globalization and international business (IB) evoke inter- est – and Lastly, the linkage between globalization and IB is discussed further and I. How Globalization and International Business Are Related involves balancing between custom ratio and business design segment to get article failed to explore issues in relation to human rights, environmental matters. 6 A working definition of economic globalization is the global integration of 10 One of the most striking differences between the new economy and the one that also include the Asia-Pacific Economic Co-operation and the Association of.
In other words, the high cost of the information technology infrastructure and highly skilled labour used in the production process require a marketing niche that caters to a large global market than a small national market. It has also necessitated the introduction of the concept of mass customization, and sensitivity to cultural diversity. This is in addition to the logistical benefits of integrating production globally and forming international economic liaisons through mergers, acquisitions, hostile take-overs, alliances, and networks in order to bring economic transactions that were previously conducted at arms length under administrative control.
It has replaced the rigid, hierarchical, top-down structure with a more flexible, horizontal, integrated work place model. It has also spotlighted the three essential skill requirements of the information age. First, academic skills that provide the basic foundation to get and keep a job, and to achieve the best results. Those include an ability to communicate effectively, think critically, and continue to learn for life. Second, personal management skills such as the combination of positive attitudes, responsibility, and adaptability.
Those would include time management, individual accountability, and meeting deadlines. Third, teamwork skills which require a personal disposition to work with other members of a diverse and varied group of individuals. Indeed, the greatest challenge and the most unique opportunity for new age managers is to garner the tremendous potential and remarkable creativity of a workforce environment that brings together human diversity, as well as professional and occupational dissimilarity in a harmonious and productive workplace structure.
There is no denying that the road from invention to innovation is long and fraught with many obstacles. It is not unusual for many inventions to be left behind because of obstacles in securing the necessary financial capital or adapting an invention to the economic realities of mass production.
Inventions today are more likely to be the product of a team effort and a concerted research and development initiative of some government laboratory, academic institution, or major corporation. The first school subscribes to the notion that inventions are an incremental and marginal process.
The second school of thought argues that some inventions are the catalyst for abrupt structural change that permeates the economic landscape in a tidal wave of production realignments and technological clustering. Regardless of what school one subscribes to, there is no denying that the great inventions that took place during the Industrial Revolution between and had a profound impact on economic productivity and personal lifestyle. These inventions included electricity, the internal combustion engine, radio, the telephone, phonograph, motion pictures, the chemical and pharmaceutical industries, advances in entertainment, communications, urban sanitation, and travel in the form of air and motor transportation.
The Information Revolution has resulted in a new spurt of inventions with expansive structural changes and significant economic transformation.
It should be noted that at the start of the 21st Century we are simply at the beginning of a second significant cluster of innovations with far-reaching economic and social impact. The list of inventions ascribed to the new economy is still in its infancy but already includes computers, the internet, and telecommunications devices.
The restructuring of the workplace has individualized the nature of work and led to the disaggregation of labour. In turn, this transformation of the work environment has diluted the concept of the welfare state, and punched holes in the social safety net. The challenge facing public policy in the new economy is to find a way for flexible work and flexible employment to continue to support social security entitlements and programs. Scale Versus Scope 22 The economic gains of the Industrial Revolution were associated primarily with economies of scale.
Economies of scale accrue when the cost of producing a unit of output decreases as the output rate increases prior to diminishing returns setting in.
Impact of globalisation on international business
This is a result of the incremental decrease in per unit cost, as the per unit fixed cost is distributed over a larger number of total production output. The mass production of consumer durable goods using the assembly line method of production is a good example of gains from economies of scale during the Industrial Revolution. More specifically, car manufacturers have been the beneficiaries of economies of scale through the use of cost saving machinery and highly specialized labour, along with targeting increases in production output levels.
Economies of scope accrue when highly specialized labour inputs and expensive state of the art equipment is used to produce a range of goods and services.
Hence, a decrease in per unit cost as a consequence of increasing the number of different goods produced is attained. In other words, economies of scope are realized when highly specialized and expensive technical inputs are shared by a variety of different outputs. Microsoft is a good example of a business enterprise that has attained economics of scope.
