What is Globalization? What are its concepts?
- It is the trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies.
It is a trend characterized by denationalization (national boundaries becoming less relevant) and is different from internationalization (entities cooperating across national boundaries).
The greater interdependence that it is causing means an increasingly freer flow of goods, services, money, people, and ideas across national borders.
- It involves much more than the expansion of trade and investment among nations.
- It embraces concepts and theories from political science, sociology, anthropology, and philosophy as well as economics. As such, it is not a term exclusively reserved for multinational corporations and international financial institutions.
- In fact, it has been described as going “well beyond the links that bind corporations, traders, financiers, and central bankers.
- It provides a conduit not only for ideas but also for processes of coordination and cooperation used by terrorists, politicians, religious leaders, and bureaucrats alike.
Describe the globalization of markets?
- It refers to convergence in buyer preferences in markets around the world. This trend is occurring in many product categories, including consumer goods, industrial products, and business services. For example, Apple’s iPad qualifies as a global product because of its highly standardized features.
- Global products and global competition characterize many industries and markets, including semiconductors (Intel, Philips), aircraft (Airbus, Boeing), construction equipment (Caterpillar, Mitsubishi), autos (Honda, Volkswagen), financial services (Citicorp, HSBC), air travel (Lufthansa, Singapore Airlines), accounting services (Ernst & Young, KPMG), consumer goods (Procter & Gamble, Unilever), and fast food (KFC, McDonald’s). The globalization of markets is important to international business because of the benefits it offers companies.
What are the benefits of Globalization of Markets?
REDUCES MARKETING COSTS
Companies that sell global products can reduce costs by standardizing certain marketing activities. A company selling a global consumer good, such as shampoo, can make an identical product for the global market and then simply design different packaging to account for the language spoken in each market.
CREATES NEW MARKET OPPORTUNITIES
A company that sells a global product can explore opportunities abroad if the home market is small or becomes saturated. For example, China holds enormous potential for e-business with more than 400 million Internet users.
LEVELS UNEVEN INCOME STREAMS
A company that sells a product with universal, but seasonal, appeal can use international sales to level its income stream. By supplementing domestic sales with international sales, the company can reduce or eliminate wide variations in sales between seasons and steady its cash flow.
YET LOCAL NEEDS ARE IMPORTANT
Despite the potential benefits of global markets, managers must constantly monitor the match between the firm’s products and markets to not overlook the needs of buyers. The benefit of serving customers with an adapted product may outweigh the benefit of a standardized one. For instance, soft drinks, fast food, and other consumer goods are global products that continue to penetrate markets around the world.
What is the Globalization of Production?
Globalization of production refers to the dispersal of production activities to locations that help a company achieve its cost-minimization or quality-maximization objectives for a good or service. This includes the sourcing of key production inputs as well as the international outsourcing of services.
What are the benefits of the Globalization of Production?
ACCESS LOWER-COST WORKERS
Global production activities allow companies to reduce overall production costs through access to low-cost labor. For decades, companies located their factories in low-wage nations to churn out all kinds of goods, including toys, small appliances, inexpensive electronics, and textiles.
ACCESS TECHNICAL EXPERTISE
Companies also produce goods and services abroad to benefit from technical know-how. Film Roman (
www.filmroman.com) produces the TV series “The Simpsons”, but it provides key poses and step-by-step frame directions to AKOM Production Company (www.akomkorea.com) in Seoul, South Korea. AKOM then fills in the remaining poses and links them into an animated whole.
ACCESS PRODUCTION INPUTS
Globalization of production allows companies to access resources that are unavailable or more costly at home. The quest for natural resources draws many companies into international markets. Japan, for example, is a small, densely populated island nation with very few natural resources of its own—especially forests. But Japan’s largest paper company, Nippon Seishi, does more than simply import wood pulp. The company owns huge forests and corresponding processing facilities in Australia, Canada, and the United States.