StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Major Trends in Globalization - Essay Example

Cite this document
Summary
The essay “Major Trends in Globalization” will focus on key elements and dynamics of global strategy, including the definition of global strategy, reasons for adopting the global strategy, how companies globalize, factors affecting the globalization strategy, and major trends in globalization…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.1% of users find it useful
Major Trends in Globalization
Read Text Preview

Extract of sample "Major Trends in Globalization"

 Major Trends in Globalization Introduction Globalization is one of the most influential forces affecting almost every aspect of life. With the emergence of new technologies that dismantled the geographic barriers that separated different countries and regions of the world, the world has become a global village. Today, communication across different parts of the world is possible, easier, cheaper, and convenient. For example, sending an email from the US to China is amazingly easier. With globalization growing, it has affected the business environment significantly. The emergence of large multinational and regional companies operating across many markets across the globe is evidence of the effect of globalization. In fact, many companies are now considering expanding beyond the domestic markets. The globalization phenomenon is real. However, it is important to understand what it really entails and how companies adopt global strategies. Many companies have experienced failure in their globalization strategies because of failing to understand globalization dynamics leading to adoption of poor globalization strategies. The principal purpose of this essay is to explore global strategy. The essay will focus on key elements and dynamics of global strategy, including the definition of global strategy, reasons for adopting the global strategy, how companies globalize, factors affecting the globalization strategy, and major trends in globalization. The essay will be organized into three main sections including the introduction, the body, and the conclusion. The introduction provides an overview of the topic and the structure of the essay. The body of the essay will provide a detailed discussion of the key concepts of the global strategy. This section will be divided into different sub-sections. Finally, the conclusion will provide a summary of the main points discussed in the essay and make concluding remarks. Global Strategy Before defining global strategy, it is important to begin with the understanding of globalization. Globalization may have different definitions depending on what aspects are under consideration (see Arnett, 2002). According to Prakash (2002), globalization has multiple dimensions including economic, political, social, and cultural dimensions. For example, globalization of human resources refers to the globalization of human resource (Rioux, Bernthal & Wellins, 2000). However, globalization from aneconomic perspective refers to the process whereby businesses expand out of their domestic markets to foreign markets (Krishnan, 2009). While this definition of globalization seems simple, the reality is that even economic globalization is a complex phenomenon. As Yeung (2000, p. 267) notes, globalization comprises of an intricate set of power relations and tendencies, which can transform social life completely by introducing a new spatial order. For example, the past economic crises affecting the world show how intricate globalization can be. Although the 2008/2009 crisis emerged from a few countries especially the US, the impact was felt across the world. With the emergence of globalization, many businesses identified new opportunities for growth in foreign markets. Therefore, they moved into foreign markets to tap these opportunities. These companies adopted global strategies. Therefore, the global strategy can be perceived to be the strategy adopted by a company that seeks to expand beyond the domestic market. Just like in globalization, the global strategy does not imply a single strategy. However, the underlying factor is that it represents the strategy used by companies to explore global markets. Different multinational companies have adopted different globalization strategies. These will be explored in detail in another section. In developing a global strategy, companies often take different steps. According to Yip (1989), the global strategy comprises of three steps including development of core strategy, internalization of core strategy, and globalization of international strategy. In the first step, the core strategy forms the basis of a firm’s sustainable competitiveness. This core strategy is developed before a firm actually expands outside the domestic market. In the second step, the firm starts to expand its activities to foreign markets by using an adaptation strategy. The adaptation strategy will be discussed in detail in a different section. In the final step of the global strategy, companies integrate the strategy across the different