Competing in a Global World
Introduction to Globalization
“Globalization is a fact, because of technology, because of an integrated global supply chain, because of changes in transportation. And we are not going to be able to build a wall around that.” - Barack Obama (AZ quotes, n.d).
The adopted definition from one of the world’s greatest leaders and politicians, emphasizes the influence of technology in industry 4.0 along with the supply and procurement between international borders with changes in transportation mediums – be it through physical or digital means has evolved globalization to a point that it cannot be stopped or hidden.
However, globalization did ceased to progress, and collapsed once in the 1914 in World War I (Rodrik, 2011). In the work of Rodrik (2011), it is questioned ‘could we witness a similar global economic breakdown in the years to come?’ The answer is unpredictable. Considering the current 2022 situation of the world with a war between two leading European countries in the world – Russia invading Ukraine leaves economic situations of both national and global markets in a questionable gradual disruption. Moreover, this crisis can be an example of the downsides of globalization and competition due to political powers posing a negative threat to the entire world – the society, the politics, the economy and the cultures.
The concept of business, global economy and cultural interventions has dramatically changed due to the impact of globalization. The profit-related business activities carried across national boundaries is a reason for major developments in the world; the trading blocs, information technology, workforce diversity, the status of emerging economies of China, India, Mexico and unstable political situations in various parts of the world, such as Afghanistan, the Middle East, and Africas (Katsioloudes & Hadjidakis, 2007).
Globalization and its Importance
Globalization is the free flow of resources among countries. It is the interdependency of economies. The definitions of globalization vary, extensively. It is considered a discourse, a set of beliefs, a behavioural set of principles, rules, and activities of liberalism (Lipschutz & Rowe, 2005). Lipschutz (2000) finalizes it is material in the sense that capital, technology, goods, and, to a limited degree, labour are able to move increasingly to areas with high returns on investment, without consideration to the social or political influences on countries, communities, and people. Moreover, it also has 'contradictory political effects' as stated by Crawford and Lipschutz (1998), despite the opportunities created for social movements and other forms of political organization by disrupting the existing beliefs, values, behaviours; these disruptions are probable to generate violence and even war.
In the positive aspect of globalization, activist social regulatory campaigns stands to bring prosperity to people and the world. Women's rights international campaigns, Climate Action Network, Corporate Social Responsibility projects, Campaigns for Labour Rights, and Global Strategies for HIV Prevention are few to name (Lipschutz & Rowe, 2005). The tendency to increase Globalization in the world economy is high. It is driven by various factors such as the evolution of technology, improvement in telecommunications and transportation, production of goods (automobiles, steel, aircraft, computers, telecommunications, electronics, chemicals, drugs and more), globalization in labour markets, political changes, and global competition (Katsioloudes & Hadjidakis, 2007).
Globalization indicates an enormous impact on the entire world’s economy. For example, Unilever defends its world position for more than half a century (Bartlett & Ghoshal, 1998). Procter & Gamble (P&G) mounts a major thrust into international markets in the postwar era (Bartlett & Ghoshal, 1998). Coca-Cola has 40 percent of the US market, and possess 33 percent of the world's soft drink market (Katsioloudes & Hadjidakis, 2007). Nestle, the biggest Swiss Company and the world's second largest food company markets more than 200 blends of Nescafe to cater to different markets with different tastes; and has production facilities in 59 countries (Katsioloudes & Hadjidakis, 2007). These global business tycoons influence the entire world’s business and markets. The recession of one could result in consumer pressure, eventual loss of markets and collapse of economy.
Globalization starts early as the sixteenth century, at the beginning of the twentieth century before the collapse following World War I and the Great Depression (Katsioloudes & Hadjidakis, 2007). Global markets provide greater opportunities for countries in terms of access to more funds, cheaper imports, and larger import markets. Consequently, this increase the Gross domestic production (GDP) in rich and poor countries. The parity between the developing countries that rely on foreign borrowing and the advanced countries is a result of globalization (Katsioloudes & Hadjidakis, 2007). In contrast, the establishments of International Monetary Fund (IMF) to provide financial assistance to developing economies and European Union (EU) are concentrated to bridge these discrepancies (Katsioloudes & Hadjidakis, 2007). This interdependence led to development of international institutions that holds responsibility for international trade agreements such as General Agreement on Tariffs and Trade (GATT), and the replacement World Trade Organization (WTO) in 1995, and the World Bank (Rao, 2008). Therefore, globalization poses a rigid influence on financial markets and the economy across the globe.