More specifically, Microsoft hires and utilizes the specialized skills of computer programmers, designers and marketing experts across a range of software products. In other words, a business enterprise can realize cost savings by utilizing the same inputs across a varied product range, thereby spreading the input cost and decreasing the per unit cost of production. Economies of scope are important for knowledge based industries that have a high break even point because of expensive inputs and cost overlays utilized in software development, infrastuctural plans, and equipment and marketing strategies.
It is important to note that in this sector, productivity gains are not due solely to the utilization of computers, but more specifically to the synergy of the information technology sector that embraces computer hardware, software and communications. Internetization 24 Internetization is a word that I have coined to capture the pervasive influence of the internet and the world wide web on all aspects of human endeavour for our society in the 21st Century.
It is a process that is empowered by information and communications technology in a world with a tremendous capacity for virtual connectivity. Hardly a day goes by when our individual and collective lives are not touched by some aspect of the information technology and communications revolution. The electronic prefix that is appearing before an increasing number of our daily activities such as e-commerce, e-mail, e-learning and e-government is a tangible expression of the pervasive influence of the internet.
A collateral benefit of this transformation has been the extraordinary scale of research and development in the quest for new applications to the advances in information and communications technology, the phenomenal growth of the software industry and related business services, the scale of investment in computerized equipment and in the telecommunications infrastructure, as well as the rapid growth of niche markets for satellite and peripheral industries supplying information and communications technology products, specialized components, and services.
Schumpeterian Entrepreneur 26 In his two seminal books The Theory of Economic Development and Business Cycles, Schumpeter articulated his path-breaking analysis on the role of the entrepreneur in economic growth. To this day, his body of work on entrepreneurship remains the most authoritative analysis on this subject area Orati and Dahiya, According to Schumpeter, innovation is what determines the value of entrepreneurship to economic society.
Schumpeter embraced the principle that innovation precipitates a change in production function, and the entrepreneur is the catalyst that brings it about. In this context, entrepreneurship takes on added significance as the engine of growth and a contributor to the wealth of nations Schumpeter, The manager has more limited, confined and static responsibilities in the day to day operation of a business enterprise. The entrepreneur, on the other hand, is more of an economic visionary McFarling, The functions of an entrepreneur are more dynamic and risk-taking, which embrace attempting new ways of doing business, and trying new ideas or new production methods, introducing new products, new processes and new structural forms of business organizations McDaniel, In short, managers improve a company that has already been established, while entrepreneurs create successful corporations.
Global Entrepreneur 28 The role and functions of entrepreneurship in the new global economy of the 21st Century have taken on added significance and face compounded challenges. Today we live in a challenging environment of rapidly changing economic events, where the private sector has become the most important engine of economic growth, and the public sector has shrunk in importance and influence. In this context, the entrepreneur has a primary role to play in promoting national well-being through the enterprise of the private sector.
Entrepreneurs are defining new rules of engagement on the economic landscape as they come to grips with contemporary challenges and new opportunities. New ideas, new directions, and new initiatives are the signature mark of the 21st Century.
In this new environment, entrepreneurs need to articulate a pragmatic vision, exercise effective leadership, and develop a competent business strategy. They should have personal qualities to integrate the interactive ingredients of the new economy, viz. Their business strategy should embrace flexibility, a quick response time and a proactive approach to economic opportunities Passaris, At the very heart of this transformation is the birth of the global entrepreneur.
In other words, the ability to adopt a global mindset in the exercise of entrepreneurial initiatives. Indeed, in addition to a new global vision, new competencies and new skills are necessary tools for the modern entrepreneur.
Among those new skills are the ability to cope with the tidal wave of frequent and repeated change, more cost-effective production methods, improving the quality of products, having a faster response time to changing market conditions, selling at lower prices, and being more aggressively competitive.
Globalization has for all practical purposes melted national borders and made geographical location irrelevant. Entrepreneurs with a global vision have the advantage of reaching out to embrace economic opportunities world-wide.
