The Birth of Globalisation Concept - Literature review Example

BORN GLOBAL Introduction The concept of globalisation is one that has gained global prominence in international marketing discourse. This is because through the concept of globalisation, businesses are gaining the opportunity of expanding across different international borders with little or no restrictions. It is not surprising that Shane and Venkataraman (2010) defined globalisation as the process of undertaking international integration of world views, markets, ideas, and concepts of profitable interest. In the light of this, Hollensen (2011) indicated that born global firms view the world as a single and borderless marketplace where they can expand to as a means of gaining international representation in their trade. This means that for businesses to see themselves as being born global, they must have what it takes to expand internationally, including the ability to overcome some of the most basic barriers and challenges to global expansion (Ahlstrom, Young, Chan & Bruton, 2004). This paper therefore discusses the assertion of Hollensen (2011) from a perspective where the concept of born global is transferred into the larger business world. The drivers and barriers to internationalisation shall also be discussed, as well as the key factors that businesses have to consider when they are globalising. Finally, the paper looks into the major management decisions that affect the internationalisation of businesses and how these management decisions can be taken in the right context to ensure the promotion of prudent management practices within born global businesses. Discussion Born global and its transferability The concept of born global has largely been championed by Hollensen (2011) who sees the most distinguishing feature of born global firms as the leadership of these companies, where the leaders are thought to be entrepreneurial visionaries who see the world as a common marketplace with no restricting borders. Through the vision of these leaders of the world as being a single marketplace, internal structures and policies are put in place to ensure that business is done in these firms in a manner that is embraced by the larger global audience. Peng (2007) posits that there are a number of ways in which the idea of born global can be transferred from being a theoretical concept into a practical concept. There are four major modalities that have been noted to be needed when transferring the idea of born global from a theoretical basis into a practical one. These are producing to meet global standards, producing to meet global demand, producing with a globally competence human resource, and having a global resource base to maintain production (Alvarez & Busenitz, 2011). With these modalities met, a firm is said to be positioned for the global competition, making it possible to trade globally. In the view of Sapienza et al. (2006) also, once a firm meets the modalities for transferability, it is expected to begin an internationalisation process. Barriers and drivers to internationalisation Through literature, there are several barriers and drivers to internationalisation that have been associated with both large companies and small and medium scale (SME) companies. One such barrier and driver to internationalisation was noted by Hoskisson, Eden, Lau and Wright (2010) to be shortage of operating capital to finance exports. Using the Uppsala internationalisation theory, Ahlstrom et al. (2004) mentioned that one of the first stages in internationalisation is for a firm to begin with the exportation of its products and services into targeted markets. This is largely done to test the pulse of the targeted market. However, the cost of financing such exports could be costly, requiring very high operating capital that is mostly hard to be raised with SMEs and other larger companies. Another barrier to internationalisation has been found to be difficulty in identifying international business opportunities (Scheela & Van Dinh, 2004). Expanding on this barrier, Hitt, Ireland, Camp and Sexton (2001) indicated that it is one thing having the vision to see the world as a single marketplace and another thing identifying the right opportunities within that single marketplace. Unfortunately, most companies do not have what it takes to critically examine the global marketplace to find the best profitable and viable opportunities that guarantee market growth and expansion. Using the global feasibility theory, Lumpkin and Dess (2006) noted that it is only when a business opportunity is identified that a market can be created out of that opportunity. Also using the Uppsala internationalisation theory, Peng (2006) stressed that as part of the gradual international entry approach firms would always want to have overseas representatives who examine the targeted market and give accurate information. Such accurate information is important for making internationalisation decisions. However, there is the barrier of obtaining or accessing the right and most reliable foreign representation. As a result of this barrier, firms have often had to rely on unsubstantiated information and data that makes it difficult to take the right decisions on how to take full potential of the international markets they target. Last but not least, there is also the barrier of difficulty matching competitor’s strategies. As noted by Hitt et al. (2001), the Porter’s five forces theory present the intensity of competitive rivalry forces. The intensity of competitive rivalry defines the overall extent of competitive force that is carried by the competitors that the prospecting firm would go and meet (Zoltan, 2014). This competitive rivalry is said to be influenced by the use of strategic option, which makes the local firms gain competitive advantage whiles doing business in the prospecting markets. With such competitive advantage, the local firms become preferable to local customers than the prospecting companies. Consequently, the prospecting companies have faced the barrier of effectively competing with in local competitors (Jones & Coviello, 2005). In most cases, the lack of competitive competence has been seen in the areas of price, product quality, and focus segment. Key factors to consider when globalising Writing on the factors to consider when going global, Barney (1991) indicated that there are two major factors which are external factors and internal factors. Under each of these factors also, there are positive influences and negative influences. This creates four general key factors for internationalisation. Writing on positive influence external factors, Luo & Mezias (2002) noted that these are factors that are not controlled directly by the prospecting company but have the ability to ensure that there is growth and development with the internationalisation process. Two such positive influence external factors are ease to travel and good financial opportunities