Global Perspective
Global Perspective
The use of the parent´s currency in the evaluation process may overemphasize the importance of the parent currency, thus affecting the way the operations of the ME are conducted. A possible consequence is that the overall financial results are not optimized on global basis. One can argue that there is a lack of a multinational or global perspective. Likewise, using the subsidiary´s currency means similar shortcomings to using the parent´s currency, that is, attaching too much importance to the subsidiary´s currency and, consequently, lack of global perspective. The issue is similar regarding the analysis of exposure to exchange rate fluctuations. An analysis on a subsidiary by subsidiary basis lacks global perspective. Analyzing the exposure globally but in the parent´s currency attaches too much importance to the parent´s currency. Analyzing the exposure in each currency but from a global perspective may many times prove to be an unsurmountable task.
If an enterprise wants to be considered truly multinational, it must have a global perspective and hence adopt a global strategy. A global strategy means a plan whereby an enterprise stakes its major business decisions, by taking into account global opportunities, global alternatives, and future global consequences. It means that a decision-maker frees himself/herself from any national binders and considers world markets and world-resource locations and not simply the markets or resources of a particular country in isolation. Furthermore, the aims of a global strategy is to maximize results on a multinational basis rather than to treate international activities as a portifolio of diverse and separate country companies (Robock and Simmonds, 1973).
Developing a global strategy depends upon the way executives think about doing business around the world. The design and implementation of a global strategy requires that managers in both headquarters and subsidiaries follow a worldwide approach which considers subsidiaries as neither sattelites nor independent city-states but as parts of a whole the focus of which is on worldwide as well as local objectives. Each part of the system makes its unique contribution with its unique competence. This approach named 'geocentrism' by Perlmutter (1969) requires a reward system for subsidiary managers which motivates them to work for worldwide goals and not just defend country objectives (Robock and Simmonds, 1973).
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pontus.troberg@shh.fi