Conducting business in a local, regional or national milieu is significantly different from doing business internationally. For example, it requires upscaling from a national image in the market place to a global image. This involves endorsing the same standards of quality throughout the world on a consistent basis, but at the same time incorporating the flexibility to tailor packaging or the image of the product to suit the customs and traditions of the local market.
The contemporary entrepreneur must develop a knowledge and appreciation of the cultural, social, and economic differences that influence how people perceive and interact in their environment and its relationship to community development. It requires being constantly sensitized to the different cultural values, attitudes and approaches to problem solving and decision-making.
A proficiency in managing diversity domestically and internationally is essential for harnessing the multicultural profile of the workforce and ensuring optimum levels of productivity. The cultural diversity of the workforce is an economic asset that must be deployed to strategic business advantage. It translates into an ability to communicate in the languages of many different countries, and familiarity with local customs, traditions, business, and financial habits.
Marketing strategies must understand the role of languages and cultures as they attempt to introduce new products in foreign markets. The failure to take local preferences, packaging, branding, local conditions, and economic infrastructure into account can result in poor strategic decisions. An imperative for effectively managing cultural diversity is cultural sensitivity.
The modern entrepreneur requires a comfort level that is conducive to utilizing the multicultural, multiracial, multilinguistic, and multifaith character of the workforce.
This is a profound economic advantage in such areas as international trade, identifying export markets, overseas business contacts, opening doors of economic opportunity, establishing a presence in overseas markets, facilitating foreign direct investment, integrating advanced technology, and assessing the business risk of operating in a foreign market. A global perspective involves a holistic view of workforce inclusiveness whereby all employees are treated fairly and equitably, and are provided with equal opportunities and equal rewards.
It requires the effective integration of diverse cultures in the business network in a productive and trusting environment. In short, this is about creating people synergy, where the outcome is greater than the inputs, because of the strategic co-ordination of a diverse and pluralistic workforce. Integrating innovation has become a constant objective for economic efficiency and the development of a successful business strategy.
The modern entrepreneur must embrace the role of a catalyst for innovative change on a continuous time frame. In this respect, entrepreneurs must seek opportunities for achieving economies of scale and economies of scope.
Global enterprises can ascertain these economies by extending their reach to global markets. In doing so, they extend the potential of their domestic market and enhance the scope of their innovation initiatives through research and development, the development of new products, improving quality, and reducing the cost of existing products. It should be noted that developing global niche market requires a long-term customer oriented focus. In order to compete in the contemporary global market, products and services must be sensitive and responsive to local market needs and customer preferences.
Furthermore, in the fast paced world of business, even the long term is getting shorter. Given the diversity of market requirements and needs, the dispersion of manufacturing and out sourcing, the importance of research and development leadership, and the recognition of technological advances for product and process innovations; learning and the transfer of knowledge are key to global success.
Business organizations that are successful must be able to co-ordinate, transfer, and use knowledge gained rapidly and effectively. There must be an administrative model that facilitates the corporate vision and has the plans to implement it effectively and consistently throughout the entire organization. It is in this regard that product quality takes on added significance.
The culture of the modern enterprise must be to adhere to high quality standards that are company-wide and permeate throughout the entire enterprise, not just parts of it. In this global environment, corporations will require the skills to communicate with diverse groups of people. To do so effectively requires multilingual training and high levels of cross cultural awareness and sensitivity.
Besides the positive effects of good communication skills among colleagues and with clients, effective communication is of particular importance to geographically dispersed and culturally diverse organizations. Sensitive communications build trust and send a common message that helps build a strong corporate culture and shared value systems. The organizational structure must be characterized by flexibility and multidimensionality in order to operate effectively in a diverse global environment.
In this regard, effective teamwork is an essential requirement for business success. It goes without saying that with the increased complexity of global operations, the ability to function effectively in work teams - especially in culturally diverse groups - is of paramount importance. The advent of better and cheaper global communication technology means that global teams can operate without being in the same physical location.