markets. Based on this conceptualization of global strategy, Yip (1989) identifies five levers that make a global strategy; market participation, product offering, marketing approach, location of value-added activities,and competitive moves (p. 31). Reasons for Business Globalization Since the emergence of globalization, many companies have adopted a global strategy. This trend implies that there are certain factors that are attracting companies to expand globally. There are various potential reasons for business globalization. Different companies will have different reasons for going global. However, some of the reasons are quite universal. It is the prioritization of the reasons that makes the difference between companies. Some of the most cited reasons for business globalization include technological growth, trade liberalization, growing labor mobility, concentration in domestic markets, and growing opportunities in new markets. Technological Growth –the emergence of new technologies has played a major role in the globalization of businesses. One of the main technological developments that have had a significant influence of the growth of globalization is the internet technology. The emergence of the internet technology transformed how people from different parts of the world communicate. Before the internet, real-time communication was quite a challenge because of the costs and barriers that existed. However, the internet resolved these challenges. Businesses could use the internet to communicate with customers across the world. Today, almost every company has a website or other social media platforms. With the internet technology, businesses could expand their business to the regional and global arenas more conveniently. For example, many companies are now using e-commerce by selling their products online (Laudon& Traver, 2007). Apart from the internet technology, other technologies such as telecommunication and transport technologies have also reduced berries to international trade. For example, businesses can now transport goods and labor faster and more conveniently using air transport or electric trains. Moreover, business meetings across company offices across the world can be held virtually using e-conferencing. Technology is at the core of business globalization. Trade Liberalization – trade liberation has also been a major reason for business globalization. There are now many regional trading blocs across the world, which have eliminated any economic barriers that prevented trade between countries (Garrett, 2000). For example, the formation or European Union, African Union, OECD, and Asia-Pacific Economic Cooperation have enhanced international trading because the economic barriers such as high taxation policies have been eliminated or reduced. Although formation of Free Trade Agreements is influenced by multiple factors, the elimination of trade barriers to create open markets to international trade is one of the main factors (Urata, 2002, p. 25). Labor mobility –there has been growing labor mobility since the globalization of production. In fact, Silver (2003) talks of a new phenomenon known as internationalization of labor to imply the current status of labor mobility where the divide between the North and South is almost irrelevant today. Companies have taken advantage of this labor movement to go global because they can source labor from almost anywhere in the world. For example, many multinational companies have entered China because of the cheap labor available there (Zhang, 2001; Ali & Guo, 2005).Many more multinational companies are offshoring and outsourcing labor thanks to the growing labor mobility. Concentration in Domestic Markets – companies also choose to expand to foreign markets because of the growing concentration in their domestic markets. The growing competition in the domestic market could reduce the opportunities for future growth in that market forcing companies to look across the borders for more opportunities for growth. This is evident in the US where blue-chip companies are now looking to foreign markets for sustainable growth because the domestic market is already concentrated (Oakley, 2011). The same trend is also evident in emerging economies such as China and India. Opportunities in Emerging Markets – emerging markets are the new frontiers in business globalization. Emerging markets present numerous opportunities for companies to grow. Some of these opportunities include large market potential, cheap labor, cheap raw materials, and limited competition compared to developed markets. In a recent study to identify the determinants of foreign direct invest in BRIC countries, Ranjan and Agrawal (2011) established that these emerging economic powers had multiple opportunities including macroeconomic stability, infrastructure facilities, large market sizes, cheaper labor costs, and better growth prospects. In another similar study, Jadhav (2012) established that large market size, trade openness, and macroeconomic stability as key drives of foreign investment in BRICS economies. However, the BRICS countries