There might a controversial thought of why countries cannot depend on the goods and services they produce, and be self-sufficient. Theory of Absolute Advantage by Adam Smith (1723-1790) well explains this. According to the Theory of Absolute Advantage, the efficiency of production depends from country to country, and its advantage is based on natural or acquired (technology and skills) in the production goods (Katsioloudes & Hadjidakis, 2007). Examples include, Spain, which has an absolute advantage in the production of olive oil and trade. It requires fewer person-hours of two to produce one unit of olive oil (Katsioloudes & Hadjidakis, 2007). Italy, on the other hand, has an absolute advantage in the production of shoes with two person-hours, but low advantage in oil olive production with four person-hours (Katsioloudes & Hadjidakis, 2007). This is the scenario in the global interdependence between countries, which leads to expansion in foreign markets for exchange of authentic resources, services, goods, culture and labour facilitating internationalization.
Globalization – Today’s World of International Business
The beverages people consume might be produced in India with the collaboration of a USA company, or the medicine, the tea people across various continents drink is prepared from the tea powder produced in Sri Lanka (Rao, 2008). The spares and hard disks of computers might have been produced in the United States of America, Korea or even China and the perfumes people apply might have been produced in France (Rao, 2008). International business has joined different cultures together despite cross-cultural discriminations. Now, every individual is capable of having the experience of browsing internet, visit different websites and know the products, and services offered by various companies around the world due to globalization. Moreover, thanks to the evolution of technology, it makes experiences convenient for the local and international customers to transact in the international business arena without any physical intervention.
A Changing Business World – Revolutionary Industry 4.0 and its Influence on Global Strategic Planning
“Think global, act local” (Johansson, 2009).
The above quote illustrates a big picture to concentrate on the global perspective, however to enact it with the distinctive local touch. For instance, Sri Lanka exports varying types of tea to various global markets; catering to each international market’s preference. As an example, the British markets prefer black tea; Russian markets prefer black and green tea, and the Chinese markets prefer white, Oolong and green tea. However, from packaging to the brand names and digital marketing the localism is promoted, extensively with the help of technology. New technology is the most general source of innovation, especially for global products (Johansson, 2009).
Digitalization plays a critical role in operations, moreover due to global uncertainty and trade disruption. Therefore, businesses must look to automate every touch point and bridge the data gaps (McEachran, 2022). By doing so, the increasing technological accumulation facilitates innovation with extended R&D facilities in an organization (Cantwell, 2016). The deployment of IoT (Internet of Things) of industry 4.0 improves productivity and efficiency of a business. While, not all companies follow this, it is evident the IoT deployments in the manufacturing sector increased by 67% as reported by the GlobalData research. Apart from the benefits, challenges are nearly abundant for every business (McEachran, 2022).
AI (Artificial Intelligence) is one influence that replaces the human element in industries. Regardless, of the fact, robots cannot replace human workers, completely; IoT and machine learning are used in robots to predict outcomes and complex decision-making in maintenance work (McEachran, 2022). This creates demand for technological skills among workers. Another area machine learning prompts influence is in the improvement of design processes (McEachran, 2022). Therefore, technological skills are a key demand in international businesses to cater to digitalized markets and to meet these trends. This indicates a pressure among companies in upskilling, and reskilling existing workforces, and creating the suitable learning and development environment. Ultimately, it is recommended companies need to shape both hard and soft McKinsey’s 7S factors namely skills, systems, style, strategy, and staff, accordingly to achieve this. It also creates pressure on potential candidates, as companies are attracted to tech and digital-savvy new talent. Alternatively, technology has been key to firms communicating with teams during global lockdowns due to the pandemic (McEachran, 2022). This was a factor for organizations to function in hybrid, virtual or blended models, which is an excellent initiative to engage in; especially for working mothers, and international employees. Technological based financial solutions such as Fintech (Financial Technology) boosts the above models through crowd-funding business projects, and especially e-commerce through crypto-currencies (digital currency), and transactions.
