Cascade Effect and Global Business Revolution - Research Paper Example

Cascade Effect & Global Business Revolution Introduction The paper accounts a detailed description of cascade effect in global business revolution and its implications for firms to compete internationally. During the past few decades, the economic conditions and environment has greatly revolutionized across the globe. The policies related to relaxation of international trade and easy flow of capitals, the quick and astonishing advancements in technology, establishment and growth of capital markets and trade beyond the borders have ensued in an enormous burst of merger and acquisition (M&A) practices within the international firms in developed countries. In addition, it is an observation that the course of denationalization and deregulating in various regions around the world has been another significant reason of such burst globally. After the year 1980, the accomplished M&A practices across the globe developed at an average rate of 42% per annum that is US$ 2.3 trillion until 1999. This amount is equal to the 8% of entire GDP of the world (Nolan et al, 2007). The development and growth between 1980 and 2000 was enormous and tremendous, the world has never seen this order of magnitude in business and the M&A practices became the gateway to earn huge benefits. The result of the newest trend of M&A practices is far greater than that of the nineteenth century. With the increased influence of globalization throughout the world, these practices have resulted in more fundamental and deep shift with respect to the business construction and structure across the globe. The global business has undergone complete transformation in its structure due to the phenomenon of globalization and increase in M&A practices. Nolan coined the name "global business revolution" for this phenomenon and with time, the name has become as common but important as the phenomenon was. In order to understand the effects involved in the phenomenon of global business revolution completely, the comprehensive study of the phenomenon itself is very necessary. Experts have showed that the phenomenon of business revolution across the globe has completely altered and revolutionized the quality and nature of capital markets and firms. Moreover, the revolution concerning the international business has resulted in increase in competitiveness between the international firms. In addition to the fact, the global business revolution has transformed the conceptualization of economic growth to more of the global economic development. Three Aspects of Cascade Effect The studies made in context of global business revolution have indicated the three major prospects of this phenomenon. The first prospects is the sudden burst of M&A practices towards the completion of twentieth century that has developed unexampled modes of compactness and inclination in most of the highly developed regions belonging to the economic world. The resulting global competitiveness has pushed companies in different industrial sectors to merge as to get greater economic development and significant influence in crucial business practices that forms and brings fundamental private-enterprise benefits of business companies across the globe. These practices involve mutual branding, technological skill and accomplishment, human resource management, finance, research, and development acquisition, advancement in IT, and logistic support. The second significant aspect of the competitive forces and heightening of complex structures included in organization of economic development have fortified the designing and sorting practices of prominent firms that are the system analyst and integrators, and the most significant business companies existing in value chains globally. The presence of traditional theories of administration and nationalism restricts the firms to interact and merge globally; however, the latest trend of business revolution has enhanced the M&A practices of the firm beyond the legal constraints of the firm in order to strengthen its roots in global value chain. The third important aspect of global business revolution is the fact that the system analysts and integrators communicate the pressuring forces for integration to their first level supply personnel in a very persistent manner (Gholz, 2003). This has made possible by increasing the essentials and needs in quality of the product, costs, and technical advancement. As the first level supply personnel integrate, they in turn communicate the same pressuring forces to their supplier sing the same working factors. The competitiveness and the pressuring forces, thus, continue to move along the chain in order to increase and scale up the global economic practices. Case Studies For comprehensive understanding of the major and most significant prospects of the global business revolution, it is critical to realize the topic in terms of case studies. The paper throws lights on the aspects of global business revolution by analyzing three case studies related to aerospace industry, the beverage industry, and the retail industry. The researches made on these case studies determine the alterations and revolution in the basic structure of business. The first case study belongs to the aerospace industry. This industry holds utmost significance due to its prime importance in defense and security programs. With the introduction of the concept of global business revolution, the aerospace industry has come across major structural changes at every front of aerospace value chain. Aerospace Industry Aerospace industry holds the position of being the most advanced in technological manners throughout the world. The planning, devising, assemblage, marketing, and modification in this industry substantiate potential economies of larger magnitude and greater significance. The designing, development, and updating of aircrafts requires needs huge amounts of monetary investments with substantial marketing costs for the launching period of the aircraft. There is no doubt about the fact that the chances of failure are enormous; however, the gains and benefits induced by success in this field are beyond expectations as well. A well-developed new airplane can have the life of twenty years, and it can earn the good fortunes of US$ 25-40 and highly rewarding benefits as well (Nolan et al, 2007). With the introduction of globalization and the phenomenon of global business revolution, the aircraft industry has changed largely. The aircraft companies in United States