UNIVERSITY OF LA VERNE La Verne
UNIVERSITY OF LA VERNE
La Verne, California
A Paper Submitted in Partial Fulfillment
of the Requirements for
BUS 695: Strategic Management
Taya N. Berry
College of Business and Public Management
Department of Business and Economics
May 6, 2018
Globalization exists in many industries in the world today. It is far more common now than it was back in the day. According to the text, globalization has two meanings. The First meaning is that globalization is the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information (DME, pg. 214). The second meaning is that globalization is the growing similarity of laws, rules, norms, values, and ideas across countries (DME, pg. 214). Companies take big risks when they diversify business abroad. These risks can present opportunity when trading among the nation. Opportunity occurs in more ways than one. As with everything else in life, there are advantages and disadvantages to globalization. Globalization has increased significantly in previous years. In a variety of industries, it is estimated that the rise of globalization will continue to increase and exceed the trade between nations. The increase of globalization has created huge business opportunities for multinational corporations (DME, pg. 214). In order to globalize an organization, one must understand the strengths and limitations of international strategies in the global marketplace so that the plan will be a success and not a failure.
Leaders play an important role in making the decision to globalize a company. It is their productivity and decision making that determines the fate for many businesses. The choices that executive managers make are taken into serious consideration because strategies would not be developed, and processes would never be implemented if the decisions did not lie in the hands of upper management. Organizations require their thought leaders to implement processes and extract the best problem solving skills that are utilized to ensure that companies operate seamlessly. My living case is on globalization. I will describe the impact that different decisions can have on an organization and how changing a leader’s thought process can make a huge difference in the overall success of its employees and mission.
In this paper, I will analyze Chapter 7 of the textbook which discusses the international expansion of a company which has motivations and risks. This chapter specifically discusses how some motivations and risks are associated with an international globalization strategy. I will also refer this discussion to chapter 8 which discusses human capital. I will use the global connectedness DHL article from Blackboard week 6 to provide further analysis regarding how to
obtain a successful global business as well. I will relate these chapters and topics to my organization. And lastly, I will incorporate information from the Ghemawat-Global Problem Solving Without The Globaloney.pdf Course Content.
I work for an organization named Providence St. Joseph Health- St. Mary Medical Center in Apple Valley, California. I have been working for this organization for almost a year now. My career has always been in the medical industry. I have 20 years of professional experience in the medical field. Providence St. Joseph Health-St. Mary Medical Center organization is a USA-based investment and is comprised of different hospitals. Each hospital is called ministries. In spite of its global vision, value proposition and pursuit of community stewardship and social responsibility, Providence has struggled for quite some time now to obtain significant investment funds until 2016. St. Joseph Health hospitals were acquired by Providence which is an organization that is considered to be one of the largest health care organizations in the industry. In order to accomplish the goals of the organization, persistent efforts, building the key elements (people, resources and business networks) for a successful venture despite the serious early financial constraints had to be achieved. Providence St. Joseph Health- St. Mary Medical Center is now the full name of the organization that I work for. St. Mary Medical Center is part of the Providence St. Joseph Health organization. The facilities that exist within the health system offer a wide variety of services within each of their respective regions. These regions are Northern California, Southern California, Montana, Oregon, Washington, West Texas, Eastern New Mexico, and India. India is the new expansion (https://www.stmaryapplevalley.com/about-us/).
St. Joseph Health was established in 1982. Our health care organization originated back in 1912. A small group of women who are now known as the Sisters of St. Joseph Orange travelled across the country to open a school and it eventually became a hospital in a town known as Eureka, California (https://www.stmaryapplevalley.com/about-us/). Currently, St. Joseph Health continues its tradition of the Sisters through acute care hospitals, home health care, rehabilitation programs, primary care clinics and a lot of other community outreach and wellness programs. In each community it touches, St. Joseph Health reaches out to care for the poor and vulnerable (https://www.stmaryapplevalley.com/about-us/). Aside from St. Joseph Health, St. Mary Medical Center for 60 years has grown to become a leader in medical excellence (https://www.stmaryapplevalley.com/about-us/). The small facility was built in 1956. This ministry is now a 212 bed hospital. The foundation of the core values are based on hospitality, dignity, justice, service, and excellence.
Providence began to do poorly financially. An executive decision was made by the powers that be to allow all of the ministries as a whole to be acquired by Providence. The decision was made to be globalized as well. Providence was in financial trouble. They wanted to acquire all of the ministries in order to help them become healthy financially and to grow and offer the best care to the local communities of the people that reside close to the ministries. Not only did they acquire the ministries, but they also acquired all that came along with the ministries (services, any financial debt, programs, etc). Providence was aware of the positives and negatives prior to making the decision to acquire St. Joseph Health.
