How multi-national companies can benefit from globalisation drivers

Essay, 2001

9 Pages, Grade: A+



1 Introduction

2 Definitions

3 Global Drivers
3.1 Changing World Markets
3.2 Macroeconomic Change
3.3 Technology
3.4 Customers
3.5 Production and Distribution

4 Benefits
4.1 New Markets
4.2 Strategic Advantage
4.3 Risks/Costs
4.4 Skills/Knowledge
4.5 Products
4.6 Governmental risks

5 Conclusion


1 Introduction

This essay describes global drivers leading to the increased emergence of strategic alliances (SAs) and cross-border joint-ventures (JVs) and implied potential benefits for multinational firms (MNEs).

Applying Yip’s framework[1] (viz. appendix), drivers and benefits are analysed. It will be shown that importance of drivers and likelihood benefits hinge upon the MNE and its industry and determine its engagement in SAs and JVs.

2 Definitions

A MNE is a firm ‘headquartered in one country [but with] operations in other countries’1.

A strategic alliance means two firms collaborating to mutually profit from market share, knowledge and resources. The point is ‘for a company to emerge from an alliance more competitive than when it entered it’[2].

An international (cross-border) joint venture is ‘an agreement between two or more partners to control an overseas business’[3]. ‘Joint ventures may fill intermediate-term needs but may also mortgage the long-term global future’[4].

3 Global Drivers

‘Industry globalisation drivers are externally determined [and] create the potential for a multinational business to achieve the benefits of global strategy’[1]. These drivers’ relative importance varies across industries and firms.

3.1 Changing World Markets

MNE’s home markets are either too small to sustain growth (Nestle in Switzerland) or are saturated. Therefore, MNEs face the pressure to expand abroad to ensure future profits. Companies must obey global quality standards, as ‘almost every product market in the major world economies has foreign competitors’[2]. The emergence of global players puts pressure on competitors to either expand their market, too.

This driver is important to every MNE. No industry or firm operating internationally can ignore this change.

3.2 Macroeconomic Change

The emergence of free trade zones (e.g. Nafta, EU, Mercosur) opens previously protectionist markets, abolishing tariffs and trade barriers, thus creating new market potential. So does deregulation and privatisation in MOE states. The same applies to privatising formerly nationalised industries in Europe (e.g. telecom, railway companies).

The Euro makes prices transparent, letting businesses and customers perceive saving opportunities. Implied competition and price harmonisation put pressure on companies to penetrate existing markets further or to develop new ones.

Greater openness and interdependence of the world economy allows MNEs to allocate capital and labour optimally worldwide, thus achieving maximum efficiency (Heckscher-Ohlin theorem).

Again, this driver cannot be ignored by any industry or MNE.

3.3 Technology

Emerging global technology standards force companies to adapt. Useful economic lives of new technologies become shorter, due to shortened product life cycles. Many new ‘technology investments are too expensive to amortise in one market only’[3].

This driver’s importance highly depends on the MNE’s industry. Chip producer Intel must continuously buy global state-of-the-art technology. B2B technology leads to cost savings for manufacturers, but has few advantages for service companies. Pharmaceutical companies’ production technology has not changed significantly despite global markets.


[1] Yip, G S: “Global Strategy… In A World of Nations?”, Sloan Management Review, Fall 1989, pp29.-41

[1] Rugman, Alan M.. - International business : a strategic management approach / Alan M. Rugman, R. - 2nd ed. - London : Financial Times/Prentice Hall, 2000 (p5)

[2] Hamel, G, Doz, Y L and Pralahad, C K: “Collaborate with your competitors and win”, Harvard Business Review, Jan/Feb 1989, pp133-139 (p.135)

[3] Rugman, loc. cit., p.5

[4] Bleeke, J and Ernst, D: “The way to win in cross-border alliances”, Harvard Business Review, November/December 1991, pp127-135

[1] Yip, loc.cit., p.29

[2] ibid

[3] ibid

Excerpt out of 9 pages


How multi-national companies can benefit from globalisation drivers
University of Warwick  (Warwick Business School)
Catalog Number
ISBN (eBook)
File size
387 KB
This essay demonstrates how multi-national corporations are able to take advantage of the momentum of globalization in order to gain competitive advantage. 103 KB
Globalisation, Competition, International
Quote paper
Marcus Matthias Keupp (Author), 2001, How multi-national companies can benefit from globalisation drivers, Munich, GRIN Verlag,


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