Globalisation of Business
Stages of Globalisation
A firm passes through different stages of development before it becomes a truly global corporation.
Typically, a domestic firm starts its international business by exporting. Later it may establish joint ventures or subsidiaries abroad. From an international firm it may then develop into a multinational firm and finally into a global one.
Ohmae identifies five different stages in the development of a firm into a global corporation.
First Stage is the arm’s length service activity of essentially domestic company which moves into new markets overseas by linking up with local dealers and distribution.
Second Stage the company takes over these activities on its own.
Fourth Stage the company moves to a insider position in these markets, supported by a complete business system including R and D and engineering.
Fifth Stage the company moves towards a genuinely global mode of operation.
Essential Conditions for Globalisation
1. Business Freedom
There should not be unnecessary government restrictions which come in the way globalization like import restriction, restrictions on sourcing finance or other factors from abroad, foreign investments etc.
The extent to which an enterprise can develop globally from home country base depends on the facilities available like the infrastructural facilities.
3. Government Support
Unnecessary government interference is a hindrance to globalization, government support can encourage globalization.
Resources is one of the important factors which often decide, the ability of a firm to globalize. Resourceful companies may find it easier to thrust ahead in the global market.
The competitive advantage of the company is a very important determinant of success in global business. A firm may derive competitive advantage from any one or more of the factors such as low costs and price, product quality, product differentiation, technological superiority, after-sales services, marketing strength etc.
A global orientation on the part of the business firms and suitable globalization strategies are essential for globalization.
Advantages of Globalisation
Foreign capital, if properly utilized can substantial contribution to the economic development of the nation.
Productivity grows more quickly when countries produces goods and services in which they have comparative advantage.
Increase in competition would make companies more cost and quality conscious and innovative.
Global competition and imports keep a lid on prices, so inflation is less likely to derail economic growth.
Exports jobs often pay more than other jobs.
Unfettered capital flows gives the country access to foreign investment and keep interest rate low.
Globalisation opens up enormous domestic and global opportunities for firms in developing countries.