In this Article we discuss the key international business issues which were faced by the Italian management consulting firm – A&G Management Consulting. The company faced with those processes as globalization and multinational enterprises (further- MNEs). We considered the main theoretical lenses of globalization such as large scale of economics, environment and generation. We discussed that cost efficiency and volatile demand led to the globalization of business which decides to make operations globally. We discussed about means of inequality which lead to jointing the trade and culture throughout the world. We focused on global supply chains, international production networks to show how globalization goes on. We considered indicators in globalization in the example of China. We considered historical lenses and origins of globalization from the old old time to nowadays. We considered definition of globalization and further, its meaning. We considered origins of globalization in the context of Silk route and well-known competition between China and America.
We consider the consulting company- A&G Management Consulting. A&G is Italian privately owned firm in the form of limited liability company founded in 1988 (Wikipedia web-site/A&G Management Consulting). A&G is a management consulting firm which is based in Turin, Italy (Polo ICT official web-site, A& G web-site/Company/Who we are). A&G work for 20 years in the field of management consulting industry (A& G web-site/Company/Who we are). A&G realizes projects in theManufacturing, Service, Finance, Banking and Insurance sectors (A& G web-site/ Company/Who we are). The company leads to identifying of a problem and solving an issue (A&G web-site/Company/Who we are). The company carries out consulting practice in those fields as a Strategy & Change management, Programme\Project Management, Operational Information Management, Human Capital, Organizational Structures and Processes, Advance Finance, Sales & Marketing, Supply Chain Management, Informational Technology, Digital Creativity (A&G web-site/Expertise/ Strategy & Change Management). Therefore, the company exists more than 20 years and solves a wide range of questions.
The company`s practice is wide. The company practices in change management (A&G web-site/ Strategy and Change Management/Change Management). Consultants of the company identify the problem, transfer entire methods to the organization, and further reduce the risk of the project through mutual responsibility (A&G web-site/ Strategy and Change Management/Change Management). The company does expertise in organizational design, e.g. consultants prove experience those fields of operations management (A&G web-site/Organization and Processes). Consultants are acknowledged with “requirement engineering” projects (A&G web-site/Organization and Processes). Therefore, the company is good in consulting.
Key international business issues which were faced by the company A&G management Consulting are globalization and multinational enterprises (MNEs). We consider globalization first.
Globalization occurred with the change on large scale of economics, environment and generation. `People have held widely different views regarding definition, scale, chronology, impact and policy. ` (p. 39, Scholte. 2005). It is why the globalization occurred. Changing generation means changing environment, means changing culture (Fimen, 2011). This leads to the new age of globalization. The technological development changed the environment where large vertically integrated companies had been for a long time, although they joined together in a burst in the mid-nineties. (p. 73, Berger and the MIT Industrial Performers Center, 2005). Raised costs and the volatility of demand led companies to make operations outside and to do business multinationally(p. 73,Berger and the MIT Industrial Performers Center, 2005). `…almost every company operating in day`s global economy has to figure out` (p. 139,Berger and the MIT Industrial Performers Center, 2005). Companies decide which operations go local, which go global (p. 139,Berger and the MIT Industrial Performers Center, 2005). Change of functions is different (p. 165, Berger and the MIT Industrial Performers Center, 2005). Some companies make components, some make a design or design and retail (p. 165, Berger and the MIT Industrial Performers Center, 2005). Therefore, globalization occurred under certain reasons.
Globalization raised under means of inequality and necessity to joint trade and culture. The globalization arose from great inequalities, such as economic, between North and South (p. 34, Ritzer, 2011). Author analyzed the issue and wrote that it is `…a good place to get a quick shapeshot of global trade` (authors et al cited in p. 82, Ritzer, 2011). Author considered `net economic flows in and out of a nation state` as a national`s trade overflow and shortage (authors et al cited in p. 82, Ritzer, 2011). Author considered the most valuable economic chains and networks included into global trade- supply chains, international production networks, global commodity chains, global value chains (p. 83, Ritzer, 2011). `Globalization… encompasses virtually the entirely of the globe` (p. 28, Ritzer and Dean, 2010). Admirers of globalization wrote about culture which joins people throughout the world (p. 30, Ritzer and Dean, 2010). Author focused on such economic factors as force and relocation of production, technology (p. 41, Ritzer and Dean, 2010). Therefore, globalization raised throughout the world.
