Understanding International Business - Essay Example

Running head: Business International Business Name: Course: Instructor: Date: International Business Globalization can be defined as compression of time as well as space that is unprecedented thereby portrayed as an interrelation in social, political, economic and culture which often interdependent on each other when measured using global mechanisms. In the past few years, the global business environment has evolved rapidly via the market liberalization and the globalization of economies has caused a new, aggressive business setting for firms. In the era of globalization, a strong force is steering the globe into a converging commonality, and that drive is technology. It has affected travel, transport, and communication. Nearly everyone requires all the items have seen, heard about or experienced through the new technology. This has caused the emergency of another reality in commerce- the surfacing of international markets for products that are standardized to the consumer. Organizations that are prepared to this brand new trend profits from huge economies of scale in management, marketing, distribution, and production. The market globalization is a reality and it is already happening. This implies that the commercial world of multinationals and multinational corporations are about to be eliminated. Internationalization is portrayed as a reflection of the domination of traditions like national governments and multinational corporations. The multinational companies produce end products that are designed for the local markets. On the other hand, globalization is a reflection of new innovations and new types of protagonists. This therefore implies that the global companies produce goods that are standardized for all the markets in the world. Global standardization is process of coming up with products that are standardized and marketed globally with a marketing mix that is standard. This essay is going to highlight obstacles and drives that affect the realization of a completely standardized global market, by discussing the whole issue in regard to Levitt’s idea. Levitt had a very integral argument that offers promising predictions of the world-that preferences are shaped and reshaped at a constant manner-is the central view and argument for managers, scholars as well as the elites. Interaction has the influence of transforming things as opposed to leaving them just the way they were before. Apparently, managers who have the opportunity of running successful firms are obliged to change the world, not leaving it the way they found it (Rawi, Richard & Tedlow 2003, p. 4). Successful managers are those that dwell on treating the preferences of customers as a given rather than treating them as outcomes. If we are to cling on Levitt’s idea about globalization, we will find out that the global market does not entirely mean what was found by the firms, but rather what firms tend to make out of the global market. Globalization can easily be achieved since the world is becoming easily accessible through technology and faster means of transportation. Population from one market place from a particular region can easily get access to the population in a different market place in a different region (Cameron 2009, p. 19). The transport and communications costs have fallen drastically over the past two decades and the costs have significantly fallen over the past half century. The technological improvements that have taken place in transport and communications have resulted into very cheap means of accessing economically viable markets of carrying out business transactions. Major transformations have taken place in communications and processing of information have tremendously decreased the cost of communication in a global environment, thus coordination and controlling business organizations. The internet has further eased communication. The growth of the World Wide Web has rapidly increased communication. A complete standardized global market has been enable via global communications that convey the invariable modern possibilities drumbeat throughout to enhance and lighten work, entertain, divert and raise living standard. It is also worthy noting that the same nations that demand the international community to respect and recognize the entity of their cultures persist on the bulk transfer to them new technologies, services and goods. Communication has allowed a rapid modernization which is not just a wish but also a prevalent thing among those who stick, with ancient heritage, attitude and religion (Christensen 1997, p. 44). This way the global desires and needs have been irretrievably homogenized. This has created a situation where Multinational Corporation is obsolete and the global corporation absolute. Additionally, it should be noted that there exist difference between global and multinational corporations. Global corporation runs with definite steadiness- minimal cost- as if the whole globe was one thing, it markets similar services and goods in the similar manner everywhere. Contrary, the multinational organization runs in a multiple nations, and adjusts its practices and products in each resulting to relatively high cost. The cost driver for complete global market standardization is influenced by location of required resources and variation in country costs (Joshi 2009, p. 15). Other aspect that influence cost driver is potential for scale of economies such as R & D, production e.t.c. Curve of experience that is flat in an organization has reduced globalization process. One reason that the industry in facsimile had huge potential in the globe than industry in furniture is that for machines of faxing, their cost of production reduced between 30 % to 40 % with every two folds of volume. The curve is more flat in industry of furniture and other services oriented firms. Firms that tend to have much higher expenses in R & D e.g firms in aircraft industry, show higher economies of scale compared to those firms in where huge percentage of cost are labor and cost. Corporate whose costs reduce by not less than 20 % for every doubling of production tend to be high potential for complete standardization of global market. If an organization pushes prices and costs down and forces reliability and quality up while retaining rational concern for suitability, consumer will prefer its world of products that are standardized (Fullerton 1988, p. 117). Actually, huge corporates running in one country or even in one city do not standardize all what they sell, do or make. This practice works since a market segment in a particular nation is rarely distinct, it has closely related market everywhere particularly because technology has standardized the world. Also small local segments have their global that is similar to other places and become involved to global competition, particularly on price. The competitor on global perspective will look constantly to standardize his products and services everywhere. He will turn from this standardization only after exhausting all probabilities to retain, and he will go for reintroduction of standardization whenever divergence and digression have happened. He will not take assumption that consumer is a king who understand his own desires. Nationalism is a force that is strongly driven by the magnitude of globalization. However, it is evident that some vital transformations have taken place in some nationalism. For instance, in the Soviet Union, many nationalists’ movements sprung up at the time