The medical field is a complex industry. Providence St. Joseph Health has plans to continue to expand globally for better interest of the organization. “The first principle, devolution, emphasizes that not everything needs international coordination. It is based on the fact that most (such as China, India, and Brazil) have experienced slumps in their growth rates” (Ghemawat-Global Problem Solving Without The Globaloney.pdf, Course Content). Today, there are a total of 16 ministries. In this industry, motivations and risks are what will make a company take the leap of faith to globalize the organization. The motivation or benefits and the risks associated with international expansion, including the emerging trend for greater offshoring and outsourcing activity (DME, pg. 218). Once Providence purchased St. Joseph Health, immediate changes started to occur. Some of the human resources team was outsourced to India. The compensation department and other departments were outsourced to call centers out of the country. There were layoffs in different departments across the board. The first wave of layoffs were none patient facing positions. I am even starting to see within my department reduction on the workload being transferred to other areas of the company. At this time, job requisitions are at an all time low. Providence started cutting costs when it acquired St. Joseph-St. Mary Medical Center and all of the other ministries. There are a lot of reasons that motivates a company to pursue international expansion. One of the main reasons is to increase the size of potential markets for a firm’s products and services (DME, pg. 218). This is exactly one of the reasons why Providence made the decision to purchase St. Joseph Health. According to the text, expanding a firm’s global presence also automatically increases its scale of operations providing overall cost leadership strategies, such as an increase in revenues and asset base potentially enables a firm to attain economics of scale. This provides multiple benefits (DME, pg. 219). One of the benefits was to gain all of St. Joseph Health’s services that are provided to the sick. The costs of the services are profitable. It appears that St. Joseph Health ministries are suffering because Providence took over and now they are making changes to cut costs and people are losing their jobs. It looks as if they are looking after their own and they are doing layoffs with the St. Joseph Health employees. “Globalization itself, after surging through 2007, faltered in the wake of the financial crisis” (Ghemawat-Global Problem Solving Without The Globaloney.pdf, Course Content). Although the global expansion to India was a good move for Providence because it was cheaper, it was not in the best interest of the employees because they were replaced by people that worked for much less. It was a win for Providence but a loss for St. Joseph Health organization as a whole. We were doing fine financially and no talk of layoffs prior to the Providence merge. In my opinion, the global move was negative news for employees.
Providence St. Joseph Health-St. Mary Medical Center does the practice of human capital. In chapter 8, it emphasizes how one of the most important assets of an organization is to have strong skilled management or employees as a whole. For example, within the talent acquisition department, it is now approved to have the recruiters work from home twice a week. Our organization believes that if you give employees the luxury to have perks, the production may increase even more. It is strongly believed that a happy employee makes a productive employee. Employees are also trained and developed by career coaches. Advancement is encouraged in their careers. In the text, according to Stephen Gaal, founding member of Walnut Venture Associates, venture investors do not invest in businesses, instead, they invest in people…very smart people with high integrity (DME, pg. 256). Remote workers are one way that Providence is cutting costs because they can eliminate office space and not pay for things that they would usually pay for in an office setting. Providence is trying to cut back costs in every way possible in order to show that the purchase helped them more than hurt them. The idea of them expanding and becoming a global company was another move to decrease costs. The expansion to India was part of the strategy to decrease costs. In India, things are much cheaper. The cost of labor for employees are significantly lower. I believe that human capital was applied well with the employees as well.
Providence utilizes global connectedness with India and any other countries that they will be expanding with in the future. According to the global connectedness DHL article from Blackboard week 6, “Globalization has served as the world’s engine of progress over the past half century,” commented Deutsche Post DHL Group CEO Frank Appel”(The Global Connectedness Index, 2016, DHL, Course Content). “The GCI documents that globalization has finally recovered from the financial crisis, but faces an uncertain future. It is imperative that policymakers and business leaders support an environment in which globalization can continue to flourish and improve the lives of citizens around the world” (The Global Connectedness Index, 2016, DHL, Course Content). Providence stays connected with the world by utilizing DHL global connectedness. While this is a resourceful tool to use, it still does not solve the problem of financial crisis that Providence has. They are still trying to trim the costs at others expense such as people losing their jobs. There is a sense of urgency and global connectedness assists but not in every way that it was intended to be with the acquisition.
