UNIT 18 GLOBAL BUSINESS ENVIRONMENT LO 1 ANALYSE

UNIT 18: GLOBAL BUSINESS ENVIRONMENT LO 1: ANALYSE THE KEY FACTORS WHICH DRIVE GLOBALIZATION

UNIT 18: GLOBAL BUSINESS ENVIRONMENT M 1: CRITICALLY ANALYSE THE IMPACT THAT KEY FACTORS HAVE UPON THE GLOBAL BUSINESS ENVIRONMENT IN TERMS OF BENEFITS AND CHALLENGES.

FACTORS THAT ARE INFLUENCED BY GLOBALIZATION: COST • The globalization of customer needs and the opportunities for scale and standardization it brings will fundamentally alter the economics of many industries. Economies of scale and scope, experience effects, and exploiting differences in factor costs for product development, manufacturing, and sourcing in different parts of the world will assume a greater importance as determinants of global strategy. At bottom is a simple fact: a single market will no longer be large enough to support a competitive strategy on a global scale in many industries.

FACTORS THAT ARE INFLUENCED BY GLOBALIZATION: COST • Global scale and scope economics are already having far-reaching effects. On the one hand, the more the new economies of scale and scope shape the strategies of incumbents in global industries, the harder it will be for new entrants to develop an effective competitive threat. Thus, barriers to entry in such industries will get higher. At the same time, the rivalry within such industries is likely to increase, reflecting the broadening scope of competition among interdependent national and regional markets and the fact that true differentiation in such a competitive environment may be harder to achieve.

FACTORS THAT ARE INFLUENCED BY GLOBALIZATION: COST • At the same time, the rivalry within such industries is likely to increase, reflecting the broadening scope of competition among interdependent national and regional markets and the fact that true differentiation in such a competitive environment may be harder to achieve. Sourcing efficiency and costs vary from country to country and global firms can take advantage of this fact. Other cost drivers to globalization are the opportunity to build global scale economies and the high product development costs nowadays. (Ferrier, 2004)

FACTORS THAT ARE INFLUENCED BY GLOBALIZATION: MARKET • One clear aspect of globalization has been the drive toward international commerce. Businesses are virtually interlinked, creating a powerful force in the form of a market without borders. As small business enterprises gain a global foothold, a contradiction emerges: on one end is market potential in various parts of the world; on the other, every financial catastrophe occurring in one part of the world reverberates globally.

FACTORS THAT ARE INFLUENCED BY GLOBALIZATION: MARKET • This is compounded by emerging markets that have seen an increase in manufacturing industries and buying power, and companies have to compete for raw materials and customers. As domestic markets become more and more saturated, the opportunities for growth are limited and global expanding is a way most organizations choose to overcome this situation. Common customer needs and the opportunity to use global marketing channels and transfer marketing to some extent are also incentives to choose internationalization.

FACTORS THAT ARE INFLUENCED BY GLOBALIZATION: ENVIRONMENT • In an effort to mitigate global warming, governments, manufacturing industries and small businesses worldwide are focusing on sustainability by encouraging environmentally friendly practices. Going green is a powerful global force that comes at a cost to small business. Every company product must have a stamp of approval proclaiming its production and disposal processes are green. The service industry must observe stringent environmental laws that add to administrative overheads. The net effect is a rise in production costs incurred by the manufacturing sector and the business community as a whole.

FACTORS THAT ARE INFLUENCED BY GLOBALIZATION: COMPETITION • Competition constitutes an important driver for bringing about globalization. An organization generally strives hard to grain competitive edge in the market. The frequent increase in competition in the domestic market compels organizations to go global. Thus, various organizations enter other countries (for selling goods and services) to expand their market share. With the global market, global inter-firm competition increases and organizations are forced to “play” international. Strong interdependences among countries and high twoway trades and FDI actions also support this driver.

FACTORS THAT ARE INFLUENCED BY GLOBALIZATION: COMPETITION • Industry characteristics—such as the degree to which total industry sales are made up by export or import volume, the diversity of competitors in terms of their national origin, the extent to which major players have globalized their operations and created an interdependence between their competitive strategies in different parts of the world—also affect the globalization potential of an industry. High levels of trade, competitive diversity, and interdependence increase the potential for industry globalization. Industry evolution plays a role, too. As the underlying characteristics of the industry change, competitors will respond to enhance and preserve their competitive advantage. Sometimes, this causes industry globalization to accelerate. At other times, as in the case of the worldwide major appliance industry, the globalization process may be reversed.