joined and merged together with each other in order to achieve the unexpected gains and profits to make their existence significant as compared to other aircraft companies of the world. This increased competitiveness among the potential companies related to aircraft technology across the globe gave rise to even more amalgamation of aircraft companies. The cascade effect never stopped working and as a result, Airbus (Nolan, 2005) and Boeing aircrafts appeared to be the world's best aircrafts. The history behind the two producers is the unification of other plane industries of United States with Boeing, making it the world's most famous, most powerful airplane. This is the case with Airbus as well that came into existence with the amalgamation of producers belonging to countries, such as Britain, Spain, France, and Germany. Consequently, Boeing and Airbus have appeared to be the two most potential system integrators in the world. These two system integrators, as stated earlier, have the greater costs for procuring these aircrafts. However, instead of concentrating on direct manufacturing and producing, the two system integrators concentrate on effective and efficient increment in sorting and planned designing of aerospace supply chain. The pressure on the system integrators passes on to the supply personnel and then to the sub systems and supply personal networks. This makes the two giants ticking and running with the productivity and profitability increasing every second. Analysis of the aerospace industry indicated that during the time when the system integrator accepts the rising operations and practices of designing and sorting lying in domains of value chain, at the same time, it assigns an ever-increasing amount of significant practices to its supply personnel. In composite systems, these assigned practices usually involve crucial operations, such as the planned designing, production, and assemblage of crucial components and subsystems of airplanes. Therefore, the abilities of supply personnel are the matter of utmost significance, and they act as a unified part of the increased competition in the value chain and a very important part of system integrators as well. Advancing the progress of one sector after another, the system integrators have employed in a kind of industrial planned designing to endorse the value supply chain with considerably lesser; however, more able and potential supply personnel in the aerospace industry. This has made a significant increment in the needs and essentials related to the abilities of these unified supply personnel and integrating experts of subsystems in a greater and wider domain of work involving planned designing, research and development, finance, and service and support (Nolan et al, 2007). Consequently, the unification and amalgamation of systems by the significant firms and companies has established strong and acute pressuring forces for integration between the first grade supply personnel in order to enhance, extend, and expand abilities and potentials and attain economic growth of magnitude and vision in significant businesses with respect to global business revolution (Nolan, 2001). Hence, in order to make up the huge budget requirement for the system integrators, the supply personnel make huge investments in research and development sectors, and extend as to enjoy the advantages and profits from cost minimization by economic growth of magnitude and significance (Nolan et al, 2007). Beverage Industry The other significant case study relates to the beverage industry. It is a misconception that the beverage industry involves a lesser extent of compactness and engrossment with respect to global industry. In fact, the beverage industry is one of the industries that have the higher level of concentration with respect to industries across the globe. The nature of the products, commodities, goods, and services rendered by this industry encountered a smaller change during the two decades. The industry involves beer industries, soft drink industries, and the mineral water industry being the faster developing industry as compared to the other two. The highly developed countries around the world, the beverage industry used to be one of the most disunited industries. However, with the global business revolution, the beverage industry has appeared to encounter extreme and immense industrial integration through the practices of mergers and acquisition during the few years. Moreover, the industry has come across major and fundamental changes in its structure coping up with the global business revolution. These structural changes have made enormous effects on the value chain of beverage industry completely by system unification and amalgamation with the help of the prominent beverage industries across the globe. The unification of system integrators involves the process of taking the possession of raw materials used as the input to the beverage industry. This process, on most parts, consists of the research and development work. The next significant point included in system integrators is the powerful and potential capability to create impressive and extravagant brands. The system integrators in beverage industry today are taking hold of powerful brands as Coca-Cola, Fanta, and PepsiCo etc. These beverage industries act as the system integrators having the longest chains of supplies. These system integrators with the help of long chain of supply personnel and subsystems render services at reduced costs and higher qualities in the competitive and consolidated international market. The suppliers in this industry are the means to make investment in terms of technology and technological development, and extend with system integrators spread around the world. Retail Industry The third case study in order to understand the global business revolution and cascade effect is the retail industry. This industry is one of the giants in the list of industries worldwide; the retail industry is one of the biggest industries with respect of employment opportunities. The significance of this market is prominent as it makes the market for producers and their customers across the globe. With the greatest international business revolution and the cascade effect, the retail industry has followed the suit of other industries as beverage and aerospace industry in order to achieve greater power and advantages during the past few decades. The cascade effect has made huge firms and companies to extend beyond the boundaries and appear as the most potential in retailers