Trade and investment showed a great indicators in globalization. The transnationalization of production as the key driver of economic integration, `…dwelling readily on aggregate FDI figuration support of that hypothesis`. China admirers of globalization thought `location and institutional framework are increasingly irrelevant` (p. 168, Ritzer and Atalay, 2007). Author wrote on distribution of trade and investment (p. 169, Ritzer and Atalay, 2007). Authors wrote about great investment opportunities for foreigners in China (South China Morning Post, 2013, Fuhrman, 2015, Orr, 2017). Therefore, globalization led to China growth.
Origins of globalization are very historical and old. Globalization arose in one time with capitalism (Wikipedia web-site, History of capitalism, Wikipedia web-site, Globalization). Author considered that relocation of production, technology and forces are capitalism in general (p. 41, Ritzer and Dean, 2010). Days became a years, and capitalism grew in a worldwide market. Authors connected it with the development of English East India Company in 17th century (Chaudhuri, 1965/1999). It was a trade between British East India Company and Dutch East India Company (Chaudhuri, 1965/1999). The last one was described as a first multinational corporation with stock offered to a wide circle (Chaudhuri, 1965/1999). Therefore, East India company was a great source of globalization.
Different authors considered another source of globalization. Other authors suggested globalization arose in 19th century as a result of the Industrial Revolution (O’Rourke, Williamson, (2002). `More nations embraced international trade` (O’Rourke, Williamson, (2002). The invented of shipping containers led to peak of globalization of commerce (Levinson, 2013, Gittins, 2006). Scholte (2005) wrote that globalization took material from mid-nineteenth to the half of 20th century (p. 89, Scholte, 2005). Therefore, Industrial Revolution was considered as a source of globalization.
Research showed another point of view with origins of globalization in 20th century. Other authors often determined that globalization arose in 20th century and they connected it with the Bretton-Woods Agreement (Buttonwood, 2014). Others jointed globalization definition with the growth of capitalistic American companies in 19th century such as Standard Oil, etc. `it was the largest oil refinery in the world of its time` (Exxon Mobil Corp., 2008). After adoption as a monopoly company in 1911, Standard Oil broke into 34 companies, including Exxon, Amoco,Mobil and Chevron (The Economist, 1999). Therefore, authors considered Standard Oil growth and further Bretton-Woods Agreement as a origins of globalization.
Authors determined globalization by different words. `Globalization, wrote Anthony Giddem in 1990s, is a term which must have a key position in the lexicon of the social sciences` (Giddes, 1990, cited in p. 1, Rosenberg, 2000). Globalization is something which stimulate worldwide social relation, as author wrote` the intensification of world hide social relation` (Giddes, 1990, cited in p. 2, Rosenberg, 2000). Globalization determines a process in which economies, societies and cultures become integrated `…via multinational chain of trade, foreign investment, capital flows, (slide 2, Prof. Singh, 2018). Globalization is more focused on the side of economics (slide 2, Prof. Singh, 2018). Therefore, globalization was determined in social means either as a multinational chain.
Silk way stimulated the globalization. World globalization was stimulated by the well-known Silk way, arose in 207 BCE–220 CE (The Megalithic Portal & Megalith Map, 2013). `China developed a substantial trading influence in Southern Asia during a time expanded international commerce that spanned 200 years`.(p. 49,Delios, Bewmish, 2004).In the 15th century China made a maritime expedition ordered by the Ming Emperor Yongle to 37 countries(p. 48, Delios, Bewmish, 2004). Globalization was stimulated by Silk route.
Authors wrote a lot about China and America. Countries which mostly `born` MNEs are The United States of America and China (Cheung, 2018, p. 1-2, Cufe Business School, Columbia Center of Sustainable Development, 2016). The GDP of America is 24.32 %, the GDP of China is 14.84 % (slide 5, Prof. Singh, Gramer, 2017).Trade war of two giants, China and America, showed nobody is right. Specific plans of government destroyed trade relations between countries, creating new and new boundaries on that (Vaswani, 2018, Lee, 2018, Lee, 2018). Globalization led to China growth (The Economist, 2016, Simpson, 2018, Yaghmaian, 2013). Exchange of goods and growth of technologies made China strong (Chan E., 2018, Yee, 2011). Therefore, China and America are main worldwide forces nowadays and within last 20 years.
