Magazine article Global Finance

The Challenges of Globalization

Magazine article Global Finance

The Challenges of Globalization

Article excerpt

In practice, globalization does not appear directly, but through a process that I call "continentalization." What I mean is that a number of building blocks make up the global economy-mainly the free trade zones NAFTA for North America, the European Union for Western Europe, ASEAN for Southeast Asia, and Mercosur for southern Latin America.

Free trade zones initially form their own borders to the rest of the world. This is necessary in order to harmonize standards of living and economic conditions on a continental basis. The lion's share of trade and direct investment is achieved within the regions anyhow. For example: Western Europe accounts for two-thirds of German foreign trade in manufactured

goods. It is therefore especially important for companies to be able to operate without trade barriers when doing business on a continental basis. But true globalization calls for an eventual opening up of these existing free trade zones.

What does an international company like Hoechst have to do in order to meet the challenges of globalization? First, we need cultural change. All employees should work in international teams or on international projects. That doesn't simply mean speaking a foreign language, it also means cultural sensitivity and overcoming national paradigms. At Hoechst we promote the international exchange of managers at group level. The bond of common nationality will be replaced by a common professional mission.

Second, we have to create new, flexible organizational structures. We have restructured Hoechst from a multidivisional conglomerate into a holding com pany consisting of focused and marketdriven, decentralized businesses that are responsible for their global operations.A flexible international network of companies can better cope with rapid changes in the global marketplace.

Third, globalization calls for a commitment to shareholders. …

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