda invested for seven full years before sustaining profitability in Europe, financing this global effort with cash flows earned from a leading market position at home and in the United States.

Three crucial steps were decisive in Honda's achievement. First, Honda turned market preference around to the characteristics of its own products and away from those of American and European competitors. Honda targeted new consumers and used advertising, promotions, and trade shows to convince them that its motorbikes were inexpensive, reliable, and easy to use. A large investment in the distribution network-2,000 dealerships, retail missionaries, generous warranty and service support, and quick spare-parts availability-backed up the marketing message.

Second, Honda sustained growth by enticing customers with the upper levels of its product line. Nearly half of new bike owners purchased larger, more expensive models within 12 months. Brand loyalty proved very high. Honda exploited these trends by expanding from its line of a few small motorcycles to one covering the full range of size and features by 1975. The result: self-sustaining growth in dollar volume and a model mix that allowed higher margins. The higher volume reduced marketing and distribution costs and improved the position of Honda and other Japanese producers who invaded the 750cc "super bike" portion of the market traditionally reserved for American and European companies. Here Honda beat the competition with a bike that was better engineered, lower priced, and whose development cost was shared over the company's wide product line.

The third step Honda took was to exploit economies of scale through both centralized manufacturing and logistics. The increasing volume of engines and bike assemblies sold (50,000 units per month and up) enabled the company to use less costly manufacturing techniques unavailable to motorcycle producers with lower volumes (see Exhibit III). Over a decade, Honda's factory productivity rose at an average annual rate of 13.1%-several times higher than European and American producers. Combined with lower transportation cost, Honda's increased output gave it a landed cost per unit far lower than the competition's. In turn, the lower production cost helped fund Honda's heavy marketing and distribution investment. Finally, economies of scale in marketing and distribution, combined with low production cost, led to the high profits that financed Honda's move into automobiles.

What can we learn?

Each of these successful global players changed the dynamics of its industry and pulled away from its major competitors. By achieving economies of scale through commonality of design, Caterpillar exploited both its worldwide sales volume and its existing market for parts revenues. Competitors could not match its costs or profits and therefore could not make the investment necessary to catch up. Ericsson created a cost advantage by developing a unique modular technology perfectly adapted to its segment of the market. Its global strategy turned electronics from a threat to Ericsson into a barrier to its competitors. Honda used marketing to homogenize worldwide demand and unlock the potential for economies of scale in production, marketing, and distribution. The competition's only refuge was the highly brand-conscious, small-volume specialty market.

In each case, the industry had the potential for a worldwide system of products and markets that a company with a global strategy could exploit. Construction equipment offered large economies of scale in component manufacture, allowing Caterpillar to neutralize high transportation costs and government barriers through local assembly. Ericsson unlocked scale economies in software development for electronic switches. The modular technology accommodated local product differences and governments' desire to use local suppliers. Once Honda's marketing techniques raised demand in major markets for products with similar characteristics, the industry's economies of scale in production combined with low transportation costs and low tariff barriers to turn it into a global game.

In none of the cases did success result from a "world product." The companies accommodated local differences without sacrificing production costs. The global player's position in one major market strengthened its position in others. Caterpillar's design similarities and central component facilities allowed each market to contribute to its already favorable cost structure. Ericsson's shared modules led to falling costs each time a system was sold in a new country. Honda drew on scale economies from the centralized production of units sold in each market and used its U.S. marketing and distribution experience to succeed in Europe.

In addition to superior effectiveness and cost advantages, a winning global strategy always requires abilities in two other dimensions. The first is timing. The successful global competitor uses a production cost or distribution advantage as a leverage point to make it more difficult or expensive for the competitor to respond. The second is financial. The global innovator commits itself to major investment before anyone else, whether in technology, facilities, or distribution. If successful, it then reaps the benefits from increased cash flows from either higher volume (Honda and Ericsson) or lower costs (all three companies). The longer the competitor takes to respond, the larger the innovator's cash flows. The global company can then deploy funds either to increase investment or lower prices, creating barriers to new market entrants.

A global player should decide against which of its major competitors it must succeed first in order to generate broad-based success in the future. Caterpillar located in the Far East not only to source products locally but also to track Komatsu. (Cat increasingly sources product and manufacturing technology from Japan.) Ericsson's radical departure in technology was aimed squarely at ITT and Siemens, whose large original market shares would ordinarily have given them an advantage in the smaller European and African markets. Honda created new markets in the United States and Europe because its most powerful competitors, Yamaha and Kawasaki, were Japanese. By exploiting the global opportunity first, Honda got a head start, and it remained strong even when competitors' own international ambitions came to light.

