Changes in the Concept of Globalisation - Essay Example

BORN GLOBAL Table of Contents Table of Contents 2 Introduction 3 Changes in concept of globalisation 3 Drivers and Barriers to internationalisation 5Influence of internationalisation on Management Decisions 6 Standardisation and adaptation 7 Key Factors effecting internationalisation and market structures 8 Conclusion 9 Reference List 10 “The most distinguishing feature of born global firms is that they tend to be managed by entrepreneurial visionaries, who view the world as a single, borderless marketplace.” (Hollensen, 2011) Introduction Globalisation is undoubtedly one of the most highlighted factors in every segment of discussion. In the words of Dunning (2002), globalisation has not only widened the scope of the business houses but has developed a new segment in context of organisational development and growth. Cavusgil and Knight (2015) mentioned that entrepreneurs and business houses have been able to overcome the geographical barriers and establish a global brand. In a manner, globalisation has raised the hope of developing a single market place with limited barriers and a common platform for operation. However, this belief has differentiated the birth and expansion process of business firms as globally launched products and brands are increasing in the market. This statement will be analysed in the report by considering various aspects of internationalisation and its influence on business operation. Changes in concept of globalisation Globalisation has been defined by many scholars and researchers considering its various characteristics and features, however a precise definition is yet to be developed for the most popular concept of the late twentieth century (Zucchella, Palamara and Denicolai, 2007). Globalisation was started as a process for unifying the corporate practices of the world by creating common platforms for consumers and business houses to perform (Analoui and Karami, 2009). The changes in the business practices that followed the aspect of globalisation had not only influenced the economic scenario of the world but also created new opportunities for nations to accumulate their resources and develop their trade and commerce. In the words of Hollensen (2011), globalisation has been a motivating factor for the business houses as many firms are now trying to launch themselves in the international market directly. These firms are often considered as global born brands (Jeannet and Hennessey, 2010). Nevertheless, the viability of the concept of globalisation or a borderless market has been criticised in many aspects. Based on the growth and changes in the business processes in the international market place, the concept of globalisation has also undergone some changes in the past decade. Kourdi (2009) stated that as the world is being moulded into a global shift, economic and technological forces are acting as the primary drivers of globalisation. Parker (2011) criticised that the changes in international perspective can lead to elimination of many national and social cultures and diminish the historical importance of a community or group. Focusing on the operational aspects of the business processes, Barney (2009) reflected that as firms are engaged in the process of internationalisation, their internal managerial processes are highly affected. Working in new market places within an unknown environment can result in an increased operational costs rather than a beneficial business practice process. The shift or transferability of the concept of business practices thus is directly related with the phenomena of globalisation or internationalisation. According to Chesbrough (2009), the transferability of globalisation mainly occurred because of the political and economical influence on the corporate sector of the business houses. Gary, Wood and Pillinger (2012) added that cultural and socio-economic factors such as crimes, national values and expectations of individual communities and business processes have also increased the transferability of globalisation. Drivers and Barriers to internationalisation The barriers or drivers of globalisation as said by Hollensen (2011) are changes based on the geographic, political, demographic nature and economic scenario of the countries. For instance, an American firm expanding to the UK will focus on quality enhancement and brand development whereas while planning the expansion process of India, the focus will be mainly on product promotion and pricing strategy. These factors are mainly related to demography of the consumer base and also to some extent the economical scenario of the concerned markets. Considering the global perspective, Grant and Spender (2009) opined that globalisation can be difficult to adapt, as the changes in markets also indicates the changes in operational costs and other expenses of the business firms. Lorenzoni and Lipparini (2009) noted that small and medium scale companies are unable to expand their business process mainly because of shortage of working capital and inefficient resources for identification of the scope of business in foreign markets. Apart from these, price changes, exchange rate fluctuations, influence of global and local regulatory bodies are also major factors influencing the process of globalisation of business firms (Morris, Schindehutte and Allen, 2011). In terms of the primary drivers of globalisation as mentioned above are the economical and technological changes in the national and industrial perspectives. According to Robinson, Fornell and Sullivan (2010), the global recession of 2007-08 has reduced the stability of the global economy and influenced the performance of the corporate sector in a negative manner. The European market faced critical risks as American multinational firms started pulling back from their countries and this also effected the growth of the emerging markets where outsourcing was a major source of income (Miller and Cardinal, 2007). In this scenario, the need for recovery from the financial meltdown pushed the corporate sector and the political bodies of the nations in enhancing their growth opportunities by developing a global outlook. According to MacMillan and Venkataraman (2009), the market drivers for internationalisation of businesses also vary according to the global status of the host country. For instance in Australia, controlled supply chain and reduced cost of operations are attracting global firms whereas for Canada the managerial capacity of their labour force, R&D focus and capital stability are enticing global entrepreneurs. Influence of internationalisation on Management Decisions Internationalisation of business houses is the most sought after process by the firms for escaping from the steep competition filled markets. Hollensen (2011) noted that to an extent the aspect of internationalisation of firms is influencing the organisational structure and work practices of the firms. This brings the concept of born global firms which launch themselves in the international platform for covering up a bigger market space and reduce the influence of geographical borders. This has been marked as evolution of business development as well as the growth of globalisation in the business management processes (Korsakienė and Tvaronavičienė, 2012). In the words of Grant and Spender (2009), as globalisation has expanded the market place for the firms, the managerial decisions now being taken have to consider a wide spread area. On the other hand, the implications of the changes in the markets, economical and political scenarios of nations, changes in consumer behaviour have a direct influence on the operations of the firms (Morris, Schindehutte and Allen, 2011). Cavusgil and Knight (2015) argued that as firms are trying to internationalise themselves, the social and cultural values of the consumers are getting lost. This can have a significant impact on the consumer decision making and the products and service base of the corporate houses. Considering the case of global born firms, MacMillan and Venkataraman (2009) mentioned that global born firms have to ensure that they have sufficient knowledge and experience regarding the technological and economic factors of the markets along with the customer information. Analoui and Karami (2009) specified that knowledge management is a core function for the international firms as the business processes needs to ensure accuracy in their data analysis and also communicate the results of their Research and Development processes throughout the functional and decision making segments of the organisation (Nummela Saarenketo and Puumalainen, 2004). One of the most effective examples of knowledge management in global perspective has been presented by Heinz who has customised their knowledge and database management tool in a manner which allows the organisation to communicate their decisions to all the internal stakeholders of the business (Morris, Schindehutte and Allen, 2011). Finally, MacMillan and Venkataraman (2009) mentioned that globalisation or internationalisation has increased the functions associated with the decision making processes and can become a time-consuming strategic planning process. However, this can again be considered as a challenging factor in view of the high competition in the international market place. Standardisation and adaptation As per the observations of Grant and Spender (2009), business firms have gained a better platform to adapt to the customer needs and market expectations of the business. As globalisation has helped the firms to enter a larger market place and cater their services and products to a wider consumer community, the aspect of diversity among the internal and external stakeholders of the firms have also increased. The employee base of the companies has started recruiting locals in order to understand the consumer behaviour as well as developing a better service structure for consumers (Lu and Beamish, 2006). On the other hand, as the organisations are catering to a culturally diverse consumer base the management cannot focus their strategy on any individual service aspect and have to develop a flexible service structure (Korsakienė and Tvaronavičienė, 2012). Gary, Wood and Pillinger (2012) reflected the supply chain of the firms is mostly affected as a result of change in market places and organisational activities. Cavusgil and Knight (2015) further explored that as the infrastructural, economic, political and technological scenario of various nations differ, the organisations have to decide their operational functions in accordance to the capability of the nations. Google Plc reflected a better internal management process by strictly adhering to data analysis for decision making that reduces the emotional aspect in their decisions. However, Analoui and Karami (2009) maintained that flexibility in operations not only depends on the operational level activities but should be initiated from the strategic decisions and objectives of a business. After Ford Mulally joined Ford Motors as their CEO, he set an excellent example of a flexible workforce and also an amalgamated effort from the employees to fulfil the organisational objectives despite their differences (Morris, Schindehutte and Allen, 2011). Mulally’s focus on developing a unified effort for the company helped him in creating a shared vision and also increase the efficacy of resource utilisation of the company. The given examples show that the adaptations and standardisation can also be managed by inducing flexibility in the work culture and structure of the organisation rather than controlling the external factors influencing over the work process of the business houses. Key Factors effecting internationalisation and market structures In order to identify the factors that influence internationalisation and market structures of the business world mostly established environmental analysis tools such as Porter’s Five Forces or PESTLE are used. However, considering the wide scope of internationalisation of firms, the specific objectives will be evaluated in this section. MacMillan and Venkataraman (2009) proposed that market structures are not influenced by the internationalisation process unless the changes in the market can be related with the changes in the consumer behaviour. However, Gary, Wood and Pillinger (2012) criticised that increase of foreign direct investment in the global perspectives is acting as a barrier for the domestic medium and small scale firms of the country. Also reduce in the business operations of the local firms is gradually reducing the cultural and social attachments of the consumers with local brands. Morris, Schindehutte and Allen (2011) estimated that internationalisation of firms is reducing the number of products and services in the market places and can also result in failure of the SMEs of the countries. However, Cavusgil and Knight (2015) countered that internationalisation allows SMEs to reflect their capability and quality to a greater audience which is a huge opening in relation to the competition in the market. This can also be noticed in the real life business aspects as firms are trying to expand their regime by engaging in strategic alliances, mergers and acquisitions, ventures, etc. This directly influences the market structure of a country but also has the potential of creating a single borderless market in the business industry. Conclusion The expansion strategies of the corporate firms are mainly supported by the concept of internationalisation and globalisation. The changes in the business aspects have not only affected the market structures but also changed the operational styles and the decision making processes of the firms. While some scholars argued the growth of globalisation as it can diminish the local markets, other suggested globalisation will help in creating a unified market place which can highlight the individual skills of the nations and their firms to a larger audience. However, operating in a borderless market place also requires strict guidelines and fair practices on the part of the firms which can be considered as impractical in real life scenario. Reference List Analoui, F. and Karami, A., 2009. Strategic management in small and medium enterprises - Page 74, London: Thomson learning Barney, J. B., 2009. Strategic factor markets: Expectations, luck, and business strategy, Management Science 32( 1 ) , pp. 1231-1241 Cavusgil, S. T. and Knight, G., 2015. 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