Globalization Overview

Globalization Definition

• Globalization is the interaction and integration of people, companies, and governments worldwide.
• This leads to economic interdependence.
• Globalization impacts global politics, culture, the environment, and communication.

Key Characteristics

• Multinational Corporations (MNCs) have increasing power and global reach.
• Technological advancements facilitate globalization, such as faster travel and shipping.
• Governments reduce trade barriers to encourage free trade.

Globalization of Markets

• National markets are merging into a single global marketplace.
• Companies face similar competitors (e.g., Coca-Cola vs. PepsiCo, Boeing vs. Airbus).
• Global consumers drive this integration.

Globalization of Production

• Companies source goods and services globally to leverage cost and quality differences in labor, energy, land, and capital.
• Multinational corporations (e.g., Boeing, Apple) utilize components from around the globe.

Advantages of Globalization

• Encourages free trade and job creation.
• Reduces costs and increases competitiveness.
• Facilitates global communication and knowledge exchange.
• Promotes technological advancement and innovation.

Disadvantages of Globalization

• Increases social inequalities.
• Leads to unfair labor practices.
• Causes job losses in developed nations due to outsourcing.
• Raises security risks (e.g., terrorism, data protection issues) and environmental concerns.

Role of Technology

• Innovations like microprocessors, telecommunications, the internet, and transportation accelerate globalization.

Internationalization

• Involves conducting business in multiple countries, often within a specific region.
• Focuses on limited regional expansion, unlike globalization.
• Key areas for companies to consider are:
  • International business dealings across borders
  • The decision on whether to remain domestic or go global
  • Barriers to expansion such as insufficient finances, lack of knowledge, or lack of connections.

Theoretical Models

• Uppsala Model: Companies expand gradually in foreign markets. This occurs in stages from sporadic exports to selling products through foreign sales subsidiaries, and eventually moving to full ownership of foreign subsidiaries.
• Stopford's Model: Companies gradually enter foreign markets, starting with export activities and potentially going as far as forming manufacturing branches and gaining full ownership of foreign subsidiaries.

Local Adaptation

• Adapting products, services, advertising, and communication strategies to align with local cultures, customs, traditions, and preferences.
• Local preferences should be accommodated through adjustments such as using local languages, adjusting to local tastes, etc.

Glocal Strategy

• Combining global standardization with local differentiation.
• This approach balances global branding with local preferences.
• Companies balance a global strategy with the need for adaptations to local preferences.

Case Studies of International Businesses

• Exemplary companies such as ESET, Avast, and others that successfully adapted their business strategies in international markets.

International Business Strategies

• Multidomestic: High local responsiveness, low global integration.
• Global: High integration, low local responsiveness.
• Transnational: High integration and responsiveness.
• International: Low integration and responsiveness.

Reasons for Expanding Internationally

• Growth opportunities
• Cost savings and risk diversification
• Strategic positioning
• Reputation and local demand

Key Factors in Entry Mode Decision-Making

• Market size, growth potential, and market share.
• Product type, marketing strategy.
• Time horizon and company involvement level.
• Characteristics of target market

Entry Modes

• Exporting: Direct (managing sales directly) or indirect (using intermediaries).
• Licensing: Licensing rights to produce/sell a product.
• Franchising: Franchising rights to use a brand and business systems
• Joint Ventures (JV) and Strategic Alliances: Partnerships sharing resources
• Wholly Owned Subsidiaries: 100% ownership of operations in a foreign market.

Examples of Market Approaches

• Exporting cases
• Joint Ventures examples
• Greenfield Investments: Full operational control, high initial investment

Culture

• Culture is a system of shared values and norms.
• Key aspects of culture include values (abstract concepts of good/bad, right/wrong), norms (social rules guiding acceptable behavior), and society (groups with shared norms and values) and how these factors influence communication and behavior.
• Aspects defining culture include social structure (individualistic or collectivist tendencies), religion, language, education, political systems, and the economy.

Hofstede's Cultural Dimensions

• Power Distance: The degree of inequality that exists and is accepted between people with different levels of power in a society (low or high).
• Individualism vs. Collectivism: The focus on self-reliance versus group harmony.
• Uncertainty Avoidance: The preference for certainty and structured environments or in contrast to allowing ambiguity and flexibility.
• Masculinity vs. Femininity: The distribution of gender roles (achievement oriented vs. quality of life).
• Long-term vs. Short-term Orientation: The focus on future rewards vs. immediate gratification.

Impact of Culture on Business

• Cultural differences affect workplace interactions, corporate structures, customer relations, and marketing strategies.

Importance of Cross-Cultural Communication

• Understanding cultural differences enhances global workforce management, negotiations, and collaboration, and it improves customer satisfaction in international markets.