are not the only emerging markets with opportunities that drive foreign investment inflows. Bremmer (2015) identifies seven emerging markets that have significant opportunities for foreign direct investment including Malaysia, Indonesia, Kenya, India, Colombia, Poland, and Mexico. Approaches to Business Globalization When adopting global strategies, companies are confronted with the challenging decision of which approach to use. The two dominant approaches in business globalization are standardization and adaptation. In standardization, companies apply a uniform strategy across all markets (Wind, 1986). The standardization approach is well exemplified by a common marketing strategy. A company using the standardization approach will use the same marketing strategy for all markets including the same product strategy, pricing strategy, promotional strategy, and distribution strategy (Theodosiou&Leonidou, 2003). The adaptation strategy differs from the standardization approach in that it does not apply the uniform approach. Instead, a company treats each foreign country as unique and develops customized strategies for each market. In this approach, a company considers the specific local conditions in different markets and then adapts its strategies to these conditions (Wind, 1986). Companies often consider the advantages and disadvantages of the two approaches when selecting which to apply. The advantages of the standardization approach include the economies of scale and simplicity. Since the company uses a uniform approach, the cost of globalization is much lower than when the company has to adapt the strategies to suit each country. However, the standardization approach is criticized for being over-simplistic and unrealistic in the sense that it negates some critical differences among countries in terms of culture, consumer needs, purchasing power, technological development, and laws (Theodosiou&Leonidou, 2003).The adaptation approach is considered to be appropriate because of addressing these market differences. However, the approach is criticized for being too complex and costly(Wind, 1986). The standardization versus adaptation approaches have been criticized for being problematic. According to Ghemawat (2007), the two approaches are based on assumptions that hide the possibility of other approaches to global strategy. To address this problem, Ghemawat proposed the AAA Triangle. According to this model, multinational companies can choose to use either one or a combination of three approaches in their globalization strategies. The three approaches include aggregation, adaptation, and arbitrage. The aggregate and adaptation approaches are not new in this new model. The only new feature is the arbitrage approach, which entails differences such as when offshoring some critical processes to nations with cheap labor. According to Ghemawat’s AAA Triangle, companies that intend to globalize often consider the prevailing circumstances when selecting the specific strategy to apply. Specifically, Ghemawat (2007) argues that the predominant business expense should be a major factor in determining the appropriate approach to use. The aggregation strategy is more appropriate when a company has more focus on research and development. The adaptation strategy is more appropriate when a company has a significant investment in advertisement. Finally, the arbitrage approach is most appropriate when most of the company expenses are labor expenses. Despite the criterion of business expense for selecting the most appropriate approach to globalization. Ghemawat (2007) also notes that companies should be ready to change their approach to globalization depending on the changing business needs. Apparently, adopting a rigid framework denies multinational companies from exploring the broad range of opportunities available. For example, multinational companies can change from one approach to another or combine several two or the three strategies. For example, a company such as Tata Consultancy Services integrates the arbitration and aggregation strategy in its global operations (Ghemawat, 2007: 1). Factors Affecting Business Globalization The decision to globalize business operations is determined by multiple factors including economic and non-economic factors. Although the potential opportunities and threats are part of the main considerations for most companies, it is important to consider the specific factors to have a clear understanding of potential opportunities and risks. One of the best models for understanding these factors is the PESTEL model. The PESTEL model is an effective model for analyzing new markets for potential opportunities and risks. This model focuses on six elements including political factors, economic factors, sociocultural factors, environmental factors, and legal factors (Yüksel, 2012). Political Factors – political factors represent issues such as political stability, political risks, and government policies. Different countries have different political issues, which affect business operations including foreign businesses. For example, when Google