[MUSIC] When the last globalization stage started in the 1990s, there was this belief among many of those celebrating globalization that the world was going to start converging towards a more homogeneous place. And a lot of people only were even talking about the world that it's becoming, and that the convergence was many times related to this idea of Americanization of the world. What we're going to explore today is the following, first, the world is not flat, the world is actually very heterogenous and globalization did not lead to conversions. And second, we're going to then explore how to deal with these heterogenous world and what tools have been developed in order to analyze these great degree of diversity. [MUSIC] Let's explore some of these elements that were considered as the ones in which we were going to look at some commercials. Let's start with elements like culture, despite again, the integration of markets, and better communication, and all these kinds of things. The world realized, in the last few years, that actually people tend to like their culture. They like certain lifestyles they grew up with, they like their food, their music, their soap operas, their TV. All these kinds of things did not disappear with globalization, people might still consume Many products of many other countries. But people are still very jealous many times about what they grew up with, and again, about some of the things that define them as things they drink, things they eat, or a particular general lifestyle. A second element that was believed was going to happen or we were going to witness was more like a borderless world. I mean, since tariffs were decreasing, the idea that the fact that moves we're going to be moving around and people were going to be moving around, we're going to make the nation state increasingly irrelevant. Now, if there is something that was witnessed between the 1990s and the early 21st century, in this last stage of globalization, was that sometimes despite of globalization or actually. Because of globalization nationalism became stronger in all over the world, I mean we've seen examples of different ethic groups in different countries trying to call for independents like the Catalonians in Spain, like the Scottish in Great Britain. And many movements in many countries emerging political movement that emerged around a political platform that was around the idea of protecting their national identity. So actually the contact with people from other places of the world and the accessibility of products of many places of the world, instead of making the world borderless, made the world in many places more jealous about protecting their national identity. Which has had very important political consequences related to the two previous points, it's been discovered that, probably and surprisingly, people still prefer what is familiar to them. Let's take one example, now you can read newspapers from pretty much every country of the world online. However, research has shown that when you look at the people who are actually writing comments on the news of these global newspapers tend to be people from the countries in which these newspapers are published. Let's say a British person is not necessarily, reading an Australian newspaper, even though it's in English and even though that person can write comments on that. So it's been discovered that, people tend to, when going online to read about the news, they tend to go to the sources at least from their country or countries that are very associated to their countries. Similarly, global firms, the big multinationals, it's been discovered that they still tend to higher more local people. Local meaning, people from the headquarters of the multinationals, in the 1990s and 2000s, there was this big idea that global corporations we're going to be citizen less we're not going to have any particular citizenship. You could have a CEO from foreign country, a board composed from the people from many other countries, employees from all over the world, so it was believed that national Identity. For multinational was going to be lost and it's not happened, people from, let's say, I'm an American multinational, still tend to hire Americans, same for the Japanese, same for the French, and so on. So again, people, despite all of the globalization, even in these Issues that might sound superficial, like where do you get your news from? It's still people read from or still people to go the familiar elements, similar to what happens with something that looks superficial, as where do you read the newspaper We see consequences with global firms. It's been shown that many big multinationals still hire people from the country they're coming from. In the 1990s there was this widely held belief that the with the creation of global firms, firms were going to lose national identity, that you we're going to have a CEO from one place and abort try compose like people from many places and employees also from all over the world. At a degree, there's some truth on this, but in general firms, let's say American firms, it's been discovered, still tend to hire more Americans, Japanese firms, Japanese people and so on. So still familiarity is important at that level, and therefore, it shows that people still go towards what is familiar in terms of national identity and wouldn't find a convergence in this aspect. The most recent global economy started with the adoption of market reforms particularly in former communist countries. Now what was believed was that an adoption of market reforms meant that the world was as I mentioned before converging towards some homogenate, because it was believed, okay, now we're all. Capitalist countries and therefore things are going to look similar, again, this is not exactly what happened and there is a whole literature that has stopped about varieties of capitalism. The kind of capitalism that you find in Western Europe is not the same one as the one you find in places like Russia or the United States within Western Europe, capitalism in Britain is not the same as capitalism in Germany or Norway. And the way a country like South Korea Has become an economic power, well it's a capitalist country but that follows a different path like let's say, dominated by business groups as opposed to the kind of American capitalism dominated by big firms focused on a particular segment of the industry. So that lack of convergence in this aspect certainly force us to think in different ways about the different economies of the world. Again, there was no convergence in their economic system and there's no convergence either on the way they manage their economies. This leads us to another aspect in which there was no convergence which are political systems with the fall of many dictatorships in Latin America, or South East Asia. And again, the adoption of market oriented reforms there was this idea, again, that the world was convergence towards what is known as liberal market friendly democracies. Now this is not the case, elections are not conduct in the same way all over the place, they are not equally clean, even the constitutions are not written in the same way. So this was a big disappointment for those who believed that globalization was going to lead to convergence and this is not the reality. So again, this is another aspect in which no convergence again and this has implications for business. The implications of these slack of conversions cover most aspects of how a multi national operates in the global economy they go from what you offer in a particular country, how you offer that product or service. How the workplace is organized, how the negotiations with the government are going to be conducted or even how the production processes are going to be undertaken. So how do we deal and how do we evaluate this very heterogenous world? In which a corporation will operate, for this, Professor Pankaj Ghemawatt has developed a particular framework known as the CAGE framework. CAGE stands for Cultural, Administrative, Geographic and Economic distances. We'll explore each one of these elements of the CAGE analysis in the next videos. [MUSIC]