Augmented reality and virtual reality are essential tools for employee learning, training and skills transfer (McEachran, 2022). One such major innovative example is Google Lens, which uses AR to give a better user experience. In contrast, while implementing these worldly changes, it is also crucial to understand privacy and security concerns in data protection to avoid mistakes (McEachran, 2022). Though, it is unguaranteed whether Industry 4.0 will lead over the next five to ten years, it certainly poses a competitive edge to both local and international businesses as it ensures staying on top of these trends, businesses are not left behind in the digital revolution (McEachran, 2022).
Another important fact is, people’s social behaviour leads to YouTube success. According to Chang and Yücel (2022) in the article published on Think with Google, 'connection tops credentials'. Live streams on YouTube to connect with audiences in real time makes cultural moments a communal affair instead of big budgets or complicating scripts (Chang & Yücel, 2022). For example, HikakinTV live streamed his road to 10M subscribers, fans gathered to be part of this emotional milestone (Chang & Yücel, 2022). It was Japan's No. 1 trending video in 2021. YouTube Shorts is another captivating innovative approach that earns up to millions of views with the right content. Hence, evidently social media platforms provide paramount success towards marketing a business, and international business.
In addition, businesses need to consider the challenges posed by the environment when implementing technological changes and formulating strategies. For example, when China dumped steel at cheap prices in the Indian market; posing a threat to the Indian steel industry, Indian steel industry improved its technology to meet the challenges and dumped its steel in US markets. WTO states 'Dumping' as 'a situation of international price discrimination' where the price of a product in the importing country is less than the price of the same product in the market of the exporting country (World Trade Organization, n.d).
Information technology revolution is a main factor to the changing scenario of international business across the world from e-commerce, transport technology such as GPS to virtual organizations. As explained earlier, globalized marketing technology and global communications make global coordination incredibly feasible and faster, facilitating R&D and helping international business. Sri Lankan taxi and delivery app PickMe, developed by Digital Mobility Solutions Ltd., is an example that innovates its services through technological means. Regardless of various controversies since its introduction, the brand continues to expand its services through digitalization. Its recent simplified delivery solution PickMe Flash allows customers to deliver parcels from multiple locations within the country. Despite being a domestic business, PickMe has marked its name globally, being the only Sri Lankan organization to nominate for the Best Agile Transformation Initiative awards competing with global giants such as FedEx and Holubuva (Island, 2021). Moreover, Apple's latest innovation, the M1 Ultra, which released on 18th of March 2022, the world's most powerful chip for a personal computer could be the next big threat to Intel and the rest of the competitors (Apple Inc., 2022).
Challenges in International Business
International business vary from domestic business since laws, cultures, purchasing power and economic conditions differ within countries (Katsioloudes & Hadjidakis, 2007). There are also limitations on trade with import and export policies among countries. For viable conduction of business overseas, firms must adopt new practices and adhere to meet the international standards from domestic customs. International business associates with other concerns in addition to usual issues involved in domestic trade, which includes currency to use, creditworthiness of the importer, acceptable methods of payment and arranging finance (Rao, 2008).
Political relationships among countries further influence what organizations can do internationally. For instance, in 2000, China forced Coca-Cola to drop a multi-million-dollar Ad campaign due to the fact Ads using the voice of Taiwanese singer A-Mei, whom publicly supports Taiwanese independence (Katsioloudes & Hadjidakis, 2007). Cultural norms of the society is another challenge that decides the longevity of an international business in a specific culture. For example, international franchise chains like Pizza Hut, McDonald's, and KFC cater halal-free food respecting the cultural differences of Muslim societies.