entered the Chinese market, it had to confront the government’s restrictions by adapting its services to be in line with these government policies (CNN Money, 2012). Economic Factors -economic factors include aspects of a country’s economysuch as taxation, cost of production, and economic growth that affect businesses. Different countries have different economic conditions that multinational companies often consider when making decisions regarding globalization of business. According to Chand (2014), economic factors affect the value creation and movement of goods. Socio-cultural Factors – socio-cultural factors include values, norms, and cultures of people from different countries. These factors affect people’s behaviors and attitudes. For example, consumer purchase decisions may be influenced by their cultures. Companies must consider cultural issues when adopting globalization strategies (Leung et al., 2005; Musso & Francioni, 2009). For example, the standardization approach may be appropriate when cultural diversity between the domestic market and the foreign market is low. Technological Factors – technological developments and infrastructure also determines companies’ globalization strategies. Developed countries have better technological infrastructure than developing countries. Therefore, when considering globalization from the developed to the developing countries, multinational companies will consider the available of critical technologies for production, communication, and supply chain management among other critical business activities. Environmental Factors – with the growing concerns over the environmental sustainability and corporate social responsibility, understanding the environmental policies and lows in different countries is also an important factor in the global strategy. Some countries have strict environmental laws such as pollution laws, waste management laws, and land-use policies that will affect a company’s operations. Legal Factors – different countries have different laws and constitutions. Understanding the legal environment in different countries plays a major role in decisions regarding global strategy. For example, the mode of entry that a company chooses to use in entering a foreign market will partly be based on the country’s laws regarding foreign investment avenues (Koch,2001). From the six factors discussed above, there is a clear line separating market factors and non-market factors in the global strategy. The non-market environment comprises of the political, socio-cultural, environmental, legal, and institutional factors. Although these factors are not directly linked to the market factors, they play an important role in the global strategy. Multinational companies should consider the non-market environment as well when developing their global strategies. Ignoring these factors can lead to failure of such global strategies. Major Trends in Globalization One of the major outcomes of globalization has been the emergence of large multinational companies such as Wal-Mart, Samsung, Toyota Motor Corporation, Google, and Boeing. Such multinational companies have become more powerful in that they lead in their respective industries. However, some of the recent trends may change this. For example, there is an ongoing shift in power dynamics from the traditional North-South relationship (Piskurich, 2014). New companies from the emerging markets such as Samsung Electronics are taking over as the global leaders in globalization. Traditional global brand such as Nokia are no longer as strong as they used to be. Additionally, new policies and laws are being developed that will shape the future of global strategy. The association of multinational companies with unethical business practices has necessitated the adoption of new policies and regulations to reduce such risks. This is causing a paradigm shift in multinational companies from profit-orientation to purpose-orientation (Cassandra, 2012). These and other trends will continue to shape globalization in the future. Conclusion Globalization is a complex issue. However, this has not prevented companies from adopting global strategies. Moreover, many works on globalization and global strategies have emerged. Multinational companies are faced with difficult situations where they have to consider multiple factors and approaches in their global strategies. Failure to consider all the relevant factors and possibilities may cause unintended failures in business globalization. The changing global environment and emerging trends are also complicating globalization strategies. However, the existence of successful multinational companies implies that adopting an effective global strategy is possible. For this to happen, firms must be keen in understanding all aspects of globalization. References Ali, S., & Guo, W. (2005). Determinants of FDI in China. Journal of global business and technology, 1(2), 21-33. Arnett, J. J. (2002). The psychology of globalization. American psychologist, 57(10), 774. Bremmer, I. (2015). The new world of business. Fortune. Retrieved from http://fortune.com/2015/01/22/the-new-world-of-business/ Cassandra. (2012). Global trends for 2013: A top ten for business leaders. The Economist. Retrieved from http://www.economist.com/blogs/theworldin2013/2012/11/global-trends-2013 Chand, S. (2014). 