The global corporation is once again under the microscope. Twenty to thirty years ago the concern was whether global corporations would behave responsibly without adequate international law and regulation to contain their behavior. The fear was that they would become as powerful as, and less responsible than, the countries in which they operated. Now the focus of interest seems to be different, if one believes the author of a book published several months ago, End of the Line: The Rise and Coming Fall of the Global Corporation.
The basic arguments of this book are that globalization has led corporations to outsource too much of their work and, more important, their intellectual capital. This has created a worldwide level of interdependency that increasingly threatens to disrupt supply lines and markets at times of earthquakes, explosions, terrorist acts, and other disasters in one part of the world. Operating a lean organization in a global economy, the argument goes, results in more use of just-in-time inventory management and premium transportation for critical parts and other resources that are increasingly sensitive to such disruptions. Further, U.S. manufacturers in particular face a decline in capability as a result of vigorous outsourcing initiatives.
This seems to come at a time when outsourcing is still on the rise. I was reminded of this again in late March: Several MBA student teams, engaged in putting together business plans for the annual contest among budding entrepreneurs here at HBS, were awaiting the arrival of software being designed in India that would allow them to demonstrate smoothly-functioning Web sites important to their prospective businesses. Getting the software completed in India allowed them to concentrate on strategic issues in which their audiences would be more interested. But Indian software was also much more affordable on the limited budgets available to these student teams.
And End of the Line's arguments come at a time when labor mobility is once again being debated on the North American continent. In this case, it concerns the treatment of illegal immigrants already in the U.S. The fact that they are here and that millions of others have arrived in Europe suggests an increasing tendency for labor to seek global solutions. Whether this is good or bad depends on whether one believes that jobs are lost and wages reduced for U.S. citizens and legal immigrants or whether immigrants of any stripe help lower costs for all kinds of goods and services.
Some would argue that more fluid labor markets, increased outsourcing, and the tendency to locate jobs in low-cost labor markets, wherever they might be, could provide a safeguard against any calamity except perhaps a world war. This assumes that astute global managers outsource primarily non-strategic activities, act responsibly, and maintain positive working relationships on the local operating level, as well as establish multiple sources of supply. Is this a tall order for them to fill? Has globalization reached its peak? What do you think?
To read more: Barry C. Lynn, End of the Line: The Rise and Coming Fall of the Global Corporation (New York: Doubleday, 2005)
Readers: If you'd like to respond, please write in before the deadline of Wednesday, April 19 at 10 a.m. EST.