Globalisation is the production and distribution of products and services of a homogenous type and quality on a worldwide basis.
Levitt (The Globalisation of Markets – 1983) described the development of a ‘global village’ in which consumers around the world would have the same needs and attitudes and use the same products. A global corporation would be one that operated as if the entire world was one entity, to be sold the same things everywhere.
Levitt’s focus was on the marketing aspects of globalization. The global business corporation will also be characterized by
Extended supply chains: Instead of making the product at home and exporting it, or setting up a factory in the host country to make it, the global corporation may factor out production so that different parts of the product (or service) originate in different countries. Womack et al (The Machine That Changed The World) suggest that the globalization of the automobile industry led the way for this model.
Global human resource management: This involves pan-national recruitment and development of human resources.
Ohmae’s five Cs: factors encouraging development of global business
Ohmae (The Borderless World) has identified a number of reasons which might encourage a firm to act globally arranged into a ‘five C’s’ framework. By adding an extra two C’s Ohmae extends his analysis into global business.
The customer: Are consumer tastes across the world converging upon similar product characteristics?
The company itself: Selling in a number of markets enables fixed costs to be spread over a larger sales volume.
Competition: The presence of global competitors, who are enjoying the benefits of global commitment, could encourage a previously local or regional operator to expand its activities.
Currency volatility: Setting up assembly overseas is a way of reducing the exchange rate risks inherent in exporting and may also help to get around government imposed trade barriers.
Country: Locating business activities overseas may provide cheaper access to labor, materials and finance, along with the goodwill of host governments.
The continuing political acceptance of free-trade by international economies is essential to the success of these strategic investments