DIGITAL REVOLUTION AND THE IMPACT ON GLOBALISATION • One of the crucial factors of globalization since 1990 s, enhancement in telecommunications and Information Technology (IT) has marked remarkable improvements in access of information and increase in economic activities. This advancement in technologies has led to the growth of various sectors of economies throughout the world.

DIGITAL REVOLUTION AND THE IMPACT ON GLOBALISATION • Apart from this, the advancement in technology and improved communication network has facilitated the exchange of goods and services, resources, and ideas, irrespective of geographical location. In this way, advanced technologies have led to economic globalization.

DIGITAL REVOLUTION AND THE IMPACT ON GLOBALISATION • Social media has assisted big businesses with customer relations, giving individuals a sense of closeness with companies that they buy from. this new shift of power, businesses are now concentrating their ads on Facebook and Twitter. Nearly one out of thirteen people have Facebook and Twitter accounts. This means that the businesses who advertise on Facebook and Twitter will have a considerably larger target market observing their products; they now have a better chance of growing and blossoming in today’s economy. Although the target markets viewing the products of both small and big businesses will expand, there a quite a few cons of them having a presence within social media.

DIGITAL REVOLUTION AND THE IMPACT ON GLOBALISATION • • The first would be the burden of promotion change. Instead of releasing statements about product lines, companies have to cultivate stories to advertise the culture of the product as a replacement for simply summarizing its particular benefits. The second con of businesses using social media as a means for advertisement would be increased customer power. In the past, undesirable company experiences might stop within a customer’s circle of friends. In the present days, tales of bad customer service and unsatisfactory products can run rapidly through social media networks. It has become increasingly difficult for companies to withhold its negative publicity from society. The last and most important con would be, unauthorized employees speaking on company's behalf.

DIGITAL REVOLUTION AND THE IMPACT ON GLOBALISATION • What is meant by cloud computing? Cloud computing refers to a technology and business model used by IT with which a user accesses, through the Internet, to IT services that are designed, created, and made available by a company according to the characteristics of flexibility, scalability of resources, dynamic provisioning, payper-use, and self-service.

DIGITAL REVOLUTION AND THE IMPACT ON GLOBALISATION • What do you mean by globalization? A definition says that globalization can be defined as an extraordinary development of possible relationships, not only economic and financial, while prominent among the different areas of the globe, in ways and times such as to ensure that what happens in an area is reflected in real time on other areas, even the most distant, with results that traditional interpretative models of the economy and society are not currently able to assess, for the simultaneity between the action and the change it produces.

DIGITAL REVOLUTION AND THE IMPACT ON GLOBALISATION • Globalization becomes an opportunity to grow economically underdeveloped areas, not only remote, but, for example, even within the same nation, by playing on the cost factor/specialization ratio. This process has created “international fragmented production” processes where production steps can be located in separate areas and geographies. • Why compare cloud and globalization? • Cloud is certainly a form of globalization, very often based on specialization and cost reduction. • A provider of services evolves toward a cloud model because it can produce at lower costs over a wide range of IT services, thanks to standardization. However, a cloud user pays less for a service that is less personalized but certainly faster and better

DIGITAL REVOLUTION AND THE IMPACT ON GLOBALISATION • In doing so the cloud provider disregards the location of the service itself, in the same way a utility provider does with the electricity; in fact it is very difficult for a user to know where the electricity is produced. • Cloud computing forces an IT linked to the paradigms of stiffness and stillness to become increasingly obsolete. The speed that is possible in the provision of new services in a cloud environment—that is, the “time-to-market”—ensures that the cloud model will offset any problems quickly.

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REFERENCES • 2012 books. lardbucket. org. (2018). Industry Globalization Drivers. [online] Available at: https: //2012 books. lardbucket. org/books/global-strategy/s 04 -04 industry-globalization-drivers. html [Accessed 25 Sep. 2018]. • Markus Bauernfeind (Author), 2005, Drivers of Globalization: Integration of Theories and Models, Munich, GRIN Verlag, • Bartleby. com. (2018). [online] Available at: https: //www. bartleby. com/essay/The-Effects-of-Globalization-in-Social-Media -F 3 BVH 4 KVC [Accessed 25 Sep. 2018].

REFERENCES • Ammirabile, M. and Ammirabile, M. (2018). Cloud versus globalization - Cloud computing news. [online] Cloud computing news. Available at: https: //www. ibm. com/blogs/cloudcomputing/2012/05/10/cloud-versus-globalization/ [Accessed 25 Sep. 2018].