Global team work can contribute to successful business planning, a stronger commitment to achieving world wide objectives, and a closer collaboration in carrying out strategic change. However, enhanced opportunities also imply compounded challenges that are accompanied by increased complexity, uncertainty, and risk. Indeed, being global is more than simply geography. It means integrating and leveraging the tools for the successful implementation of a global vision. It also means being adept at understanding and utilizing the forces, ideologies and value systems that which shape the way nations and cultures interact, and the way social, political and economic policy impacts every aspect of how modern corporations and organizations operate across the globe.
It requires a holistic approach towards harnessing the synergy from economic, human and social capital on an international playing field. Conclusion 37 The economic profile of the new global economy has been driven by technology, fuelled by innovation and entrepreneurial initiative, and is based on new ideas, new perspectives and new business strategies.
Another very important factor that has boosted globalisation is the stupendous growth in the field of technology.
Technological development has resulted in rapid development of many aspects of our civilisation. The world as we know today is very different from the one which existed fifty or even ten years ago. The kind of technological advancement that has been achieved has not only made many important discoveries, but also led to a technology-enabled lifestyle. Together with that, people have the use of an extensive number of gadgets in their day to day affairs.
In this scenario, it is only natural that the products and services need to be better with each passing day, otherwise they will be immediately replaced. The business world has thus learned to be aware of technological changes that can affect their productivity and also positively or negatively impact their very survival.
Differences Between International Business & Globalization
There is a permanent shift in the way information is being accessed by an individual from any location of the world and utilising it for the development of their own business. Even government agencies are not untouched by the all-consuming urge of globalisation. Interestingly enough one of the major forces behind globalisation are the changing political situations as we already discussed in terms of the Chinese trade policy.
Globalisation has also led to the growth in the supporting services such as banks, transport companies etc. One of the major advantages of globalisation is perhaps its ability to promote international co-operation.
Policies are being created and nurtured which support the development of trade and in the long run benefit all countries, such as the creation of the World Trade Organisation WTO to ensure that trade flows smoothly. Since the consumer today is as much aware of their requirements as the means of getting it, it is the obligation of the businesses to fulfil those consumer requirements. The competition thus is pretty tough, and the liberalisation of policies and opening up of markets has helped gain access to a plethora of international opportunities.
Why do we need international business? Businesses are driven by the profit motive. Businesses have responsibilities towards their shareholders as well as other stakeholders to obtain a proper return on investment and also earn a profit. There are a few important aspects to this — Acquisition of resources Resources would include both raw materials as well as finished goods.
The acquisition of resources that will benefit the company and also help it to do better than its competitor is an objective for any business. Advanced technology with better components can help a business beat their competition. Increase in market base The products that are available in India, China or the United States, are also now easily available in Britain as well.
This is because markets have opened up and are now completely dependent on the continuous flow of goods from one end of the world to the other.
Differences Between International Business & Globalization | Bizfluent
This is good news from the point of view of business. The production of goods and services is dependent on demand, and the larger the market the greater the demand. Minimising the risk factor The sales and profit of any product undergoes the cycle of demand and supply. If a business is limited to just one country, then the periodic shift in demand may affect its profitability, and it could be vulnerable during a slump. To negate this, it is essential that the risk be spread over as wide an area as possible.
Thus international markets can help a business to stay afloat as while one market may be depressed another could be booming at any one time. How is international business done? There are various ways through which the world of international business operates.
It is quite important to note that all these ways have something in common, and that is the urge for global outreach. Import and export of merchandise Merchandise means tangible goods that are brought in from a foreign country or that are sent over to a foreign country for sale.
Import and export of services Services are intangible or non-merchandise products. They include transportation and tourism. For example, a British citizen travelling to India using Air India and staying in an Indian hotel represents service export income for India and service import expenses for Britain.
Note that international business services are generally more restricted by local regulations than tangible goods are. Investments The foreign investments are of two types: Foreign direct investment is used when the company wants to gain a controlling interest or the sole ownership of a business.