4 Major Stages in the Globalization of Business Firms

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What is Globalization?

In the economic sense, globalization is “the seamless exchange of wealth among countries. It refers to the marketing, production, and distribution of goods and services on an international scale. As technology, transportation, and communication systems expand, financial and trade regulations adapt” (Loy, B., Study.com).

“The integration of world markets, exchange of population and ideas, and the creation of international institutions have given us a great opportunity to be successful in global markets.In the economic sense, globalization refers to the seamless exchange of wealth among countries. It’s created when certain worldwide changes take effect” (Ibid)

What is Globalization of Business?

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Globalization of business is the change in a business from a company associated with a single country to one that operates in multiple countries.

Typical Stages of the Globalization of Business Companies

The site MBA Knowledge Base identifies the following major stages in the globalization of business:

  1. “In the first stage of globalization, companies normally tend to focus on their domestic markets. They develop and strengthen their capabilities in some core areas.
  2. In the second stage of globalization, companies begin to look at overseas markets more seriously but the orientation remains predominantly domestic. The various options a company has in this stage are exports, setting up warehouses abroad and establishing assembly lines in major markets. The company gets a better understanding of overseas markets at low risk, but without committing large amounts of resources.
  3. In the third stage of globalization, the commitment to overseas markets increases. The company begins to take into account the differences across various markets to customize its products suitably. Different strategies are formed for different markets to maximize customer responsiveness. The company may set up overseas R&D centers and full-fledged country or region specific manufacturing facilities. This phase can be referred to as the multinational or multi-domestic phase. The different subsidiaries largely remain independent of each other and there is little coordination among the different units in the system.”
  4. In the final stage of globalization, the transnational corporation emerges. Here, the company takes into account both similarities and differences across different markets. Some activities are standardized across the globe while others are customized to suit the needs of individual markets. The firm attempts to combine global efficiencies, local responsiveness and sharing of knowledge across different subsidiaries. A seamless network of subsidiaries across the world emerges. It is very difficult to make out where the home country or headquarters is” (MBA Knowledge Base).

Short Case:

“MTV Networks is one of the most successful businesses at globalization, with 29 distinct channels reaching 330 million subscribers, generating a profit of over $1 billion annually. In 1987, its first year of overseas operations, MTV managers naively assumed that Europeans would be interested in American pop stars and commentary. Soon, copycats began to offer local programming, spurring MTV to create separate, regional channels, including eight in Europe and six in Asia. Forty percent of the programming and 70 percent of the music videos feature local performers, and all of it is delivered by local VJs (video jockeys). Ratings are growing and the threat from copycats is much less. Even more importantly, advertising revenues are up, especially revenues from local advertisers” (Ibid).

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Source: Simplynotes.com

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References

Loy, B. (n.d.). How Worldwide Change Affects Globalization in Business”. Study.com. Retrieved from https://study.com/academy/lesson/how-worldwide-change-affects-globalization-in-business.html.

MBA Knowledge Base (n.d.). “Definitions of Globalization–Stages of Globalization”. Retrieved from https://www.mbaknol.com/strategic-management/definition-of-globalization/.

Rastogi, C. (2012). “Introduction to International Business, Globalization and Trading Environment of International Trade”. Retrieved from https://www.slideshare.net/charurastogi/1-introduction-to-international-business-globalization-and-trading-environment-of-international-trade.

Simplynotes.com. (21 March 2016). “Stages of Globalization”. Retrieved from http://www.simplynotes.in/mbabba/stages-in-globalization/.