In addition to the aforementioned challenges, in an era, where most businesses tend to go international, businesses need to understand the factors that contributes to the increased international business activities and the challenges they constitute. These factors are increase in global competition, development and expansion of technology, liberalization of cross border movements and the development of supporting services (Katsioloudes & Hadjidakis, 2007).
Absence of proper technology will reduce the export value of a country; lower the demand for the product, switching to competitive products and lower profit margin. Companies today should strongly focus on implementing Industry 4.0 technology through better awareness, adoption, and development and with collaboration with global partners (Katsioloudes & Hadjidakis, 2007). As demonstrated in the statistics of the article of Mukherjee (2018), even though India has a high growth rate in Micro, Small and Medium Enterprises that is considered the 'backbone of India', India is subjected to constraints. The most particular barriers are credit, procurement of raw materials, inadequate infrastructure facilities (power, water, road, and lack of skilled labour) and most, importantly, 'technological backwardness' (Mukherjee, 2018). This indicates the critical impact the environment has on transforming a domestic business in to an efficient international business.
Alternatively, Globalization creates job opportunities across the world and promotes workplace diversity. These cross-cultural interactions can be observed among global universities across various continents such as the Americas, Europe, Asia and Australia. Universities and various virtual educational platforms support intercultural communication by bringing together students from various parts of the world either by physical or digital means. Recently, online platforms play a major role in connecting students. For example, MOOC platforms like Future Learn, Coursera, and Khan’s Academy provides the opportunity for students from anywhere to access education without restriction (mostly for a fee or free). People traveling for various parts of the world for careers or tourism demonstrates another example for globalization. Hospitality industry performs a main illustration.
Whereas, adhering to intercultural diversities can be challenging, and conflictory due to barriers such as prejudice, sexism, racism, ethnicities and other. With proper education to manage diversity, it would be helpful in creating a strong, satisfied and a creative workforce to gain competitive advantage and enter new markets. Above all, we are all humans, learning to admire each difference of a person creates a connection, and that is what makes it special. Cinema is another major example that stands for globalization. Successful creations such as Seven Years in Tibet, Mulan, 2012, Life of Pi, Slumdog Millionaire, Brave, and Lagaan teaches and signifies intercultural communication in a global perspective. Besides, Netflix being the American subscription streaming service giant, brings all these intercultural cinematic creations to one platform for users all around the world. The global financial giants Mark Zuckerberg, Bill Gates, and Jeff Bezos does international business, massively through their innovative multinational technology conglomerates Facebook (Meta), Microsoft, and Amazon. Notably, the pros of international business, despite its challenges outweighs the cons.
The current scenario of Sri Lanka serves a better example to explain the fierce need of globalized investment on its economy. Unlike North Korea that survives through a command economy, Sri Lanka’s free economy requires more foreign and local investments to generate the return of hard currency, dollars in the country. As aforementioned previously, external factors are a key challenge to international business. For instance, in the event of consecutive disastrous happenings like the Easter attacks in 2019 and the Covid-19 pandemic the country’s growth is hit deeply. Inefficient investments and exports; typically lack of foreign exchange lead to catastrophic events such as the inability to buy imports, and rise in inflation rates; especially in the context of an economically developing country. This is one of the significant reasons the Board of Investment of Sri Lanka lists investment incentives for potential investors. These include reduced tax rates (14%) under terms and conditions, tax exemptions for Agro farming, and much more benefits (Board of Investment of Sri Lanka, 2021).
Conclusion
International business variates from domestic business in many various ways. When a business needs to globalize towards the world economy many factors, affect it in respect to the domestic and other countries' environment, such as political, legal, economic and socio-cultural factors. Therefore, it is a challenge that will surpass if all aspects are managed, successfully. Furthermore, some other significant drivers of international business and international competition are the development and expansion of technology. In summary, the more abundantly opportunities arise, the more preparation businesses must be equipped with taking the above factors in to account to face these challenges and take optimum advantage out of them. To reap full benefits, it is important to consider the merging of a current market in to one global market offering a standardized global product. By doing so, this emphasizes the actual meaning of equality and convergence of globalization to consider the world as one, in spite where we are from.
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