Global environment has become much more relevant in last two decades. Globalisation refers to process of integration of world economies as far as practicable. This integration calls for removal of trade barriers.
When a company goes global it sets up offices in more than one country. Then this company becomes “transnational” or “multinational” European and American. Companies have set up their offices, outfits and factories all over world.
According to an estimate, Philips Company is a Dutch company but only 10% of its total sales are generated in Holland, which is its parent country. Many European and American companies have opened their shops and factories in China, south-Korea and from there they cater to a large chunk of global demand.
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A company’s global dimension approach has certain features. Primarily, it aims at selling its products worldwide. It adopts such strategy, so that the products are sold under an international brand name. Again, a global strategy is associated with establishing outfits in other nations to reap regional advantage (e.g. cost of production in third world country in less than the west) such as B.P.O. out sourcing in India by American firms.
Another important feature of a company’s global strategy is associated with coordinating and integrating on a global basis to maximise profits and minimise costs. The brand reputation and strong presence helps to serve international consumers.
The global presence of the company also is helping favourably to operate and internationally integrate all sorts of advantages. The lower cost component abroad (as in the third world countries) and strong technological base and high level of R&D network takes a company to a suitably higher level.
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Michael Porter holds that resources permitting a potential company should proceed to be global since confining a company’s existence within the boundary of the parent country is far inferior to going global.
Philip Kotler thinks that organisation who have passed beyond international-division stage have become global organizations. They think themselves as global marketers. “Their corporate management and staff plan worldwide manufacturing facilities, marketing policies, financial flows and logistical systems. …”.
Management is recruited from many countries, components and supplies are purchased where they can be obtained at least cost, and investments are made where anticipated returns are greatest”. (Philip Kotler, Marketing Management, Prentice Hall of India).
Kotler refers from Bartlett and Ghosal’s celebrated works “Managing across Borders” that there are certain forces which favour global integration. A global strategy treats world as a single market. Matsushita operates in a more globally coordinated manner so they have performed better than GE and Philips.
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Any multinational considers present world as a “portfolio of national opportunities.” If local forces are strong and favourable then parent companies should allow more autonomy to the host countries’ branches which fit into local standard requirements.
Unilever was successful for this reason over Procter and Gamble. “Glocal strategy combines certain” core elements of parent country’s strategy with certain local elements.
Ericsson has balanced beautifully between this two. Kotler thinks merger between Swedish company ASEA and Swiss company Brown Bavery formed ABB, which is one of most successful “glocal” companies.
Global environment calls for following the law, culture, tradition, demand pattern of local country. An ideal company makes a balance between global and local dimension.
In recent times world scenario is absolutely changed due to technological up gradation. Tom Peters has argued that the technological facilities have offered a wide range of facilities and availability of easy credits and other services just by switching on computer and information technology. This business outsourcing is now giving a new dimension to the global business operation. Business process outsourcing is also emerging in a big way in India too.
A very significant development has taken place in the realm of outsourcing from other countries where raw material cost, equipment cost and labour cost is low. Many European and American Multinationals have established their manufacturing units in many South and South-East Asian countries and are organised well making huge profits, producing at a lower cost.
The globalisation efforts have increased the world wide merger and acquisition phenomena. Vertical and horizontal integration of companies have accentuated the process of mergers & acquisition, but factors like technical, strategic, financial and marketing advantages have been instrumental in promoting M&A (i.e. Merger and Acquisition).
The globalisation process has revolutionised the economic systems and their working. But the phenomenon of International propagation of trade cycle has increased quite substantially. The American recession had cast its shadow all over the world.
India was not an exception to this process. Many Indian Companies or I.T. professionals suffered from this recession. The recession has compelled job cuts in many companies such as Mercedes-Benz, IBM and other corporate giants.
According to world Investment Report, Transnational Corporation shape the process of economic change in a big way right now. The global environment is highly dominated by their action and presence.
The present context of global economy changes the process in the following ways:
(а) Increased emphasis on market forces and a bigger role of private sector, reduction of Public Sector.
(b) The changing dimensions of technology are transforming the nature, organisation and location of international products.
(c) Firms and Industries are becoming more global.
(d) Services emerging as a most vibrant sector worldwide.
(e) Third world (a select band) economies are integrating among themselves particularly with developed countries.
We see, globalisation process has brought a sea change in the economic environment. The process is bringing such an enormous transition that one cannot remain a silent spectator in this scenario. He has to feel the heat and respond according to the progress and changes. This is applicable not only to individual businessman but also to any socio-economic entity whether it is a consumer or a corporate or a government.