the Soviet Union was on the verge of accepting capitalist and democratic movements. Nationalism and economic is basically a different turfs, but with the begin of period of free market, the two fields are highly related. Nationalism and free market have influence on involved nations and so does their corporations (Oman 1996, p. 10). Globalization has enabled business firms to face evolution in order to adequately respond to the demands and needs of their customers in a global perspective (Geoffrey 1996, p. 251). Moreover, it is worth noting that current managers are able to comprehensively operate in an otherwise very competitive and complex market. The current market offers many competitive packages for managers that lead to positive competition (Young 2005, p. 86). Globalization will lead to free trade, allowing countries to produce goods of their specialization, while at the same time importing goods that they do not efficiently produce. For instance, after trade, Ghana which produces a lot of Cocoa and little rice, after trading with Korea, which produces a lot of rice and little cocoa, both countries will end up benefiting from each other. Proposers of free trade assert that when tough environmental regulations are put in place as well as very strict labor standards, then it is easier to attain progress economically (Daniels, Radebaugh & Sullivan 2007, p. 54). Foreign investment is a catalyst for raising market standards in a nation. In the past, the global corporation has faced obstacle of being unable to meet regional differences, especially in taste. The differences were inevitable as a result of the failure by the global corporation to market products of high standards but at a cost that is lower than that of competitors simply because there exists broad economies with vast manufacturing/ production, marketing and management (Kotabe et al 2004, p. 112). Actually, majority of companies have identified that efforts of standardization are obstructed mostly by the wide diversities among consumers in the global market. Particularly, there may a group of global consumers that is made of sophisticated and well travelled persons who are welcoming to global theme and universal advertising. However, this category is a small section. The huge section of consumers, globally, vary hugely in their preferences, tastes, national identities, cultural environments and languages. Hence, all aspects of the marketing functions are vulnerable to failure due to inappropriate attention to the differences between markets that are resulted by variations on cultures. Many obstacles stand in the way of the realization of globalization. Critics of globalization have always wondered whether alignment towards a more interconnected and interdependent economy of the world is an ample thing (Tedlow 2001, p. 21). This fear has always led to the springing up of protesters who comes up at almost all globalized meetings with the sole aim of disrupting meetings since they hold to the idea that globalization would transform the world in a negative manner. There has been argument that globalization will not be achieved since countries that offer minimal wage to her employees end up losing jobs (Theodore 1983, p. 31). Those on the opposing side of free trade, argue that free trade will benefit firms from advanced countries to manufacture offshore facilities by not adhering to international environmental and labor regulations. Another obstacle to realization of globalization is the fact that economic power is realigned towards supranational organizations such as World Trade Organization, the European Union and the United Nations at the expense of national governments (Travis 2007, p. 54). Consequently, the gap between the rich and the poor will continue to widen since equality will not be achieved in the sharing of the globalization benefits (Kotler & Keller 2005, p. 29). Majority of developing countries have removed rules of trade due to pressure exerted by WTO and other international institutions that outlines the fundamental regulations and rules of trade relations among nations (Reference for Business, 2010). The judicial systems, administrative setup, and agencies of enforcing law basically do not assure the political stability and social discipline that are required to support excellent business environment. Therefore, majority of multinational corporations have been investing in particular parts of the world only. This has also resulted to be an obstacle to a completely standardised global market. In conclusion, the global business environment has evolved at high speed due to globalization resulting to new, aggressive business setting of corporate. Globalization is a reflection of new innovations that has allowed global corporate to produce products that are standardized for all the market mixes in the world. Levitt argues that preferences are shaped and reshaped at a constant manner and therefore there should be transformation of things instead of leaving them the way they were before. Globalization has resulted to major improvement on communication technologies hence improving coordination and controlling of corporations. Global market has been enable through global communication. Global desires have been homogenized making multinational corporation obsolete and the global corporation absolute. The competitor on global perspective will look constantly to standardize his products and services everywhere. The global corporation has faced obstacle of being unable to meet regional differences, especially in taste. The huge section of consumers, globally, vary hugely in their preferences, tastes, national identities, cultural environments and languages. Many obstacles stand in the way of the realization of globalization that in turn obstructs standardized global market. References Cameron, G 2009, Introduction to International Business, Blackwell Science Ltd, Oxford, pp. 7- 18. Christensen, C 1997, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business School Press. Boston, pp. 43-48. Daniels, J, Radebaugh, L & Sullivan, D 2007, International Business: environment and operations, 11th edition. Prentice Hall, pp. 53-57. Fullerton, R 1988, ‘How Modern is Modern Marketing? Marketing’s Evolution and the Myth of the ‘Production Era,’ Journal of Marketing, Vol. 52, no. 3, pp. 108-125. Geoffrey, J 1996, The Evolution of International Business: An Introduction London: Routledge, pp. 251-256. Joshi, R 2009, International Business, Oxford University Press, Oxford, pp. 215-216. Kotabe et al. 2004, Global Marketing Management – 3rd Edition, John Wiley & Sons, Inc ., US, pp. 112-113. Kotler, M & Keller, S 2005, Marketing Management - 12th Edition, John Wiley & Sons, New York, pp. 112. Oman, C 1996, The policy challenges of globalisation and regionalization. OECD Development, vol. 11, no. 1, pp. 4-45. Rawi, A, Richard, S & Tedlow W 2003, Negotiation, Organizations and Markets Research Papers: Theodore Levitt's "The Globalization of Markets": An Evaluation after Two Decades. Harvard Business School, pp. 3-15. Reference for Business 2010, Multinational Corporations, viewed 14 April 2011, . Tedlow, R 2001, Giants of Enterprise: Seven Business Innovators and the Empires They Built New York: Harper Business, p. 21. Theodore, L 1983, ‘The Globalization of Markets’, Harvard Business Review 61. pp 92-102 Travis, T 2007, Doing Business Anywhere: The Essential Guide to Going Global. Hoboken: John Wiley & Sons, p. 54. Young, E 2005, Advertising Research Handbook, Ideas in Flight, Seattle, pp. 86. Read More