A few factors stimulated globalization growth. The factor from which globalization arose was cheapest labour and necessity to sale and export more. Companies started to think where to do business, where to do it effectively and profitability. China, India and other emerging economies were countries stimulated international capital flow and exchange of money. Creation plants in Asia solved a huge problem of manufacturing and brought huge capital for businessman. `This “Factory Asia” now makes almost half the world’s goods` (The Economist, 2015). Cisco make manufacturing in China (has plants) (Dou and Clark, 2015). Compaq, Dell Computer have the same (p. 134, Pecht, Lee, Wen, Fu, Lu, 1999, p. 59, Dobson and Yue, 1997). Cheap labour was the reason of globalization growth.
Key international business issue which was faced by the company is MNEs.
Globalization led to creation and development of MNEs, those played an important place in the world. MNEs jointed the people and did it in professional level. Ideas of Peter Drucker found a realization on MNEs (p. 166-167, Drucker, 2012, p. 169, p. 134, 63, Drucker, Makiarello, 2012). Under practice of modern companies and practice of author MNE created high level of corporate culture, estimated high human being and human capital. (Coleman, 2013, Deloitte.com web-site, Deloitte web-site, Oracle web-site). Therefore, MNEs were companies with the features of human capital culture.
The most authors evaluated MNEs in a one way. A multinational company (MNC) can be defined as `…an enterprise that engages in foreign direct investments (FDI)` and which controls value-added activities in a few countries (Dunning and Lundan, 2008, p. 3 cited in p. 2 of Mayrhofer and Prange, 2013). We can estimate the activity of MNEs by the number of employed people and the number of sales (p. 21, Navaretti and Vcenables, 2004). Multinational company arose within internationalization of activities, `… i.e. to own the physical assets used in their operation, abroad…` (p. 99, Navaretti and Vcenables, 2004). Therefore, MNEs are the enterprises which do business abroad.
MNEs were created under certain reasons. Under the Cage framework different cultures, languages, currencies, legal systems, physical distance between people and companies led to growth and development of MNEs (slide 1, Prof. Mellahi, 2018). MNEs were created `…to achieve the dual objectives of global integration and local responsiveness` (Slide 2, Prof. Mellahi, 2018). MNEs were created `…to achieve worldwide efficiency and synergy to take advantage of similarities across countries`. (Slide 2, Prof. Mellahi, 2018). MNE are a result of globalization in a modern time. MNEs were result of cooperation and responsiveness between governments. MNEs were result of development of microeconomic factors. Therefore, MNEs arose under the economic factors.
Different reasons impacted on globalization those time. A lot of reasons impacted on globalization such as necessity of cost reduction via scale economies, capitalization through covering customers and worldwide trends, support a united service to worldwide consumers, review and ward off global competitors, pursue the opportunities of media (Slide 3, prof. Mellahi, 2018). A lot of reasons effected on globalization.
Most authors considered MNEs as a tool of exchange of goods and products and HRM practice. Models of MNEs are discussed in the context of questions of `…norms of ownership, exchange, competition and …. internationalization` (p. 39, Jiswekky 2003). Author considered method of transfer HRM strategy which is well-known in the scale of MNEs doing business developed economies(Gwest and Hogue, 1996, Faner and Quintanilla, 1998, Tayeb, 1988, Edward and Reiner, 2004, Ferner et al, 2005-authors et al cited in p. 68, Chang, Mellahi and Wilkinson, Ibeh and Daries, 2009 cited in p. 68, Ibeh and Daries, 2009). Therefore, MNEs are international exchange models.
Increased competition effected on local firms and businesses. Doing business nowadays means face with global competition (slide 25, prof. Singh). Author of the article wrote about increased competition (Cray, 1970). `…this increased competition is difficult to obtain` (Cray, 1970). The phenomenon named as `Americanisation` concentrated on the period after the Second World War, when the US government tried to spread the ‘gospel of productivity’ and to transfer Western European (and East Asian) countries to the American `…creed of mass production, competitive markets and a sharing of productivity gains with workers` (Kipping, 2004). Business faced with global competition throughout the world.
