Trends In
Global Business
Over the past decades we have experienced an explosion of
international and large-scale projects. Benefits from these efforts have, in
turn, spurred on more efforts. Here are some trends.
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Expansion of individual firms to sell
their products and services in other countries. This began in the nineteenth
century, but really accelerated after World War II. Today, you see the same
products and services in almost all countries—leading to resentment of the
invasion of the local culture.
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Standardization in government regulations
and simplification. Governments around the world have seen the benefits of
expanding trade and business through changing and simplifying regulations
through free trade zones and other measures.
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Mergers and acquisitions. This
will be explored in Chapter 12 in more detail. Today, you can see that the number
of individual large companies doing business in just one country or area has
greatly diminished.
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Requirement for a global presence to be
viable in an industry. Whether you look at automobiles, banking, insurance,
pharmaceuticals, or one-hundred other industries, you can see that there is
drive for global presence.
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Worldwide manufacturing and
distribution. When you buy any complex product that has multiple components,
chances are that individual pieces were made in a variety of locations. Assembly
was then carried out somewhere else.
Why have these occurred? A prime reason is improved communications
and technology. Another reason has been expansion of transportation. Both of
these have lowered the cost of doing business in multiple locations to the point
that is affordable to many individuals as well as companies.
What are the benefits that organizations seek in carrying out
international and complex projects such as those mentioned above?
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Economies of scale. By having one
headquarters you achieve administrative economies of scale. By centralizing
manufacturing activities of the same type you have additional economies of scale
and lower costs of operations.
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Strength in size. For many firms there
are major benefits to increased size. Retailing is a good example. A WalMart or
Carrefour can obtain goods at lower prices and then be more competitive.
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Penetration of new markets and increased
sales. The elapsed time to enter new markets has been dramatically reduced.
In addition, a company can enter a market on a test basis and then later
withdraw or retrench if the conditions are not favorable.
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Access to human resources. Many firms
are challenged with labor problems such as a lack of personnel with specific
skills or high labor costs. Operating internationally can help ease these
problems.
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Lower cost of operations. With
economies of scale and flexibility in moving and locating operations to lower
cost locales, the cost of doing business is reduced.
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Maintenance and expansion of the firm’s
competitive position. You often either grow or risk dying out. This has been
the case in banking, insurance, and the automotive industry. When a competitor
has success in expansion, you often have no choice but to copy the move.
What is the impact of these global trends? More international
projects. But as you have seen, the results are often mixed. For every case of
success, there are many instances of failure and problems. Look at the merger of
Chrysler and Daimler-Benz for one example of problems.
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