Playing the Global Chess Game

Global competition forces top management to change the way it thinks about and operates its businesses. Policies that made sense when the company was multidomestic may now be counterproductive. The most powerful moves are those that improve the company's worldwide cost position or ability to differentiate itself and weaken key worldwide competitors. Let us consider two potential moves.

The first is preempting the leading positions in major newly industrializing countries (NICs). Rapid growth in, for example, Mexico, Brazil, and Indonesia has made them an important part of the worldwide market for many capital goods. If its industry has the potential to become global, the company that takes a leading position in these markets will have made a decisive move to bar its competitors. Trade barriers are often prohibitively high in these places, and a company that tries to penetrate the market through a self-contained local subsidiary is likely to fall into a trap.

The astute global competitor will exploit the situation, however, by building a specialized component manufacturing facility in an NIC which will become an integral part of a global sourcing network. The company exports output of the specialized facility to offset importing complementary components. Final assembly for the domestic and smaller, neighboring markets can be done locally. (Having dual sources for key items can minimize the risk of disruption to the global sourcing network.)

A good illustration of this strategy is Siemens's circuit breaker operation in Brazil. When the company outgrew its West German capacity for some key components, it seized the opportunity presented by Brazilian authorities seeking capital investments in the heavy electrical equipment industry. Siemens now builds a large portion of its common components there, swaps them for other components made in Europe, and is the lowest-cost and leading supplier of finished product in Brazil.

Another move that can be decisive in a global industry is to establish a solid position with your largest customers to block competitors. Many businesses have a few customers that dominate the global market. The global competitor recognizes their importance and prevents current or prospective competitors from generating any sales.

A good example is a British company, BSR, the world's largest producer of automatic record changers. In the 1970s, when Japanese exports of audio equipment were growing rapidly, BSR recognized that it could lose its market base in the United States and Europe if the Japanese began marketing record changers. BSR redesigned its product to Japanese specifications and offered distributors aggressive price discounts and inventory support. The Japanese could not justify expanding their own capacity. BSR not only stalled the entry of the Japanese into the record-changer market but it also moved ahead of its existing competitor, Garrard.

A global company can apply similar principles to block the competition's access to key distributors or retailers. Many American companies have failed to seize this opportunity in their unwillingness to serve large, private-label customers (e.g., Sears, Roebuck) or by neglecting the less expensive end of their product line and effectively allowing competitors access to their distributors. Japanese manufacturers in particular could then establish a toehold in industries like TV sets and farm equipment.

The decision on prices for pivotal customers must not be made solely on considerations of ROI. Equally important in global competition is the impact of these prices on prospective entrants and the cost of failing to protect and expand the business base. One way to control the worldwide chess game in your favor is to differentiate prices among countries.

Manage Interdependently

The successful global competitor manages its business in various countries as a single system, not a portfolio of independent positions. In the view of portfolio planning theory, a market's attractiveness and the strength of a company's position within it determine the extent of corporate resources devoted to it. A company should defend strong positions and try to turn weak ones around or abandon them. It will pursue high-profit and/or high-growth markets more aggressively than lower-profit or lower-growth ones, and it will decide on a stand-alone basis whether to compete in a market.

Accepting this portfolio view of international competition can be disastrous in a global industry. The global competitor focuses instead on its ability to leverage positions in one country market against those in other markets. In the global system, the ability to leverage is as important as market attractiveness; the company need not turn around weak positions for them to be useful.

The most obvious leverage a company obtains from a country market is the volume it contributes to the company's overall cost or effectiveness. Du Pont and Texas Instruments have patiently won a large sales volume in the sophisticated Japanese market, for example, which supports their efforts elsewhere. Winning a share of a market that consistently supports product innovation ahead of other markets-like the United States in long-haul jet aircraft-is another leverage point. The competitor with a high share of such a market can always justify new product investment. Or a market can contribute leverage if it supports an efficient scale manufacturing facility for a region-like Brazil for Siemens. Finally, a market can contribute leverage if a position in it can be used to affect a competitor's cash flow.

Organization: The Achilles Heel

Organizational structure and reporting relationships present subtle problems for a global strategy. Effective strategic control argues for a central product-line organization; effective local responsiveness, for a geographic organization with local autonomy. A global strategy demands that the product-line organization have the ultimate authority, because without it the company cannot gain systemwide benefits. Nevertheless, the company still must balance product and area needs. In short, there is no simple solution. But there are some guidelines to help.

