Task: 02

Globalization is due to a host of factors including worldwide investment, production and

marketing, advances in telecommunication technologies and the internet, increases in world

travel and the growth of global media (Ozsomer & Simonin, 2004). The best definition was from

Rahnema (1998) who saw globalization as “...the decline of the nation-state due to the forces of

technology and the world market and the resulting assertion of cultures, ethnicity, nationalities,

pluralism and the violence of terrorism and fundamentalism”.

Velho (1997) has spoken of globalization as an object, a perspective and a horizon. The object

approach involves thinking of globalization as a single process, as if ‘it’ were being addressed

from an Archimedean standpoint. Many books and articles on globalization, not least written by

sociologists, stipulate that there are three major dimensions of such: the economic, the political

and the cultural. The latter, the cultural, has come increasingly to the fore partly because of the

concern with economic globalization (George, 2007). Several key trends drive the globalization

of the world economy and, in turn, force businesses to consider international operations to

survive and prosper. Some of the most important trends include falling borders, growing cross-

border trade and investment, the rise of global products and global customers, the growing use of

the Internet and sophisticated information technology (IT), the role of emerging markets in the

world market, and the rise of global standards of quality and production (K. Praveen & Jhone,

2017).

Defining as “global” a company that derives at least 20 percent of its revenues from each

of the three so-called triad regions—North America, Europe, and Asia Pacific—and not more

than 50 percent from any one region, a book-length study of 2001 data by Rugman (2005) finds

that only nine of the Fortune Global 500 firms qualify as truly “global.” These firms are:
From North America: IBM, Intel, Coca-Cola. From Europe: Philips (the Dutch electronics

company), Nokia (Finland), LVMH (French luxury goods). From Asia: Sony, Canon, Flextronics

(the Singaporean electronics component manufacturer) (Johansson & Johny K., 2009)

Globalization of markets involves the growing interdependency among the economies of

the world; multinational nature of sourcing, manufacturing, trading, and investment activities;

increasing frequency of cross-border transactions and financing; and heightened intensity of

competition among a larger number of players (Thomas Hout et al, 1982). This phenomenon has

been fueled by advances in communication and transportation technologies, the spread of

economic growth and wealth around the world, the loosening of barriers to trade, and the

formation of regional economic blocs (Arnoldo, 1989). Globalization of markets is best reflected

in the "internationalization" of business transactions. This means that one or more aspects of

economic

activity carries an international character. According to S. Tamer Cavusgil, in 1993 “One of the

parties to the transaction may be a foreign partner; the transaction may involve a foreign

currency; financing may involve foreign lenders; technology may originate from a foreign

partner; and so on”. As well as it is possible to identify at least five dimensions or facets of the

globalization of markets. First is the fluid nature of manufacturing and sourcing activities.

Today, business activity flows freely to places best equipped to perform it most economically

and efficiently. Second, competition for customers and markets has intensified significantly as a

result of globalization. 5 Whereas only a handful of multinational companies dominated

international trade a couple of decades ago, today companies from all parts of the world are

participating in worldwide business. Companies from practically every nation are jockeying for

positions in various industries. Third, the types of international business transactions have
proliferated. In the past, much of international business activity was in the form of export-import

and foreign direct investment. Today, transactions are varied and more complex: contract

manufacturing, franchise operations, countertrade, turnkey construction, technology transfers,

international strategic alliances, and more. Fourth, technology spreads freely and rapidly between

markets and players. Technological leadership does not provide a monopolistic advantage for

very long. Companies must capitalize on their discoveries quickly, before others match them.

Fifth, borrowing-financing activity has become worldwide as well. Businesses finance their

growth and expansion through international capital markets. As such, they are able to take

advantage of varying interest rates and currency markets by tapping a wide variety of funding

sources.

The implications of the increasingly global nature of market transactions are many. In a

fundamental sense, it makes the distinction between domestic and international redundant and

superficial. It threatens those players that confine themselves to a narrow set of opportunities and

it rewards those that can envision and operate in a larger space.6 Those enterprises that learn to

operate in a more complex, uncertain environment are more likely to succeed. As transactions

gain international character, they have a drastic impact on firm performance and industry

structure. On one hand, global linkages may shorten product life cycles, create intense price

pressures, displace manufacturing, outdate technology or design, or simply cause sales and

profitability declines. On the other hand, global exchange may lead to new growth opportunities,

new sources of know-how and production inputs, new product ideas, or partnerships which cause

synergy and new sources of competitive advantage. Entire industries, if caught unprepared, can

be lost to competitors due to the realities of global competition. In the United States, we have all

observed the decline of industries such as steel, textiles, shoes, tires, and electronics. Many other
lesser-known industries have faced near extinction: musical instruments, motorcycles, and

outboard engines, to name a few.

Globalization raises many practical issues and concerns for the individual business

enterprise. What sorts of guidelines and input should guide product design? How desirable are

knowledge-sharing agreements? Joint development of technology and know-how? What are

ideal features of international business partners? How should management monitor competitive

activity? How can competitive advantages be created and sustained? What degree of attachment

is optimal to alternative sourcing and production locations around the world? Management has to

grapple with these and many other similar questions on an ongoing basis. In most industries, this

is not a matter of choice but of necessity. No one line of business or industry is totally immune

from international competition. In truly global industries, competition is among a relatively few

dominant companies around the world. Examples are earth-moving equipment, automobiles,

pharmaceuticals.

References

Arnoldo C. Hax, Building the Firm of the Future, SLOAN MANAGEMENT REVIEW,

Spring 1989, at 75; Levitt, supra note 1, at 93.

George Ritzer (2007). The Blackwell companion to globalization / edited by George Ritzer

p. cm.Includes bibliographical references and index.ISBN 978-1-4051-3274-9

Johansson & Johny K. (2009). Global marketing: foreign entry, local marketing, & global
 Management. 5th ed. p. cm. Includes bibliographical references and index. ISBN-13:

978-0-07-338101-5 (alk. paper) ISBN-10: 0-07-338101-2 (alk. paper)

K. Praveen Parboteeah & John B. Cullen, (2017). International business : perspectives from

developed and emerging markets. Description: Second edition. | New York, NY :

Routledge, 2017. | Includes bibliographical references andindex.Identifiers: LCCN

2016050586| ISBN 9781138122413 (hbk) | ISBN 9781138122420 (pbk) | ISBN

9781315650517 (ebk) | ISBN 9781317307228 (mobi/kindle)

Ozsomer, A., & Simonin, B. L. (2004). Marketing program standardization: across-country

exploration. International Journal of Research in Marketing, 21(4), 397−414.

Rahnema, Majid and Bawtree, Victoria. (1998). The Post-Development Reader. Atlantic

Highlands, NJ:Zed Books.

Rugman, Alan M. The End of Globalization. New York: Amacom, 2001. The Regional

Multinationals: MNEs and “Global” Strategic Management. Cambridge: Cambridge

University Press, 2005.

S. Tamer Cavusgil, (1993). Globalization of Markets and Its Impact on Domestic Institutions.

Indiana Journal of Global Legal Studies, (Vol. 1: 83).

Thomas Hout et al., How Global Companies Win Out, Harv. Bus. Rev., Sept.-Oct. 1982, at
 98; COMPETITION IN GLOBAL INDUSTRIES, supra note 1, at 18.

Velho, O. 1997. ‘Globalization: Object, perspective, horizon’. In L.E. Soares (ed.),

Cultural Pluralism, Identity, and Globalization, 98–125. Rio de Janiero: UNESCO and

Candido Mendes University.