Globalisation – What comes to someone’s mind while hearing this word? Maybe a greater movement of people, goods, capital and ideas due to increased economic integration? Perhaps living in a borderless world? Possibly standardising in all areas of life? If you “Google” the keyword “globalisation”, you will get about 20 million hits. That is quite a lot. Actually, globalisation is discussed by everybody, everywhere and every time. But what does it really mean? What is behind this item? In which way does globalisation influence international business? Why do so many companies choose going global and which advantages do they get thereby? Which role does culture play in this context and which cultural challenges a global business environment brings with it? Which role do people play in this case? Are they the key of successful global business? In which way, using this human resource can have a positive effect?
There are many different definitions of “globalisation”. Carnegie Endowment states on its website globalisation101.org that “Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology” (Endowment, 2008). A shorter version is given by Donald J. Boudreaux (2007, p. 1): “Globalization is the advance of human cooperation across national boundaries.” Often globalisation is used to refer to economic globalization that means the “integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology” (Bhagwati, 2004, p.3).
Fact is, there has always been a sharing of goods, services, knowledge and cultures between people and countries, but over the last years new technologies and a reduction of barriers have lead to a much faster exchange and that is meant by “globalisation” (Global education, 2009). The world is not any longer seen as many several nations on one continent, but rather as a whole, which forms an entity. Particular on the world of business the globalisation procedure has had a major impact. In a global business environment the world seems to shrink. Organisations import and export all over the world. Merger between domestic companies and foreign ones are seen as normal. Every day international acquisitions and joint ventures arise by reasons of global business. All in all globalisation has provided many opportunities and challenges.
A lot of companies choose going global primarily to gain a greater market share. Facilitating conditions makes it much easier to act global. For example by the foundation of the General Agreement on Tariffs and Trade (GATT), barriers to international trade have been considerably lowered. These international agreements include amongst others the reduction of tariffs, creation of free trade zones, reduced transport costs, reducing or elimination of capital controls and so on. Other facilitating conditions are the revolution in transport, telecommunication and information technology (John et al, 2000, p.219). Altogether these premises call for global business.
Globalisation has opened national boundaries. For this reason, globalisation means for the majority rivalry and competition. Boudreaux distinguish “the good consequences of this competition (such as the lower prices it brings to the customer) and the bad consequences (such as the elimination of particular jobs)” and suggests in this context that “competition is real as well as important” (Boudreaux, 2007, p.2). In business, competition can bring an enormous positive effect: Organisations are permanently under pressure to be better, faster and larger than their competitors. This leads to a continual procedure of improvement of their products, their services and their whole business concept and strategies.
One of the scientists, who deal with this complex subject “competition”, is Michael Eugene Porter, University Professor at Harvard Business School. He considered that, when a company wants to gain higher profits than the other ones in the same industry, the company has to possess a competitive advantage over its competitors. “The goal of much business strategy is to achieve a sustainable competitive advantage” (QuickMBA, 2007). For this purpose, Porter defines two basic types: the cost advantage and the differentiation advantage. Cost advantage means, that a company can deliver the same goods and services as their competitors, but at lower prices. Differentiation advantage exists when a company offers benefits that exceed those of the other firms. Thus, with a competitive advantage organisations can produce superior value for its costumers and can gain higher profits for itself (QuickMBA, 2007).
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- Anonymous, 2009, Global Business Environment, Munich, GRIN Verlag, https://www.grin.com/document/130675