Better Business Basics
Better Business Basics
Defining globalization
-- a business perspectiveIT'S A SMALL BUSINESS WORLD
The buzz word these days is globalization. There is a lot of talk about what globalization is and what it perhaps should be. Some argue against the forces of globalization while others embrace its power to transform the economic lives of millions around the globe. Just what is globalization?
Globalization has been defined by various disciplines, including economics, business management and political science. This is a business view of globalization. According to Alan Rugman, the forces of globalization have been driven by the "network managers of just 500 companies worldwide which are neither monolithic nor politically powerful." These managers work for companies such as General Electric, IBM, Nestle and Unilever. The presence of these managers and their companies in overseas markets has contributed to an increase in the standard of living in these countries.
These companies view the entire world as a source of business opportunity. With falling trade barriers, commerce among countries in both goods and services is growing faster than domestic production in each individual country. Hence, money, goods and services are flowing more freely across borders. Globalization means the interconnectedness of the world economy. According to John Cullen, it implies that "companies engage in business and compete anywhere and with anyone, regardless of national boundaries."
For many of the world's largest corporations, international markets present tremendous opportunities. GE, for example, saw an increase in the percentage of revenues from overseas markets rise from 19 percent in 1987 to more than 40 percent by 2001. Nokia, the Finnish cell-phone maker, represents an extreme: more than 97 percent of its sales come from overseas markets.
For certain industries, globalization is inevitable. For example, the production of automobiles, textiles, telecommunications equipment and microelectronics products require globalization. Companies in these industries cannot remain competitive if they are purely domestic players.
Globalization empowers these companies to be more competitive by using economies of global scale while creating job opportunities for the citizens of the countries that host them.
Critics have long argued against the dangers of globalization. They argue globalization hurts economies and creates instability in developing countries. The reality is the presence of multinational companies in overseas markets has contributed to job creation. Jack Welch, the now retired CEO of GE, talks about globalization in his recently published autobiography. He states, "some contend that globalization hurts developing countries and their people. I see it differently. Globalization never looks better than when you see the bright faces of the people whose lives have been measurably improved for having these jobs."
Niti Villinger is assistant professor of management at Hawaii Pacific University. She can be reached at nvillinger@hpu.edu.