Lessons, Conclusions, Recommendations
Conclusion 1: Based on the information provided, it is evident that leadership has a big influence on making decisions for an organization to become global or not. Leadership is the process of transforming organizations from what the leader would have them become (DME, pg. 350, 2016). It was leadership that made the conscience decision to globalize the company. As mentioned earlier, it is the leaders that decide the fate of companies. In this case, globalization is the issue for the employees. Outsourcing jobs was one of the resolutions for Providence to gain more profit. According to the text, outsourcing occurs when a firm decides to utilize other firms to perform value-creating activities that were previously performed in-house. Outsourcing can either be a domestic or foreign firm (DME, pg. 225). As mentioned earlier, Providence outsourced a significant amount of work to India because employee labor is inexpensive. Offshoring was utilized as well. DME states that offshoring takes place when a firm decides to shift an activity that it was performing in a domestic location to a foreign location (DME, pg. 225). Global dispersion of outsourcing and offshoring was a positive thing for Providence but not for the employees. This was not a win-win situation.
Conclusion 2: As you can see, human capital was utilized within globalization decision making. As stated, employees were accommodated in more ways than one. The recruiters were allowed to work remote twice a week and career coaches were provided amongst other things. Although human capital was utilized, globalization was not a good strategic move for all employees especially those that have been and will be laid off. It appears that human capital that is being used for the remaining employees is so that these employees will not leave. It is a ploy to make these employees stay. A significant amount of employee’s jobs have been lost. With that being said, it is evident this was not a mutual gain for both employees that have lost their jobs or the organization. The only party that globalization was a win for partially was Providence St. Joseph-St. Mary Medical Center due to the fact that there were people that have lost their jobs and they are continuously losing their jobs now. There was an announcement this week that there were more layoffs at our sister hospital last week. We were told that the layoffs were over earlier this year but apparently that is just not true. The sad truth is that there are still more layoffs to come. There are always many phases of layoffs and the third phase is still to come.
Lesson: As a result of this discussion, the lesson learned in this globalization business decision is that Providence should have been better prepared with how their organization was operated through the years. In order to be prepared, a company has to stay abreast on all of what the competition does, technology, global connection, etc. “Being better prepared consists of first, an organization will be better off in the face of a financial crisis if its own vulnerability is limited. For example, if a company’s fiscal affairs are reasonably stable, if its inflation rate is low, its internal and external debt position is sustainable, and if its exchange rate is flexible. Second, an organization will be better off, if it has preserved the room to maneuver to respond to external shocks through the use of domestic policy instruments, primarily fiscal and monetary policies” (https://piie.com/commentary/speeches-papers/global-financial-crisis-lessons-learned-and-challenges-developing).
Recommendation: Based on the information that I have provided in this paper, I recommend that there should be a thorough strategic approach implemented before making haste decisions. “Not all the issues raised required the powers of global problem solving (as opposed to global exhortation). Many of them could be better handled at the regional, national, or local level. But there seems to be a tendency to attach the handle “global” to issues for no other reason than to give them extra emphasis. Given the limits on our capacity for global governance, cutting back on such globaloney is one way to concentrate that capacity where it really matters” (Ghemawat-Global Problem Solving Without The Globaloney.pdf, Course Content). There are other ways that an organization can try to alleviate an organizations financial crisis other than going global. An organization does not always have to globalize a company in order to stabilize the finances of a corporation. There should be a process that should be followed prior to making the decision to go global. It appears that Providence mismanaged their monies and they acquired other companies to make up for their inadequacies financially and in more ways than one. This method of a temporary fix is like putting a band-aid on a wound but there is no treatment so the condition gets worse as time goes on. Now that Providence has acquired all of St. Joseph Health ministries and they have now seen that the purchase was not the answer to their problems because the financial situation is not better and they are continuously laying off more employees. Another recommendation is to address all financial concerns within a business and rectify all financial issues and make the company financially healthy again and then make a decision to merge with another organization once all debts are no longer in the negative.
Dess, G. G., McNamara, G. & Eisner, A. B., (2016). Strategic Management Text & Cases
(8th ed.).New York, NY: McGraw-Hill
https://piie.com/commentary/speeches-papers/global-financial-crisis-lessons-learned-and- challenges-developingThe Global Connectedness Index, 2016, DHL, Course Content, Week 6
https://www.stmaryapplevalley.com/about-us/Ghemawat-Global Problem Solving Without The Globaloney.pdf, Course Content Week 6