No one organization structure applies to all of a company's international businesses. It may be unnecessarily cumbersome, for example, to impose a matrix structure on all business. Organizational reporting lines should probably differ by country market depending on that market's role. An important market that offers high leverage, as in the foregoing examples, must work closely with the global business-unit managers at headquarters. Coordination is crucial to success. But the manager of a market outside the global system will require only sets of objectives under a regional reporting system.

Another guideline is that organizational reporting lines and structures should change as the nature of the international business changes. When a business becomes global, the emphasis should shift toward centralization. As countries increase in importance, they must be brought within the global manager's reach. Over time, if the business becomes less global, the company's organization may emphasize local autonomy.

The common tendency to apply one organizational structure to all operations is bound to be a disadvantage to some of them. In some U.S. companies, this approach inhibited development of the global strategy their industries required.

Match Financial Policies to Competitive Realities

If top management is not careful, adherence to conventional financial management and practices may constrain a good competitive response in global businesses. While capital budgeters use such standard financial tools as DCF return analysis or risk profiles to judge investments and creditors and stock analysts prefer stable debt and dividend policies, a global company must chart a different course.

Allocating capital

In a global strategy, investments are usually a long-term, interdependent series of capital commitments, which are not easily associated with returns or risks. The company has to be aware of the size and timing of the total expenditures because they will greatly influence competitors' new investment response. Most troublesome, however, is that revenues from investments in several countries may have to build up to a certain point before the company earns any return on investment.

A global strategy goes against the traditional tests for capital allocation: project-oriented DCF risk-return analysis and the country manager's record of credibility. Global competition requires a less mechanical approach to project evaluation. The successful global competitor develops at least two levels of financial control. One level is a profit and cost center for self-contained projects; the other is a strategy center for tracking interdependent efforts and competitors' performance and reactions. Global competitors operate with a short time frame when monitoring the execution of global strategy investments and a long time frame when evaluating such investments and their expected returns.

Debt & dividends

Debt and dividend policies should vary with the requirements of the integrated investment program of the whole company. In the initial stages, a company with a strong competitive position should retain earnings to build and defend its global position. When the industry has become global and growth slows or the returns exceed the reinvestment needed to retain position, the company should distribute earnings to the rest of the corporation and use debt capacity elsewhere, perhaps in funding another nascent global strategy.

Honda's use of debt over the last 25 years illustrates this logic (see Exhibit IV). In the mid-1950s, when Honda held a distant second place in a rapidly growing Japanese motorcycle industry, the company had to leverage its equity 3.5 times to finance growth. By 1960, the Japanese market had matured and Honda emerged dominant. The debt-equity ratio receded to 0.5 times but rose again with the company's international expansion in motorcycles. In the late 1960s, Honda made a major move to the automobile market, requiring heavy debt. At that time, motorcycle cash flows funded the move.

Which Strategic Road to Take?

There is no safe formula for success in international business. Industry structures continuously evolve. The Caterpillar, Ericsson, and Honda approaches will probably not work forever. Competitors will try to push industrial trends away from the strengths of the industry leaders, and technological or political changes may force the leading companies to operate in a multidomestic fashion once again.

Strategy is a powerful force in determining competitive outcomes, whether in international or domestic business. And although adopting a global strategy is risky, many companies can dramatically improve their positions by fundamentally changing the way they plan, control, and operate their businesses. But a global strategy requires that managers think in new ways. Otherwise the company will not be able to recognize the nature of competition, justify the required investments, or sustain the change in everyday behavior needed.

If the company can successfully execute a global strategy, it may find itself joining the ranks of the truly successful international companies. Whether they be Japanese, American, European, or otherwise, the strategic thread that ties together companies like IBM, Matsushita, K. Hattori (Seiko), Du Pont, and Michelin clearly shows that the rules of the international competitive game have changed.

1. For a more detailed look at globalization see Michael E. Porter, Competitive Strategy.

2. For more on this subject, see Craig M. Watson, "Counter-Competition Abroad to Protect Home Markets," HBR January-February 1982, p. 40.

A version of this article appeared in the September 1982 issue of Harvard Business Review.

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International competition. Citizens from most of the older industrialized countries have become obsessed with it since the first Japanese cars started selling well. Vulnerability has replaced invincibility as the word many would use to describe once firmly established international companies. But this disquiet obscures the steady achievements a number of corporations have made against competition [...]

