What is globalization?For our purposes, we’re going to adopt the definition of globalization attributed to Sir Richard Branson, chief executive of the Virgin Group: “Globalization is the process by whichgeographic constraints on economic, social and cultural arrangements recede, thus increasing our global interdependence.”Branson R. (2007) Globalisation Laid Bare, p 39, Gibson Square, LondonThe key words here are “increasing our global interdependence.” But arewe becoming more interdependent than in the past? Some people have pointed out that the world was highlyinterdependent at the end of the nineteenth century: trade barriers were low and international goods flowed freely around the world. But others have responded to point out that twenty-first century interdependence is of a completely different magnitude. Multinational companies, the worldwide web, satellite communications simply did not exist 100 years ago. This has increased the scope for companies and individuals to interact with each other in ways that were previously impossible.For example, silk ties and scarves may be designed in Paris, the silk sourced from China, woven and printed in Italy and sold in the USA: all these business activities are interlinked across the world.But let’s be clear. There are many other answers to the question of ‘What is globalization?’ This website is primarily focused on a business perspective – hence the choice of theabove definition. This does not mean that other views are invalid or have little meaning. Rather that there is not the space to explore all these perspectives on this website.So what do we mean by interdependence?To understand globalization better, itis worth exploring interdependence further. This has been explained by Held and McGraw:“[Globalization] suggests a growing magnitude or intensity of global flows such that states and societies become increasingly enmeshed in worldwide systems and networks of interaction. As a consequence, distant occurrences and developments can come to have serious domestic impacts while local happenings can engender significantglobal repercussions. In other words, globalization represents a significantshift in the spatial reach of social relations and organization towards the interregional and intercontinental scale.”Held, D and McGraw, A (2003) The Global Transformations Reader, 2nd Ed, Polity Press, Cambridge, UK – incidentally useful reading for those who want to delve into other aspects of the topic.‘Interdependence’ means more than flows of trade, financial movements between the world’s financial centresand travelling to new locations. It means that actions in one part of theworld have reactions in another part of the world. For example, shoppers in the Raffles City Shopping Mall in Singapore will celebrate Christmas – hence the decorated tree outside the mall – alongside people in other parts of the world. Globalization helps to link people in different countries around the world by common interests, values and events.Interdependence means that there is increased global interaction: networks, cultural awareness, organisational issues and the use of web-based network messaging sites such as Facebook and QQ (in China). Our exchange means that we come tointeract more with each other than inthe past. For example, this website isnow viewed every month by people in over 60 (and rising) countries: this would have been incredible ten years ago.How is interdependence supported? Evidently by transport and communications. In addition, it is also supported by global customer demand, by the exchange of knowledge, by MultiNational Enterprises and by global actions and organisations like the Olympics, the United Nations, the World Trade Organisation and the meetings of world leaders – the G7 and the G20.Some myths and realities of globalizationIt’s a myth to regard globalization asbeing the only consideration. It is important to be clear that national and regional issues and decisions arestill important. For example, national country considerations still apply withregard to the law, defence and cultural values. Equally, regional organisations and agreements, like membership of the European Union and ASEAN, can still have a profound influence on every aspect of our lives, including those relating to business.But does this mean that globalizationis nothing more than a mere claim as some commentators have suggested? Is the concept so vague as to be incapable of rational analysisand therefore largely useless?In defence of this viewpoint, there isno meaningful global culture and no clear geographical boundary for global activity. Moreover, the world economy still relies on individual powerful nations – like the USA, China and Germany – to provide the basis of world growth and increased wealth. Such commentators have argued that globalization is little more than international activity redefined on a grander scale.This website understands this perspective and recognises that some business and other activities are essentially international in scope,not global. That is why we make the distinction used in the opening sections of the website: the difference between international, multinational and global.But the reality is that globalization isa meaningful concept for some companies, some nations and some strategic situations: this website presents evidence for this where necessary.Is globalization just a way to reinforce the power of some nations and companies?There can be no denying that globalization has helped some nationsto become and remain powerful: the USA and its possession of the ubiquitous dollar currency remains a major strength of that country. Equally, the dominance of some companies, like Microsoft in PC software and Nestle in some food products, also makes them a powerful influence in the world.Some commentators, particularly Socialist writers, have argued that this means that globalization is essentially concerned with the justifying the concept of free market competition. They say that such competition allows the already powerful multinational companies – mainly from Western nations – to maintain their market dominance andkeep out new companies from developing countries. They suggest that globalization perpetuates the power of Western multinational enterprises. According to such commentators, globalization at a more general level is a way for western countries to perpetuate Western Imperialism.The problem with this argument is that it does not fit the facts.Companies from Korea, like LG and Samsung, have become powerful in consumer electronics despite not being located in the Western hemisphere. Equally, countries like China in manufactured goods and India in computer services have become powerful in those areas without being located in the West.Essentially, the evidence shows that national power has shifted towards China, India, Russia and Brazil over the last five years. It is continuing tomove towards such countries, perhaps to be joined by at least one African or Middle Eastern country over time – South Africa? Nigeria? Egypt? Iran?What does this mean for globalization? It means that power is continuing to shift around the world, as it has done for many centuries. Globalization adds another dimensionto such power shifts but is not exclusively related to one group of countries.ConclusionsGlobalization is multidimensional: there are political, economic, social, technological and financial aspects tothe concept. It is sometimes used inaccurately and misleadingly. It is an important aspect of international business strategy. But remains only one aspect of a much broader approach to strategy development.The next section of this website explores the relationship of globalization to business strategy.Global StrategyWhat is global strategy? And why is it important?How do you build a global strategy?How do you balance global and local?How do you develop the productor service offering?Strategic ManagementWhat is strategic management?How does strategic management link with global strategy?Checklist of company strengthsHow to use market growth and market share to develop strategyComparing your costs against competitorsTen top strategies for reducing costsGuidelines for takeovers and joint venturesFinding the key factors for success in an industryStrategic Management Case plus Case Answer – Apple’s Profitable but Risky StrategyNEW Strategic Management Case plus Case Answer – Emergent Strategy at the Virgin GroupNEW Strategic Management Case plus Case Answer – How GEC Marconi used Game Theory to Make an Extra US$3 BnGlobal ManagementWhat is global management?How do you manage an organisation on a global scale?GlobalizationWhat is globalization?How does globalization relate tostrategy, especially in large companies?What are the main global institutions? And how do they relate to international trade?Global checklists of key issuesFive key resources for building a global strategyDeveloping an international channel strategyStrategies for survival in a mature industryPricing in international marketsDynamic checklist for exportersSeven steps to negotiate deals
Posted on: Mon, 26 Jan 2015 06:02:40 +0000