Globalization and International Business Globalization

Globalization and International Business

Globalization & International Business

Today, more and more companies set a goal of territorial expansion into other countries with the desire to increase their customer base, access to resources (including capital, labour force, technologies and other commodities), all to culminate with an increase in corporate revenues. This desiderate has been achieved by some organizations due to the sustained efforts of globalization and market liberalization. Whereas market liberalization basically refers to the elimination of tariff and non-tariff barriers to international trade between countries, globalization is a more complex phenomenon that is becoming increasingly present in various domains, including economics, politics, technologies and even culture. And the occurrence of this phenomenon was only possible through the changes that occurred in the economic background during the past decades, namely the last thirty years. Another element that supported globalization was the internationalization of technologies. All these then affect the way in which companies conduct their global operations.

2. Economic Changes

The world has been the stage of continuous change ever since the beginnings of the Industrial Revolution, started more than two centuries ago and continuing up to present times. In more recent decades, the primary focus has been placed on encouraging and liberalizing international trade between countries. In this particular sense, several organizations have been established to regulate global commerce, such as the WTO, and numerous treaties and alliances have been signed between countries to ease trade and reduce barriers, such as the NAFTA. All these movements are concentrated under increased efforts to achieve an economic integration.

The primary change that has occurred and made possible the new features is given by a drastic change in the consumers' behaviours. However this change did not occur on its own but was encouraged by the corporations, it played a most vital role to the formation of the current global economy. In this line of thoughts, after the end of the World War II and with the occurrence of the Industrial Revolution, the populations' living standards increased and the levels of consumerism drastically increased. As such, so did the demand; and when the internal supply was insufficient to satisfy the growing needs, products began to be imported from other countries. Vice versa, with the technological improvements countries were able to better exploit the natural resource and produce greater output. The excess was then sold on the international markets. Today however, the natural resources have become insufficient and corporations are moving their operations to less developed countries as to get increased access to the natural resources.

A most relevant change also occurred in the patterns of work. In this sense, companies now place increased emphasis on the personnel and customer strategies. Employees have become the means of satisfying the customers' needs, which then represent the path to organizational success. Changes in the employment structures also occurred and a most relevant one is the outsourcing of work to foreign countries where the labour force is cheaper. This strategy has been met with both support and criticism as it has both positive as well as negative implications.

Other economic changes occurred in the way companies look at the future. They have become increasingly aware of the risks posed by international trade and they have developed several measures to help reduce the adherent risks. Foremost, today, increased emphasis is being placed onto the preservation of the natural environment and several laws have been issued in this sense. But however the government and state authorities still issue laws that regulate the business practices, their interventionism has reduced, most of the economies being guided by supply and demand laws.

3. Technological Changes

It is generally agreed that the technological revolution of the past few decades has had major contribution to the globalization of markets and productions. In New Technology and Catching Up, Freeman has gone as far as to state that the new technological changes represent a revolution as important as the textile innovations in the late eighteenth century, the invention of railways in mid nineteenth century and the flourishing of the chemical industry in the early twentieth century (Freeman, 1989).

Basically, the technological innovations have supported the unification of international markets as it eased communications and the data sharing process between players on the economic stage. "The revolution in information and communications technology involves a constellation of industries, such as computers, electronic components and telecommunications. These are among the fastest-growing industries in most leading industrial countries. The new technology has not only resulted in the introduction of a wide range of new products but, more importantly, has produced a drastic fall in costs and vastly improved technical performance in many other sectors of the economy. Of equal significance, the new technology is bringing about fundamental changes in the organization and structure of firms and industries, and changes in factory lay-out and in the management structure, procedures and attitudes of large firms" (Singh, 1994)

Ricardo's theory of Comparative Advantages has also been implemented in the technological sector in the meaning that countries began to trade technological appliances as to increase the efficiency of their operations and reduce costs. A most relevant example in this sense is given by the large amounts of technologies produced in India and then sold onto international markets.

4. Organizational Culture and Global Management