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This diagram explains how to do a SWOT Analysis, which is one topic covered in this module. SWOT analysis assesses a business's Strengths, Weaknesses, Opportunities, and Threats. It provides a structured framework for evaluating internal capabilities and external factors, aiding strategic planning. Understanding SWOT helps businesses leverage strengths, address weaknesses, capitalize on opportunities, and mitigate threats, contributing to informed decision-making and sustainable competitive advantage.

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This cartoon cleverly captures the shift in consumer behavior towards e-commerce, even in situations where one might not typically associate online shopping, like buying cookies from a stand. It reflects the pervasive impact of digital platforms on how people make purchasing decisions in the modern era.

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This image represent evidence based decision making, one of the many topics covered in this module. Evidence-based decision making involves using factual information, research, and data to inform choices and actions. It ensures decisions are grounded in reliable evidence, promoting effective problem-solving and resource allocation. This approach enhances accountability, transparency, and the likelihood of positive outcomes, fostering informed and rational decision-making across various fields and disciplines.

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A decision tree is a graphical model that represents a series of decisions and their possible consequences. It's important in data analysis and machine learning for decision-making processes, guiding choices based on input variables to reach optimal outcomes. Decision trees are intuitive, interpretable, and widely used in diverse fields for problem-solving.

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The different organizational structures 

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The different organizational structures 

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This short YouTube video covers the different organizational structures one might come across. As discussed in the module each structure has unique benefits, impacting communication, efficiency, and adaptability to meet diverse business needs and goals.

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Provided above is a link to a funny cartoon on flexible work arrangements. At the core of all of the trends in organizational structure is employee empowerment.The movement is to trust the employee’s ability and to give him or her the authority to make decisions, even mistakes. The benefit to organizations can be greater productivity, innovation, and customer service. The responsibility of the organization is to clearly lay out the roles and responsibilities to decrease ambiguity. A good example of empowerment is flexible work arrangements. FWAs include reduced workload (part time), compressed work weeks, and remote work (telework). The most important aspect of a FWA policy is that the organization believes that the employees and their managers know best as to how, when, and where to complete their work.

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Above is a picture repressing the idea that a great culture doesn’t come from nothing, but instead is built piece by piece. When recognition is a daily occurrence, employees express themselves freely, and all team members feel that they belong. Organizational culture affects the way people and groups interact with each other, with clients, and with stakeholders. A strong culture is integral to long-term organizational sustainability and success, and one of management’s primary responsibilities is to both define and communicate this sense of shared culture.

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The diagram above shares the protected classes of employees, a topic which is covered in module 6. Certain groups of employees are legally protected from discrimination. In other words, if an employee belongs to a protected group and is discriminated against because of his or her status as a member of that group, that employee can take legal action against the employer. But being part of a protected group does not mean an employee can never be disciplined or fired.

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The article above gives a more in depth version on the organizational communication flows. Organizational communication flows encompass upward, downward, horizontal, and diagonal channels. Efficient communication fosters collaboration, aligns goals, and enhances productivity. It ensures a transparent exchange of information, reduces misunderstandings, and promotes a cohesive work culture. Effective communication is vital for organizational success, innovation, and employee engagement.

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Learning Outcome

Differentiate between downward, upward, horizontal, diagonal, and external communication flows.

Organizational Communication Flows

Information can flow in four directions in an organization: downward, upward, horizontally, and diagonally. The size, nature, and structure of the organization dictate which direction most of the information flows. In more established and traditional organizations, much of the communication flows in a vertical-downward and upward-direction. In informal firms, such as tech start-ups, information tends to flow horizontally and diagonally. This, of course, is a function of the almost flat organizational hierarchy and the need for collaboration. Unofficial communications, such as those carried in the company grapevine, appear in both types of organizations.

Downward Communication Flows

Downward communication is when company leaders and managers share information with lower-level employees. Unless requested as part of the message, the senders don't usually expect (or particularly want) to get a response. An example may be an announcement of a new CEO or notice of a merger with a former competitor. Other forms of high-level downward communications include speeches, blogs, podcasts, and videos. The most common types of downward communication are everyday directives of department managers or line managers to employees. These can even be in the form of instruction manuals or company handbooks.

Downward communication delivers information that helps to update the workforce about key organizational changes, new goals, or strategies; provide performance feedback at the organizational level; coordinate initiatives; present an official policy (public relations); or improve worker morale or consumer relations.