In depth, the company faced with competition with global consulting firms, such as McKinsey. `McKinsey & Co joints worldwide practice from different countries and clients bringing it to the client directly` (p. 1, Jensen, 1971). Author determined factors on the result of which consulting arose: `nature of organizations, the rise of management, the nature of knowledge, professions, fashion, and the post-industrial economy` (Clark and Kipping, 2012). `The origins of management consulting lie in the late 19th century, when experts in engineering, advertising and accounting` started to render their service to the companies (p. 2, Jones, Lefort, 2012). After death of Taylor in 1915 States and Europe were covered by the ideas of authors (p. 2, Jones, Lefort, 2012). People were inspired by CarlesBedaux with the idea of payment for results (Jones, Lefort, 2012). American consultants applied scientific management ideas in Europe (Jones, Lefort, 2012). Bedaux opened a firm in Britain, and in 1938 `…the firm became fully independent under the name Associated Industrial Consultants (AIC)` (Jones, Lefort, 2012). Therefore, consulting firms and consulting movement arose in post-industrial economy.
The great consulting firm- McKinsey-was founded in 1926. Within 1930s a new era of consulting firms arose in the United States (Jones, Lefort, 2012). They were focused on `…wider organizational and strategic issues` (Jones, Lefort, 2012). The accountant James O. McKinsey was a former professor at the Chicago University started to work as a specialist using a `…budgeting as a means of business administration` (Jones and Lefort, 2012). In 1926 he established a consulting firm that realized business surveys (Jones, Lefort, 2012). In 1932, Marwin Bower joined McKinsey &Co (Jones and Lefort, 2012). He was a Harvard-trained lawyer, started to be a key figure and he influenced the firm in the next six decades (Jones and Lefort, 2012). A key issue in development was a contract from the retailer Marshall Fields in 1935 and James Mckinsey gained a CEO post (Jones and Lefort, 2012). Therefore, McKinsey had a great history and origins.
The well-known consulting company continued its history under the few sales and acquisitions. In 1937 McKinsey died (p. 2, Jones, Lefort, 2012). The company divided between the Chicago office managing by Tom Kearney and the New York office managing by Bower (p. 2, Jones, Lefort, 2012). In 1946 Bower the exclusive use of the McKinsey name was bought by Bower (p. 2, Jones, Lefort, 2012). Investment indicators showed that company`s capabilities and resources were not suitable (p. 3, Bhide, 1996). Owners of the company underinvested `…in crucial intangible assets such as reputations and knowledge` (p. 3, Bhide, 1996). Another author wrote: `this is not a recession proof business…`, `…we can do very well in such period` (Cray, 1970). Therefore, the consulting firm had a great changes.
Expansion to Europe was a huge problem for most of firms. The company`s business was a quite profitable in America, and it was decided to go further to Europe (p. 4, Jones, Lefort, 2012). U.S. consultancy firms took a great impact in Europe through 1940-1950 (p. 4, Jones and Lefort, 2012). In 1961 it opened a branch in Geneva, Switzerland, then in 1964 it opened branch in Paris, Amsterdam, and Dusseldorf (p. 5, Jones and Lefort, 2012). Most of their clients were European subsidiaries of U.S. firms (p. 5, Jones and Lefort, 2012). Although the local client base was grown rapidly (p. 5, Jones and Lefort, 2012). In 1970 s McKinsey became a largest consulting firm in Germany (Kipping, 2004). `France, Bower later recalled, `yearned for American management know-how` (Bhide, 1966). McKinsey opened an office in Melbourne, Australia, in 1962. (P. 6, Jones and Lefort, 2012). Firms reached its status in Europe.
2. Summary
A&G Management Consulting faced with a large scale of micro and macro economic factors led to globalization throughout the world. Huge inequality led to globalization. The change of generation showed the new era of globalization. Business environment was sufficiently changed from the time of creation the East India Company. A wide range of companies decided to go global further to economic and operation efficiency and volatility of demand. Global supply chains, international production networks were created in those time. Globalization was a social process impacted a huge number of people and companies. MNEs and trade wars showed how companies need to compete, how to win the market. MNEs arose in different cultures and languages and jointed the huge number of people. MNEs became a result of cooperation among governments. MNES led to huge competition on the market, especially in consulting area.
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