The attempts of firms to enter the global market are often led to failure; the above the phenomenon has been attributed to a number of variables. 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. The current paper looks at the role of globalisation in international business development. It is made clear in the literature that the size of an organisation is critical for the effective globalisation of the company in question. In either case, it has been shown that globalisation can have a significant effect on international business development, but the mechanism used to achieve this objective is not standardised.
In literature and empirical studies, the role of globalisation in the growth of international business has been illustrated, but academic researchers have been employed to justify the influence of globalisation in international business. Globalization gives companies, in conjunction with Dunning (1999), the ability to extend their operations in the global market, either physically or through the Internet. For example, reference is made to the case of the communications industry where globalisation has created ‘enormous opportunities for expansion and high profits for the major companies in the industry’ (Dunning 141). Merrill Lynch, a financial services firm operating in about 31 nations, is another example used in Dunning’s study to illustrate the relationship between globalisation and international business. (Dunning 141). In accordance with the view of Dunning, as presented above, globalisation will promote the growth of companies internationally; however, such advantage is likely to be available only to large firms, which have the resources necessary for enjoying the benefits of globalisation. Small and medium-sized businesses will face a great deal of difficulty joining the global market; therefore, foreign companies of this size could not compete. In other words, globalisation might help the international growth of firms, but such prospects would mostly include large corporations, as stated in the Dunning (1999) study above.
The Worthington & Britton (2009) report highlights a different view of globalisation; according to the aforementioned study, the international market is not only relevant to international firms; it is proposed that ‘companies of all sizes should be aware of their international background’ (Worthington & Britton 45). In addition, it is clear that the availability of an expanded market for their products/services is one of the main advantages that globalisation can give companies globally. In other words, for the above-mentioned researcher, the notion of globalisation represents the presence of a globally expanded economy, covering the economies of all countries around the world.
The research by Wall and Minocha (2009) focuses on the use of globalisation in a wide variety of activities/areas, including trade, politics and sociology, to achieve benefits. Globalization is supposed to have specific advantages, particularly with regard to trade: improving the quality and level of trade established internationally between states and organisations (Wall & Minocha 2009); moreover, globalisation could help to ‘increase international capital flows’ (Wall and Minocha 2009). Globalization will also help boost ‘capital movements worldwide’ It is anticipated that globalisation will also greatly support companies that operate worldwide. An significant implication of Wall & Minocha (2009)’s view of globalisation, however, would be the following: not all large corporations would compete with their rivals; the lack of successful management would not enable small/medium-sized companies to gain 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.
- 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.