7 factors influencing globalization – discussed! Retrieved from http://www.yourarticlelibrary.com/globalization/7-factors-influencing-globalization-discussed/22639/ CNNMoney. (2012). Google blocked in China as government leaders meet. Retrieved from http://money.cnn.com/2012/11/09/technology/google-china-blocked/ Garrett, G. (2000). The causes of globalization. Comparative political studies, 33(6-7), 941-991. Ghemawat, P. (2007). Managing differences: The central challenge of global strategy. Harvard Business Review. Retrieved from http://mbi.dirkjanswagerman.nl/static/files/MBI/Module%2021/Managing_Differences.pdf Jadhav, P. (2012). Determinants of foreign direct investment in BRICS economies: Analysis of economic, institutional and political factor. Procedia – Social and Behavioral Sciences, 37, 5-14. Koch, A., J. (2001). Factors influencing market and entry mode selection: Developing the MEMS model. Marketing Intelligence & Planning, 19(5), 351-361. Krishnan, C. (2009). Globalization and its impact on business environment. Retrieved from http://www.indianmba.com/Faculty_Column/FC1057/fc1057.html Laanti, R., Gabrielsson, M., & Gabrielsson, P. (2007). The globalization strategies of business-to-business born global firms in the wireless technology industry. Industrial Marketing Management, 36(8), 1104-1117. Laudon, K. C., & Traver, C. G. (2007). E-commerce. Pearson/Addison Wesley. Leung, K., Bhagat, R. S., Buchan, N. R., Erez, M., & Gibson, C. B. (2005). Culture and international business: Recent advances and their implications for future research. Journal of International Business Studies, 36(4), 357-378. Meyfroidt, P., & Lambin, E. F. (2012). Strategies for ending deforestation in the globalization era. Annu. Rev. Environ. Resour, 36, 343-371. Musso, F., & Francioni, B. (2009). Foreign markets entry mode decision for SMEs. Key factors and role of industrial districts. MPRA Paper No. 32153. Retrieved from http://mpra.ub.uni-muenchen.de/32153/1/Foreign_markets_entry_mode_decision_for_SMEs.pdf Oakley, D. (2011). Emerging markets grow internally, expand internationally. Financial Times. Retrieved from http://www.ft.com/cms/s/0/a071a4b4-9054-11e0-9227-00144feab49a.html#axzz3SeI3bcEe Piskurich, J., H. (2014). Four globalization trends to watch in 2015. Retrieved from http://www.ogfj.com/articles/print/volume-11/issue-12/features/four-globalization-trends-to-watch-in-2015.html Prakash, A. (2002). Beyond Seattle: Globalization, the nonmarket environment and corporate strategy. Review of International Political Economy, 9(3), 1-25. Ranjan, V., & Agrawal, G. (2011). FDI inflow determinants in BRIC countries: A panel data analysis. International Business Research, 4(4), 255-263. Rioux, S., M., Bernthal, P., R., & Wellins, R., S. (2000). The globalization of human resource practices survey report. Development Dimensions International. Retrieved from https://www.ddiworld.com/DDIWorld/media/trend-research/theglobalizationofhrpractices_fullreport_ddi.pdf?ext=.pdf Silver, B. J. (2003). Forces of labor: workers' movements and globalization since 1870. Cambridge University Press. Taylor, R. (2002). Globalization strategies of Chinese companies: Current developments and future prospects. Asian Business & Management, 1(2), 209-225. Theodosiou, M., & Leonidou, L. C. (2003). Standardization versus adaptation of international marketing strategy: an integrative assessment of the empirical research. International Business Review, 12(2), 141-171. Urata, S. (2002). Globalization and the growth in free trade agreements. Asia-Pacific Review, 9(1), 20-32. Wind, Y. (1986). The myth of globalization. Journal of Consumer Marketing, 3(2), 23-26. Yeung, H., W. (2000). Economic globalization, crisis and the emergence of Chinese business communities in Southeast Asia. International Sociology, 15(2), 266-287. Yip, G., S. (1989). Global strategy…in a world of nations? Sloan Management Review, 31(1), 29-41. Yüksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), 52. Zhang, K. H. (2001). What attracts foreign multinational corporations to China?. Contemporary Economic Policy, 19(3), 336-346. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Major Trends in Globalization Essay Example | Topics and Well Written Essays - 2500 words - 1, n.d.)
Major Trends in Globalization Essay Example | Topics and Well Written Essays - 2500 words - 1. Retrieved from https://studentshare.org/social-science/1861145-global-strategy
(Major Trends in Globalization Essay Example | Topics and Well Written Essays - 2500 Words - 1)
Major Trends in Globalization Essay Example | Topics and Well Written Essays - 2500 Words - 1. https://studentshare.org/social-science/1861145-global-strategy.
“Major Trends in Globalization Essay Example | Topics and Well Written Essays - 2500 Words - 1”, n.d. https://studentshare.org/social-science/1861145-global-strategy.
  • Cited: 0 times