industry. The lining example of the prominent and potential retailer is that of Wal-Mart, this industry has occupied about 30% of US market and it is one of the most successful markets expanding its roots in every occupation (Nolan et al, 2007). This prominent position of Wal-Mart is the result of unification and merger of various retailers in order to achieve extended benefits by joining hands. The supply personnel in the retail industry have the obligation to render extended services that involves sharing of information, logistic support, planned designing per annum, and the analysis of customers' wants and desires. The logistics services includes that includes over-seas transportation, storage, clearance etc (Nolan et al, 2007) Moreover, by quick enhancement and consolidation, and M&A practices giant retail industries around the world have appeared to dominate prominent and important portion of customer expenditure in every main retail market. These giant retail industries have simultaneously stiffened their grip over the supply chain of retail industry. These practices have revolutionized and increased the effectiveness of the supply chain of retail industry and brought creativity to the market like exclusive brands etc. The continuation of the phenomenon of globalization, the business organization, and companies belonging to under-developing countries realizes themselves as if these companies are competing with the international giants or doing the work for the global firms. The huge benefits and fruits of authority (Chandler, Amatori, and Hikono, 1997) over the supply chain that the global giants enjoy, present substantial and critical implications for the firms belonging to countries that have low income. These low-level firms, in order to maintain and safeguard their existence in market strive in catching up with the big global giants. This gives rise to a competitive environment that serves as the potential challenge for firms struggling to get their position in international market (Nolan, 2001). Conclusion Finally, paper has indicated that Cascade Effect is very prominent effect seen in giant industries and core firms these days. The cascade effect is one of the unparalleled prospects of global business revolution, it is the significance, evaluation scope, and volume of the integration and consolidating pressuring forces make an effect on the whole of the supply value chains. The procedural process of compactness accomplished by co-occurring separation of already merged insignificant firms and companies and amalgamation of core and significant businesses is overlapping on the supply value chain at a greater rate. It appears to support and promote wider range of practices; the effect is working efficiently and effectively throughout the world. This phenomenon allows the global giants to unify and integrate with one and another, develop and establish rapid economic growth in order to achieve the crowns of global leaders. These first level supply personnel and the integrators of subsystems, as a result, communicate and pass the same immense and intense pressuring forces on to their own supply personnel networks following the same mechanism of integration of system using cascade effect. The consequence of this effect is the process of growth and establishment of compactness and engrossment continuing globally at the more rapid rates than before (Mazlish and Morss, 2005). This effect of concentration is evident in various business industries acting as the suppliers of products, commodities, goods, and services to the integrators of the systems. The cascade effect working at the back of global business revolution has significant implications for the type of competition. It implies the fact that the challenges, which the firms belonging to low-level countries (Sorrel, 2004) have to face are deeper than they appear to be on the first look. Following a competition with firms having repute of being global giants needs not only the matching efficiencies and skills in order to compete but also well-organized and exceptional coactions with extremely efficient and effective value chains across the globe. Moreover, during the time when the heightening authority and abilities of global system integrators make the low level firms obliged to accept the exceptional challenge of competing with these global giants (Hymer 1979), the cascade effect significantly heightens the qualities and standards of functioning of these global giants or the system integrators at an international level. The essentials for making an entrance into the significant portions of value chains across the globe, with respect to research and development, finance, and managerial skills, have increased significantly for business companies in low-income countries. The cascade effect makes the expulsion of firms of developing countries possible from significant value-added practices in the value chains across the globe. Towards the end, the firms belonging to low-income countries confront extremely difficult situations and challenges in catching up with the global giants. However, the firms also confront and face huge problems and troubles in catching up with the potential businesses that now are the master of every part of the supply chain. Moreover, if the firms belonging to low-income countries do not catch up their position in global value chains, the countries will have to suffer economic imbalance and impoverishment. Conclusively, the paper has discussed some of the significant aspects of cascade effect and its implications in terms of global business revolution. It is an expectation that the paper will be beneficial for students, teachers, and professionals in better understanding of the topic. References Chandler, A. Amatori. F., Hikono, T. (1997). Big Business and Wealth of Nations. Cambridge University. Gholz, F. (2003). The Business of System Integration. Oxford University Press. Hymer, S. (1979). The International Operation of National Firms: A Study of Direct Foreign Investment. MIT Press. Mazlish, B. Morss, E. (2005). Multinational Corporations and the New Global Elite. Cambridge University Press. Nolan, P. (1995). China’s Rise, Russia’s Fall. Macmillan. Nolan, P. (2001). China and the Global Business Revolution. Palgrave. Nolan, Peter, Jin Zhang, & Chunhuang Liu. (2007). the Global Business Revolution and the Cascade Effect: Systems Integration in the Global Aerospace, Beverage, and Retail Industries. Palgrave Macmillan. Sorrell, M. (2004). The Advertising and Marketing Services Industry. WPP. Read More