In today’s continuously changing world, globalization is what every business, organization, and nation should seek and welcome as a positive change. However, many people are unaware of the main focus and meaning of globalization, especially in comparison to localization. A large number of people believe that globalization is just another common word used to refer to changes and differences that cannot be explained. Therefore, many different activities or changes are improperly labelled to be a part of or caused by globalization. Localization is the process of adapting a product or service to a particular language, culture, and desired local preferences. Ideally, a product or service is developed so that localization is relatively easy to achieve – for example, by creating technical illustrations for manuals in which the text can easily be changed to another language. The process of first enabling a product to be localized and then localizing it for Continue reading
International Business Basics
International Trade Theories – Absolute, Comparative and Competitive Advantage
Absolute advantage theory was first presented by Adam Smith in his book “The Wealth of Nations” in 1776. Smith provided the first concept of a nation’s wealth. Adam Smith is a grandfather of economics because he introduced two important concepts that many of the new trade theories are based on these two main concepts, which are specialization and free exchange. However, many arguments were made and many economists thought there was a problem with the theory of absolute advantage after David Ricardo published the theory of “comparative cost” (aka “comparative advantage”) in the early 19th century. Even though Smith and his followers introduced many important points for the thoughts of economic, it is too complicated with this simple version of trade theory in today’s global economy. In 1990, Michael Porter introduced the diamond model of new competitiveness theory. These three trade theories are important in order to make a country Continue reading
Multinational Corporations (MNCs) – An Overview
Multinational Corporations (MNCs) are businesses that extend outside of their own country, whether they are located throughout the world or only in a couple other countries, they are considered multinational. The value adding activities which are owned by these companies are used to produce tangible goods or intangible services or the combination of both. There are many reasons as to why firms become multinational and there are various strategies for a firm to become multinational. The immediate motives of the Firms can be to expand business, to seek new market, or for additional profits and revenues. It may also be to concentrate on the economics of scale that a larger international demand can bring. The motive behind market seeking activities is strong among firms who have some advantage related to technology or brand which gives them a competitive advantage over domestic rival. Another reason for firms to become multinationals is Continue reading
Global Market Entry and Exit Strategies
Each company has a specific strategy may be selected to suit a company’s needs. Many companies use a combination of global and national strategies. Some firms use a global strategy elsewhere some countries and some products are more receptive to global strategies than others. Global strategies are directed at those national product markets that are large and have low barriers to foreign products and companies. They are also likely to compromise the center of world demand, particularly in the newer, more technologically intensive product. Companies adapting global strategies are not likely to target seriously countries with high barriers and small national product markets. However given the long term trend in declining trade barriers coupled with the economic growth, more companies will adopt global strategies. Global Market Entry Strategies Strategy is planning through companies achieve their goals and move forward. A company makes a decision to enter an international market, this Continue reading
Methods of Internationalization
In the process of globalization, a firm operates their activities globally and the internationalization process is one of the primary sites of attention. The changes in the technology in the fields of telecommunications and computer lessen the costs of cross border operations and encourage firms to engage in transnational production activities. Internationalization is a sequential process where firms internalize their economic activities characterized in terms of aggressiveness and motivated by either internal or external triggers or a combination of both. It is one of the key strategic decisions for firms to maximize or at least sustain profits to survive in the world of uncertainty and complexity. The global economic expansion has been largely facilitated by the growth of TNCs. They dominate world trade and capital movement with turnover exceeding the GNP of some countries. These corporations continue to grow and influence the landscape of the world economy. Once a firm Continue reading