CHECK THESE SAMPLES OF Major Trends in Globalization

Income Inequality and Globalisation

The current paper “Income Inequality and Globalisation” identified in relation to income inequality and the role of globalization as a causing factor in this regard stands upon three vital components, i.... Stating precisely, the sole intention of the evaluation presented in this essay is to explain the role of globalization as an influencing factor of income inequality.... Furthermore, economists have also argued that trade relations practiced within nations in the current day context are highly influenced by globalization trends and thereby, globalization can also be addressed as a vital reason for income inequality (Freeman, 1995)....
11 Pages (2750 words) Assignment

Factors Affecting the Success of Localization Strategy of Fast Food Companies

Food security and alleviation of poverty are the major concerns for the most of the Asian countries which are heavily populated compared to European or American countries.... Factors affecting the success of localization strategy of fast food companies in Asian countries Introduction Multinational food chains like KFC, McDonald and Dominos have spread their operations worldwide adopting different strategies for growth in various markets....
14 Pages (3500 words) Literature review

Conflicts of the Chinese Population

Access to computer and internet reinforced changes to their sociocultural beliefs and norms, which opened doors for invasion of globalization into Chinese populations.... Hence, change influenced by globalization and westernization has been the trend that emerged during 80s, which intensified post 90s with the widespread access to internet.... However, the patterns of changes undergone by the two generations have been similar because the changes have been influenced by the vast advancement in information and technology and globalization....
2 Pages (500 words) Essay

The Notion of Globalization

Based on this context, the paper will be concentrated on explaining the concept of globalisation as an on-going phenomenon by critically discussing the major features of the terminology.... Concept of Globalisation Globalisation can be referred as one of the major outcomes of the continuous expansion of trade activities and exchanges taking place since ages in the progressively integrated and borderless international economy.... Contextually, the major communicators or drivers of globalisation have...
8 Pages (2000 words) Essay

Effect of Globalisation on Inequalities Between Nations in Australia

A historical PerspectiveThe increasing inequality, without a doubt, is one of the most challenging aspects of the current wave of globalization.... Past several decades or in fact phases of globalization have coincided with increasing inequality within countries but inequality between nations was never observed.... owever contemporary globalisation is increasingly being associated with trends of inequality and wage distribution differences both on an intra nation and on a wider international scale....
7 Pages (1750 words) Case Study

Trends in E-business Applications

This practice also led to many wars around the world resisting the imperialistic trends.... But the recent trend is different from the imperialistic trends.... But as the profit margins started shrinking, the economies of scale coupled with the size of the available market started becoming major factors in carrying forward the e-business opportunities....
5 Pages (1250 words) Essay

Trends and Globalization in Business Management

One has to be more resourceful… One of the recent trends in designing one's career path is by conducting an informational interview.... One of the recent trends in designing one's career path is by conducting an informational interview.... This is partly due to the globalization trend in the business world.... An informational interview is “an informal conversation with someone working in an area of interest to you who will give Trends and globalization in Business Management Trends and globalization in Business Management Today, the labor market is characterized by stiff competition....
2 Pages (500 words) Essay

Sociological Aspects of Globalization

This essay "Sociological Aspects of globalization" focuses on globalization that brought new structures into existence; and the traditional social, economic and political structures were radically changed by it.... hellip; The areas that have benefitted the most, due to globalization are employment, economic development, political organizations, and social welfare.... globalization has increased international competition, which has exposed the hitherto fore insular domestic trade policies, of many a nation, to new challenges....
8 Pages (2000 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us