The Globalization CaseEssay Preview: The Globalization CaseReport this essayWith reference to alternative viewpoints and empirical evidence, answer the following question: “The globalization of international business: what is it and has it happened?”
1 IntroductionInternational business and globalization are always intertwined in discussions because the two facilitates each other. The study here looks at the process of globalization in international business. The essay begins by identifying the definitions of “globalization” and “international business”. For international business, three features stand out: the integrated national markets, attempt to seek the most advantageous location for each business process, internationalization of firms(Morrison,2009). The essay will examine these aspects within the scope of globalization and the forces behind. Statistics will be used to illustrate the presence and trend of globalization in international business.
The essay’s second element is the concept of “invisible hand” and its implications on globalization. Globalization can also be described as an “invisible hand of change” or as a state of continuous change, meaning the emergence of a new global society. This new “invisible hand” is defined as a powerful force. This force is not only in the state of absolute change but also in those processes that bring about that new state of transition. There are three things that come into play. Economic processes and governments. When you look at economic policies and governments for one moment, then the idea is clear: a new world is coming. While economic policies and governments may be discussed as being the most important factor in changing the direction of globalization, the main goal of globalization and in this context, as it pertains to the emergence of new global economic processes, is a change in their dynamics. The above considerations are then examined in a “tribal” setting which examines a larger set of questions. The essay concludes, “In the context of the global economy, the new process is not only the beginning of change but also the beginning of some of its dynamics. There is a more pressing question, what is the economic process that brings about the change? In the global sphere we find the emergence of new processes, whether in private sector, corporate and national level, as well as globalized, large scale economic development, and economic growth.” The final question is “Why is globalization occurring so often and economically so rapidly? The main factor that we can look into are the macroeconomic and the international factors. I believe the most interesting way to view global business in the modern context is in relation to their dynamics.”
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2 Concepts of Globalization and International BusinessIn essence, globalization is the process of growing interdependence among nations(Daniels et al, 2011). International business consists of all business activities carried out across national borders. This definition includes not only international trade and foreign manufacturing but also the growing service industry(Ball et al,2010).
3 GLOBALIZATION OF MARKETThe globalization of markets means the merging of separate national markets into one global market (Hill,2011), applies to standardized products, but for some consumer goods,diversity of preferences persists(Morrison,2009). It alters the operation strategies of firms which intend to gain from the global market. Converging tastes and preferences of consumers in different countries are the result of integration of cultures. It is both the promotor and impact of standardizing products brought by the globalization of markets. Firms like McDonalds and IKEA are more than just benefactors of the globalized market,they also facilitates it(Hill,2011). Globalized market applies to industrial products, agricultural produce, oil and other fuels, IT and financial products(Morrison,2009). Theodore Levitt foresee this merging of markets and the homogenization of cultures(Levitt, [1983] 1993) but he underestimated the significance in language and religious differences(Cavusgil et al,2008).
Vodafones strategies of product standardization and global branding have made it benefits from the globalized market(Cavusgil et al,2008). Firms like Vodafone are able to source globally and deliver products to global market, adapted to different tastes at competitive prices. The globalization of production, therefore, has been decisive to market success. (Morrison,2009)
4 GLOBALIZATION OF PRODUCTIONThe globalization of production refers to the sourcing of components and services globally to take advantages of national differences in the cost (Hill,2011). Technology development enables firms to separate the manufacturing process into stages each in different locations and manage them through networks(Morrison,2009). Emerging countries are seen as attractive locations with their low-cost labour and the market potential consisting of large population (Morrison,2009).
5 INTERNATIONALIZATION OF FIRMSInternational operations of firms are affected by the operating environment including social and competitive factors(Daniels et al,2011) which will be discussed in the next section.Therefore internationalization strategies such as establishing FDI and outsourcing have been adopted by firms aiming at expanding sales,acquiring resources and minimizing risk(Daniels et al,2011).
5.1 Foreign direct investment (FDI)Constantinescu(2008) suggests that the globalization appears when the companies, the nations are in persistent competition in the attraction of investments. It can be seen that foreign investment plays an important role in the globalization of international business.
According to The Organization for Economic Co-operation and Development, FDI refers to a situation of owning at least 10 percent in a foreign companys shares and aims to maintain a lasting interest in the host country(Sitken et al,2010). However most FDI flows towards a few major developing countries, such as China, while many poorer developing countries have received little FDI due to the poor infrastructure. (Morrison,2009)
5.2 OUTSOURCINGOutsourcing or offshoring occurs when a firm contracting out of a function specifically to a low-cost country in order to take advantage of low-cost operation. Thus developing countries like India and China are popular offshoring locations for developed countries like US and UK(Buckley et al, 2004,cited in Morrison,2009). Pangea3 is an example of service outsourcing firm in India. It helps U.S. companies enhance their efficiency and reduce cost by having routine legal work done in India in stead of U.S.. (Hill,2011)
Despite the expanding multinational enterprises(MNE), there is a bunch of “born-global companies” emerged with a global focus established by founders with international background which aims at global market from the very beginning(Daniels et al,2011).
6 DRIVERSThe drivers of globalization in international business have remained constant