Upward Communication Flows

Information moving from lower-level employees to high-level employees is upward communication (also sometimes called vertical communication). For example, upward communication occurs when workers report to a supervisor or when team leaders report to a department manager. Items typically communicated upward include progress reports, proposals for projects, budget estimates, grievances and complaints, suggestions for improvements, and schedule concerns. Sometimes a downward communication prompts an upward response, such as when a manager asks for a recommendation for a replacement part or an estimate of when a project will be completed.

An important goal of many managers today is to encourage spontaneous or voluntary upward communication from employees without the need to ask first. Some companies go so far as to organize contests and provide prizes for the most innovative and creative solutions and suggestions. Before employees feel comfortable making these kinds of suggestions, however, they must trust that management will recognize their contributions and not unintentionally undermine or ignore their efforts. Some organizations have even installed "whistleblower" hotlines that will let employees report dangerous, unethical, or illegal activities anonymously to avoid possible retaliation by higher-ups in the company.

Horizontal and Diagonal Communication Flows

Horizontal communication involves the exchange of information across departments at the same level in an organization (i.e., peer-to-peer communication). The purpose of most horizontal communication is to request support or coordinate activities. People at the same level in the organization can work together to work on problems or issues in an informal and as-needed basis. The manager of the production department can work with the purchasing manager to accelerate or delay the shipment of materials. The finance manager and inventory managers can be looped in so that the organization can achieve the maximum benefit from the coordination. Communications between two employees who report to the same manager is also an example of horizontal communication. Some problems with horizontal communication can arise if one manager is unwilling or unmotivated to share information, or sees efforts to work communally as threatening his position (territorial behavior). In a case like that, the manager at the next level up will need to communicate downward to reinforce the company's values of cooperation.

Diagonal communication is cross-functional communication between employees at different levels of the organization. For example, if the vice president of sales sends an e-mail to the vice president of manufacturing asking when a product will be available for shipping, this is an example of horizontal communication. But if a sales representative e-mails the vice president of marketing, then diagonal communication has occurred. Whenever communication goes from one department to another department, the sender's manager should be made part of the loop. A manager may be put in an embarrassing position and appear incompetent if he isn't aware of everything happening in his department. Trust may be lost and careers damaged by not paying attention to key communication protocols.

Diagonal communication is becoming more common in organizations with a flattened, matrix, or product-based structure. Advantages include:

Building relationships between senior-level and lower-level employees from different parts of the organization.

Encouraging an informal flow of information in the organization.

Reducing the chance of a message being distorted by going through additional filters.

Reducing the workloads of senior-level managers.

External Communication Flows

Communications do not start and stop within the organization. External communication focuses on audiences outside of the organization. Senior management-with the help of specialized departments such as public relations or legal-almost always controls communications that relate to the public image or may affect its financial situation. First-level and middle-level management generally handle operational business communications such as purchasing, hiring, and marketing. When communicating outside the organization (regardless of the level), it is important for employees to behave professionally and not to make commitments outside of their scope of authority.

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Differentiate between downward, upward, horizontal, diagonal, and external communication flows. Information can flow in four directions in an organization: downward, upward, horizontally, and diagonally. The size, nature, and structure of the organization dictate which direction most of the information flows. In more established and traditional organizations, much of the communication flows in a vertical-downward and upward-direction.

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Above is the differences between transactional and transformational leadership which are two leadership styles discussed in this module. Transactional leadership emphasizes task completion through rewards or punishments, focusing on the status quo. Transformational leadership inspires innovation, vision, and employee development, fostering positive change. While transactional leaders manage current issues, transformational leaders drive long-term growth and organizational adaptability, crucial for thriving in dynamic environments.

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Maslow's Hierarchy of Needs is a psychological theory outlining human motivation. It suggests people prioritize needs in a pyramid, from basic physiological requirements to self-actualization. Recognizing these needs helps understand and address individuals' motivations, informing personal development, workplace management, and psychological well-being.

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Attached above is Herzberg’s two factor theory which is one of many theories covered in this module. Herzberg's Two-Factor Theory distinguishes between hygiene factors (job context) and motivators (job content) influencing job satisfaction. Identifying and addressing both factors are essential for creating a motivating work environment and enhancing employee engagement.

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This article shares how to create and use SMART goals. SMART goals are Specific, Measurable, Achievable, Relevant, and Time-bound. They provide a clear framework for goal-setting, enhancing clarity, focus, and accountability, crucial for effective personal and organizational planning, performance management, and success.

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SMART Goals - How to Make Your Goals Achievable

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Total Quality Management Principles: A Comprehensive Overview

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