A business perspective of globalisation

The factors increasing globalisation can be thought of as pressures or opportunities that have stimulated businesses to move into global markets.

Market

Market drivers emerge through the development of a world market:

• the establishment of global brands (e.g., McDonald’s fast-food outlets, Nike trainers and sportswear)
• global consumers with a growing convergence of lifestyles and tastes
• growing disposable income across the world, not only in the developed economies of the West, but in the emerging industrial and services economies such as India.

Government

Here nations collaborate to increase the possibility of trading internationally to create economic advantage and wealth. Examples include:

• a reduction in trade barriers through the removal of tariffs on imports and exports (as has happened across the European Union)
• the creation of more open and freer economies as a result of, for example the ending of the closed economies of Eastern Europe and the opening up of the Chinese economy.

Competition

Increased competition arising from the opening up of economies or businesses creates an environment in which more organisations can enter the marketplace, whether nationally or internationally. This is brought about by:

• the cross-border ownership of domestic firms by foreign organisations; for example, Rupert Murdoch’s USA-based News UK group’s ownership of key media organisations, such as The Times and The Sun newspapers
• movement of companies to become globally centred rather than nationally centred through strategic alliances and takeover
• the growth of global networks which make countries interdependent within specific industries (e.g. the car industry which pulls in different components from different parts of the world).

Cost

Various cost drivers and enablers can encourage a firm to globalise:

• they enable an organisation to gain economies of scale
• the development of communication technology particularly through the internet simplifies communications and makes it easier to control costs and to globalise
• cheaper labour and other resource costs in developing countries provide an incentive, e.g. many companies have outsourced their call centres to India
• the development of improved infrastructure allows for faster and more efficient transportation systems.

Underpinning many of the points listed above is the growth in international financial markets. This growth means that close financial relationships are established on a worldwide basis and these in turn facilitate a complex and sophisticated international system of lending, borrowing, transmission and storage of money.