Globalization

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Globalization is a process whereby businesses expand their reach beyond their domestic boundaries and deal in markets around the world, apart from their own local and national markets. When a company takes its business to this extreme they stand to profit from the larger market, and the economy of of their own country profits from the increased tax revenue and disposable income of its employees. The countries in which they do business also profits for the same reasons, more jobs, more purchases, more taxes. Globalization promotes prosperity in all of the countries that embrace it.

Globalization with Spotlight on Global Manufacturing

The merits and demerits of global manufacturing, for example, are hotly debated. While global manufacturing creates employment opportunities in foreign countries that either fulfill the demand for outsourced work, or hold the factory that the manufacturer builds in their country, it also exploits labour at a very low cost compared to the home country. Let us consider the benefits and ill-effects of globalization.

Some of the benefits of globalization are as follows:

  • Promotes foreign trade and liberalisation of economies;
  • Increases the living standards of people in several developing countries through capital investments in developing countries by developed countries;
  • Benefits customers with lower pricing as companies outsource to low wage countries;
  • Outsourcing manufacturing helps the companies’ bottom lines to be competitive by keeping the cost low, with increased productivity;
  • Promotes better education and jobs;
  • Leads to free flow of information and wide acceptance of foreign products, ideas, ethics, best practices,and culture;
  • Provides better quality of products, customer services, and standardised delivery models acrosscountries;
  • Gives better access to finance for corporate and sovereign borrowers;
  • Increases business travel, which in turn leads to a flourishing travel and hospitality industry across the world;
  • Increases sales as the availability of cutting edge technologies and production techniques decrease the cost of production;
  • Provides several platforms for international dispute resolutions in business, which facilitates international trade.

Global companies

Global companies are ones that invest in other countries for business and also operate from other countries. Global manufacturers operate multiple manufacturing plants across the globe, or outsource to factories around the globe, to enable themselves to cater to multiple foreign markets or just to have goods shipped back home and show savings on total costs to bring a product to their domestic market.

Going Global

A company transitions from domestic to international by entering one or more foreign markets as an exporter or importer. Competing on a truly global scale comes later, after the company has established operations in several countries across continents and is racing against rivals for global market leadership. Thus, there is a meaningful distinction between a company that operates in few selected foreign countries and a company that operates and markets its products across several countries and continents with manufacturing capabilities in several of these countries. Companies can also be differentiated by the kind of competitive strategy they adopt while dealing internationally. Multinational strategy and global competitive strategy are the two types of competitive strategy.

Multinational strategy
– Companies adopt this strategy when each country’s market needs to be treated as self contained. It can be for the following reasons:

  • Customers from different countries have different preferences and expectations about a product or aservice.
  • Competition in each national market is essentially independent of competition in other nationalmarkets, and the set of competitors also differ from country to country.
  • A company’s reputation, customer base, and competitive position in one nation have little or no bearing on its ability to successfully compete in another nation.

Some Examples of Multinational Competition:

  • beer,
  • life insurance, and
  • food products.

Global competitive strategy
– Companies adopt this strategy when prices and competitive conditions across the different country markets are strongly linked together and have common synergies. In a globally competitive industry, a company’s business gets affected by the changing environments in different countries. The same set of competitors may compete against each other in several countries. In a global scenario, a company’s overall competitive advantage is gauged by the cumulative efforts of its domestic operations and the international operations worldwide. A good example to illustrate is Sony Ericsson, which has its headquarters in Sweden, Research and Development setup in USA and India, manufacturing and assembly plants in low wage countries like China, and sales and marketing worldwide. This is made possible because of the ease in transferring technology and expertise from country to country.

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