Globalisation
Globalisation is a process where businesses
are dealt in markets around the world, apart from the local and national
markets. According to business terminologies, globalisation is defined as ‘the
worldwide trend of businesses expanding beyond their domestic boundaries’. It
is advantageous for the economy of countries because it promotes prosperity in
the countries that embrace globalisation. In this section, we will understand
globalisation, its benefits and challenges.
Most of us assume that international and
global business are the same and that any company that deals with another
country for its business is an international or global company. In fact, there
is a considerable difference between the two terms.
International companies – Companies that
deal with foreign companies for their business are considered as international
companies. They can be exporters or importers who may not have any investments
in any other country, apart from their home country.
Global companies – Companies,
which invest in other countries for business and also operate from other
countries, are considered as global companies. They have multiple manufacturing
plants across the globe, catering to multiple markets.
The transformation of a company from domestic
to international is by entering just one market or a few selected foreign
markets as an exporter or importer. Competing on a truly global scale comes
later, after the company has established operations in several countries across
continents and is racing against rivals for global market leadership. Thus,
there is a meaningful distinction between a company that operates in few
selected foreign countries and a company that operates and markets its products
across several countries and continents with manufacturing capabilities in
several of these countries.
Companies can also be differentiated by the
kind of competitive strategy they adopt while dealing internationally.
Multinational strategy and global competitive strategy are the two types of
competitive strategy.
· Multinational strategy –
Companies adopt this strategy when each country’s market needs to be treated as
self contained. It can be for the following reasons:
° Customers from different countries have
different preferences and expectations about a product or a service.
° Competition in each national market is
essentially independent of competition in other national markets, and the set
of competitors also differ from country to country.
° A company’s reputation, customer base, and
competitive position in one nation have little or no bearing on its ability to
successfully compete in another nation.
Some of the industry examples for
multinational competition include beer, life insurance, and food products.
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