Global Business Environment
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Chapter 2 : Process of Globalization
Historical Perspective of Globalization
Early records of globalization
Trade in Eurasia
The European
Seaborne Empires
Early Modern World Economy
The Formation of
National Economies
Industrial Capital
Technological Developments
Declining Trade and Investment Barriers
Regional Economic
Integration in North America
Regional Economic Integration in
Europe
Need to globalize
Imperfections in Products Factors of
Production, Technology, Life Cycle of Products, Macro forces of
globalization, The MNE and the competitive advantage of nations
The
Stages of Development of a Transnational Corporation
Challenges of
globalization
Customer centricity in globalization, Customer value
expectations, Global customization, Global customer loyalty
The Metanational corporation.
Chapter Summary
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Globalization can be traced to times when Buddhism spread
from India to China in Ist century AD. That was when cultural links between both
countries were established. By 1300 AD, the Song Dynasty in China linked Europe
and China by land and sea across Eurasia and the Indian Ocean. The year 1300 saw
the creation of the Ottoman Empire which spanned Europe, North Africa, and the
Middle East, and connected the dynasties in Central Asia and India.
This led to the expansion of trading activities between Europe and Asia. By
1300, networks of trade ran from England to China, France, Italy, across the
Mediterranean to Egypt, and then to Central Asia (the Silk Route). The trade in
commodities continued well into the 17th century. By 1800, the Atlantic and
Indian Ocean systems were connected to one another through the flow of
commodities and by the operations of the British, French, and Dutch overseas
companies. |
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The economic conditions that prevailed in the eighteenth century continued
well into the nineteenth century. With the introduction of railways and
steamships, transportation costs came down significantly, and this created
new circuits of capital accumulation. In the twentieth century,
technological developments were further reducing natural barriers like
geographical distance. The cost of information processing and communication
fell significantly in the last few decades, accelerating the pace of
globalization.
Firms go abroad for organizational and environmental reasons. Organizational
factors are internal to the organization, while environmental reasons are
external to the organization. Internal reasons might range from wanting to
exploit worldwide market imperfections to opportunities that arise in
different stages of the lifecycle of a firm’s product. There are six ways to
enter a foreign market. They are: exporting, turnkey projects, licensing,
franchising, setting up a joint venture with a host country firm, and
setting up a wholly-owned subsidiary in the host country.
An organization goes through five stages of evolution: domestic,
international, multinational, global, and transnational stages before
becoming a metanational corporation. The classification is based on the
firm’s orientation at each stage. To be competitive, companies have to
constantly innovate and make their own products obsolete. Competition has
transformed the marketplace from a seller's market to a buyer's market where
the customers' focus is on value. Metanational companies see the world as a
place with specialized knowledge pockets: market intelligence, technology
and capabilities, scattered around. These companies sense the untapped
potential in these knowledge pockets, and try to exploit it to the fullest
extent.
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