A business perspective of globalisation
The extract below, from the Open University course B120 Introduction to business studies, explores some of the general factors which play a role in increasing globalisation across industries. As you read this consider how each factor might have affected the globalisation of the football industry.
Factors increasing globalisation: a business perspective
The factors increasing globalisation can be thought of as pressures or opportunities that have stimulated businesses to move into global markets.
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.
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.
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).
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.
Activity 2 The impact of globalisation factors on football
As you can see from the extract above, there are many factors which drive or enable globalisation of business, each of which affects particular industries to a greater or lesser extent. How do you feel these factors affect the globalisation of the wider football industry? Choose one of the four factors – market, government, competition or cost – and note down some ways in which this has impacted football.
Here are some of our thoughts:
- Market: The creation of global brands through clubs such as Manchester United and Barcelona and the impact of the global market for players might be viewed as market phenomena. The ease of travel has opened up international competitions and exposed a wider audience to football.
- Government: Governments themselves have not had much direct effect on the globalisation of football; although football's own governing bodies, such as FIFA, have made changes which have facilitated globalisation, such as player transfer rules.
- Competition: The importance of competitions such as the Champions League in driving the global image of football has shaped contemporary football. The effect of TV rights on football has helped enable a global market to develop.
- Cost: Economies of scale don’t really apply directly to the football industry although perhaps cost drivers have affected many of the industries related to football. For example, the manufacture of sport shirts is usually carried out in other countries where labour is cheaper.