abroad. Knight (2011) indicated that transportation is a factor that affects the internationalisation process, including the ease with which logistics processes can take place. This means that the ability to supply goods and services on time also depend on transportation. For this reason, where there is ease to travel to an international market, it is said that there is a positive influence external factor. Different international markets have also been said to come with different financing opportunities, some of which are more beneficial to global companies than others. Due to this, companies that have good financial opportunities abroad are also said to have positive influence external factors. There are also positive influence internal factors, which have been said to be those factors that help the company to be successful with their internationalisation process and can actually be controlled and monitored by the company internally (Brouthers, ODonnell & Hadjimarcou, 2005). In the opinion of Hoskisson et al. (2010), positive influence internal factors ought to be taken very seriously by the company seeking to go international due to the fact that those factors are in the domain of the company and can easily be manipulated by the company to ensure the requisite form of growth. Some of these positive influence internal factors include motivation of business owners to go international, readiness for the company to take risk, readiness to change business culture, and readiness to wait for international success (Peng & Wang, 2000). There are also negative influence internal factors which have been noted to be those factors that can impede the internationalisation process from an internal decision making viewpoint (Lumpkin & Dess, 2006). Some of these negative influence internal factors have been noted to be negative internationalisation experience of the leaders of the company, risk with intellectual property and possible domesticated growth (Jones & Coviello, 2005). When there are such negative influence internal factors, companies are noted to take panic decisions that may affect the success of the internationalisation process. The last key factor has to do with negative influence external factors. As the name implies, negative influence external factors are factors outside the reach and control of the company that could possibly affect the success with the internationalisation process (Baker, Gedajlovic & Lubatkin, 2005). These negative influence external factors have been said to cut across different variables and parameters of doing business. Some of these have been noted to include customer restrictions, cultural misfit, bureaucratic hindrances, regulatory policies, and lack of infrastructure. Writing from a more theoretical perspective, Nayan (2007) noted that companies that are going international and want to have adequate understanding of the factors that await them in the international markets may either use a PEST analysis or SWOT analysis. This PEST analysis gives an indication of the political, economic, social, and technological factors that await the company in the foreign market. The SWOT analysis on the other hand gives the strength, weaknesses, opportunities, and threats which await the prospecting company (James, 2014). By implication, the PEST analysis can be used to have an understanding of the positive and negative influence external factors whiles the SWOT analysis can give understanding of the positive and negative influence internal factors. Management decisions theories in internationalisation The issue of management decisions have been noted to be very important in the internationalisation process. This means that in order for companies to qualify to be called born global, it is important that they have leadership that take the right management decisions about the internationalisation process. Based on this, the decision theory of management is discussed in relation to the internationalisation process. The decision theory of management was proposed by Herbart Simon who saw management process as a decision making process (Zoltan, 2014). By implication, born global firms are expected to undertake management from a decision making process perspective. Knight (2011) explained that when using decision theory of management, emphasis is placed on decisions, which are made through rationale choice from different alternative solutions. Based on the decisions theory of management, companies seeking to go international have been noted to build a decision making process that studies decisions, decision makers, and the environment in which decisions are made (Nayan, 2007). In the reasoning of James (2014), there are a number of ways in which companies can make the decisions theory of management a practical one. To do this, companies are admonished to have a leadership structure that makes it possible to involve and include the human resource base of the organisation in decision making process. The basis for this assertion is that once this is done, decision no longer becomes the reserve of a few people but the company at large. This way, it is possible to design an administrative model of decision making that can be used to determine how management process takes place based on decision making. Conclusion From the discussions so far, it can be concluded that the view of Hollensen (2011) that born global firms are management by visionary leaders who see the world as a single and holistic marketplace is useful for companies seeking to expand internationally. This usefulness arises because it gives the companies the opportunity of identifying the modalities needed for them to become globally viable. Having said this, it can also be deduced from the discussion that having this understanding of born global does not necessarily make a firm a globalised firm. The basis for this assertion is the barriers that were identified with the internationalisation process. For companies to become true born global frims therefore, it is expected that having they have identified and accepted the notion of the world as a single, borderless marketplace, they also have to have the right qualities that make it possible for them to put their challenges and barriers behind. In order to do this effectively, the companies will be expected to put in place the right management decisions for internationalisation. Even though most of these management decisions are theoretical in nature, the companies could still position themselves to practice the management decisions. Once all these factors have been considered, firms can fully make claim for themselves as becoming born global firms. References Ahlstrom, D., Young, M.N., Chan, E.S., & Bruton, G.D. (2004). Facing constraints to growth? Overseas Chinese entrepreneurs and traditional business practices in East Asia. Asia Pacific Journal of Management, 21(3), 263–285. Alvarez, S. & Busenitz, L.W. (2011). 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