Dimensions and Stages in Globalization
Another way of thinking about globalisation is to explore how connections between people and places have lengthened in distance, deepened and become faster over time.
Lengthened in distance over time (products and services are sourced routinely from distant places and faraway continents)
Deepened over time (a sense of feeling “globally connected” now extends into many different areas of modern life, ranging from the imported food and TV programs we consume to our use of global social media)
Become faster over time (in recent years, people have begun to talk to one another in real-time using technologies such as Skype)
Globalisation also involves people and places becoming interconnected with one another by different kinds of global flow. These include:
Every day, enormous flows of money pass through the world’s stock markets. Investment banks, pension funds and private citizens buy and sell shares and money in different currencies in order to make profits. In 2013, the daily volume of foreign exchange transactions reached US$5 trillion.
Despite the restrictions imposed by many governments, record migrations have been recorded in recent years. Soon there will be a quarter of a billion economic migrants in the world. Some states have a special need for migrant labour. For example, Qatar is reliant on Indian construction workers.
Flows of manufactured goods have multiplied in size in recent years, stimulated by low production costs in China and even lower-waged economies, such as Bangladesh and Vietnam. In 2015, global GDP (Gross Domestic Product) fell just short of US$80 trillion in value. Of this, around one-quarter was generated by trade flows in agricultural and industrial commodities
By 2040, India is expected to be the second largest economy in the world and some of its economic success is attributable to the call centre services which Indian workers provide for large US and EU companies.
The internet has brought real-time communication between distant places, allowing goods and services to be bought at the click of a button. Facebook had 1.5 billion users by 2015, each generating countless numbers of “likes” daily. On-demand TV has increased the size of information flows greatly in recent years.
Stages in Globalization
- Domestic Company
Market potential is limited to the home country. Production and marketing facilities are located at home only. Surplus may or may not be exported. There are no overt efforts to develop foreign markets. It may add new product lines, serve new local markets but whole planning is limited to national markets only.
- Their focus remains with domestic market.
- Their productions facilities remain based in home country.Their analysis is focused on the national market.
- They do not think globally and avoid taking risk in going global.
- Their top management may have traditional kind of business management competency and less global expertise.
- They perceive that there is risk in expanding into global market and thus they try to play safe and satisfied with whatever gains they are getting in domestic market.
2. International Company
Some ambitious efficient domestic companies after going beyond their domestic marketing capacities start thinking of expanding their operations in International Markets.The main strategies for entering international market is:
a) Off-shoring/global outsourcing (seeking cheaper source of raw material or labour)
e) Joint Ventures/Acquisitions
f) Direct Investments
Even though they think of international markets, still they are of ethnocentric or domestic oriented. These companies adopt the strategy of locating the branches of their companies in other countries and practice the same domestic operations in foreign markets,including the same promotion, price, product etc. policies.
- Focus on going beyond,domestic
- Their management remains ethnocentric with a vision to expand internationally.They extend their domestic products,domestic prices and other business practices to foreign countries.
- They keep their marketing mix constant and extend their operations to new countries.
- Their management style remains centralized for their home nation and extended top down to the overseas market country.
3. Multinational Company
After sometime, international companies realize that the domestic model and practices adopted through extension policies do not serve the purpose. The foreign customers may not prefer the products that are sold in domestic market. Hence, these companies respond to the needs of different customers in different countries and produce such goods and services that will satisfy them.
- Companies when they spread their wings to more nations become multinational companies.
- Sooner or later they realize that they have to change their marketing mix according to the foreign market.
- This can also be termed as multi domestic,in which different strategies are adopted for different market.
- The management of such companies remains decentralized and even production may be in the host country.
- Performance evaluation is done at different host countries.
The global company adopts global strategy for marketing its products.It may produce either in the home country or in any other single country and market its products throughout the world.It may also produce the products globally and market them domestically.
- Such companies have a global marketing strategy.
- They either produce in home country or in a single country and focus marketing globally.
- They adapt to the market conditions according to the foreign market.
- Their performance evaluation is done worldwide.
5. Transnational Company
Transnational Company operates at the global level by way of utilizing global resources to serve the global markets. It has geocentric orientation and has integrated network.Its key assets are dispersed and every sub-unit of the company contributes towards achievement of the company objectives. It produces best quality raw materials from the cheapest source in the world,process them in the country wherever it is economical and sells the finished products in those markets where prices are favourable.
- Transnational companies have a geocentric approach,which means they think globally and act locally.
- Transnational companies collect information worldwide and scan it for use beyond geographical boundaries.
- The vision of such to grow more in a global way.
- The R&D,management,product development are shared worldwide.
- Their human resources procurement and development remains globally.