A Decisive Role in the Growth of International Businesses - Essay Example

? Explain and discuss how Globalisation has affected the growth of international business The attempts of firms to enter the global market are often led to failure; the above phenomenon has been related to a series of factors. It seems that not all firms are appropriate prepared in order to operate globally. On the other hand, the potential success of such projects cannot be estimated in advance. Current paper examines the role of globalisation in the growth of international business. In the literature it is made clear that the size of a firm is decisive for the globalisation of the particular firm to be successful. In any case, it has been proved that globalisation can highly affect the growth of international business but the process used for the achievement of this target is not standardized. The involvement of globalisation in the growth of international business has been highlighted in the literature and the empirical research; however, academic researchers have employed in order to justify the power of globalisation on international business. In accordance with Dunning (1999), globalisation offers to businesses the chance to expand their activities in the global market, either physically or through the Internet. Reference is made, for example, to the case of the communications industry where globalisation has given ‘enormous opportunities for expansion and high profits for the industry’s major firms’ (Dunning 141). Another example used in the study of Dunning for showing the relationship between globalisation and international business is that of the financial services firm Merrill Lynch, a firm ‘operating in about 31 countries’ (Dunning 141). In accordance with the view of Dunning, as presented above, globalisation can support the development of businesses internationally; however, such benefit is expected to be available only to large firms, which have the resources necessary for enjoying the benefits of globalisation. Small and medium sizes firms would face many difficulties in entering the global market; moreover, the firms of this size could not compete international firms. In other words, globalisation could support the growth of businesses internationally, but such prospects would involve mostly in firms of large size – as also explained in the study of Dunning (1999) above. A different perspective of globalisation is highlighted in the study of Worthington & Britton (2009); in accordance with the above study, the international market is not related only to international businesses; it is suggested that ‘businesses of all sizes should be aware of their international context’ (Worthington & Britton 45). Moreover, it is made clear that one of the key benefits that globalisation can offer to businesses internationally is the provision of an extended market for their products/ services. In other words, for the above researcher, the concept of globalisation reflects the existence of a market, which is geographically expanded as possible – covering the markets of all countries worldwide. In the study of Wall and Minocha (2009) emphasis is given on the use of globalisation for achieving benefits in a wide area of activities/ areas, including trade, politics and sociology. Regarding specifically trade, globalization is expected to have specific benefits: improvement of the quality and the level of trade developed among states and organizations internationally (Wall & Minocha 2009); moreover, globalisation could help toward the ‘increase of the international capital flows’ (Wall and Minocha 2009, p. 14). Also, globalization could help towards the increase of ‘capital flows worldwide’ It is expected that businesses, which operate globally, would be also strongly benefited from globalisation. However, an important implication of the view of Wall & Minocha (2009) on globalisation would be the following one: not all firms of large size are able to compete their rivals; the lack of effective management would not allow firms of small/ medium size to get access to the international market and perform independently. On the other hand, Prasad (2003) notes that the support of globalisation to international businesses could have various forms. More specifically, it is noted that globalisation can support international business both directly and indirectly; in the context of its direct support to international business, globalisation could provide to international firms access to all markets worldwide. Indirectly also, globalisation could help the firms to develop effective strategic plans – which, in the long term are expected to help towards the improvement of the position of these firms towards its competitors. Another indirect benefit of globalisation to international business would be the support of local markets – targeted markets; reference can be made particularly to the support of the economy of developing countries, as this support could positively influence the ability of the public to acquire the products/ services of the specific firm (Prasad 2003). From a similar point of view, globalisation can help to the improvement of strategic choices of international businesses – this improvement would result to the increase of these firms’ potentials to increase their profits or to expand geographically; the above target could be achieved in the following way: leaders of international firms are educated on the needs and the potentials of the global market (Parhizgar 16). In this way, the skills of leaders to identify the potential chances of the global market are increased; this increase would result to the alignment of business strategies with the demands of the global market – thus, the power of the firm in the international market is improved. Moreover, international firms that aim to support their operations and increase their profitability have to be appropriately prepared (Parhizgar 16); the most important phase of their preparation would involve in the evaluation of their value systems and the introduction of policies that best serve and support the specific systems. In accordance with the above view, globalisation would help international businesses not only to increase their customer base but also to improve their strategies; in the long term, this trend would be particularly important allowing for a stable and continuous growth. From a similar point of view, globalisation could support the stable development of businesses within a particular market, through the following perspective: through globalisation the industrialization of a country would be promoted – by supporting business initiatives that can be developed using existing resources (Justin 7). In this way, the potential markets for the products/ services of international firms are increased. However, it is important that local culture is respected and that the efforts to change the characteristics of local economy would be effectively controlled – as of their appropriateness and their necessity. In any case, Justin (7) makes clear that appropriate restructuring of the firm’s operational activities should follow the expansions of businesses geographically. At the next level, the firm’s strategies should be reviewed; the above task is considered as necessary since the benefits of globalisation are likely to last for a specific – short – period of time; for achieving long-term benefits through globalisation, firms would need to employ two different strategies: a quality strategy and an appropriately customized development strategy (Justin 7). In this way, globalisation would participate in the achievement of long-term benefits, which would support more, effectively the firm’s performance in periods of crisis – like the current one. In accordance with Nande & Dias, globalisation can support the growth of international business through the following methods: a) in order to respond to its increased needs, an international firm is expected to employ large-scale production methods; it can also hire staff with advanced technical skills; in this way, the specific firm will be able to use its resources more effectively, b) after entering the global market, a firm can spread its risk of loss; by spreading the risk of losses between the local and the global market, a firm can ensure the allocation of funds required for the firm’s operations in the domestic market, in fact the payment of all the firm’s obligations (costs, compensation etc.) in the local market can be made by using the profits gathered in the international market, c) it is easier for international firms to achieve their ‘profit objective’ (Nande & Dias 211), d) the provision from the government to the firms of incentives in order for the latter to expand their activities locally; in the context of these incentives, a firm can be offered significant tax benefits – which would not have offered if the firm was not global, e) the entrance of a firm in the global market – and the development of its operations in this area – would lead to the improvement of quality of goods/ services and the increase of innovation across the organization – aiming to beat the rivals in the global market, f) overall, since its entrance in the global market, a firm is expected to improve its competitiveness, i.e. its power to compete its rivals, g) after entering the global market, the brand name of the firm is, usually, highly benefited; however, the relevant results/ benefits may not last for a lot. The literature presented above proves that globalisation can have a decisive role in the growth of international businesses; however, its role is not always equally important; moreover, the appearance of delays and barriers during the efforts of a firms to enter or to establish its position in the global market cannot decrease the value of global market. On the other hand, the lack of effective measures when operating globally can lead a business to severe failures (Ali 2000). Globalisation can be a framework through which the growth of international businesses can be achieved but measures should be taken in advance so that the relevant risks are minimized. Works Cited Ali, Abbas. Globalization of business: practice and theory. London: Routledge, 2000. Dunning, John. Governments, globalization, and international business. Oxford: Oxford University Press, 1999. Justin, Paul. International Business. New Delhi: PHI Learning, 2008. Nande, Arvid & Dias, Shaila, International Business and New Trends. Shivaji, Nagar: Nirali Prakashan, 2007. Parhizgar, Kamal. Multicultural behavior and global business environment, London: Routledge, 2002. Prasad, Eswar. Effects of financial globalization on developing countries: some empirical evidence. Washington: International Monetary Fund, 2003. Wall, Stuart, Minocha, Sonal. International Business. Essex: Pearson Education, 2009. Worthington, Ian & Britton, Chris. Business Environment. Essex: Pearson Education, 2009. Read More