Quiz 2.1
Examine the 3 factors that affect globalisation.
(5 marks)
Globalization is an approach to international markets that requires a firm to make
fundamental changes in the nature of its
business by establishing production and marketing facilities in foreign markets.
Factors that affect globalization are:
physical environment, firms locate near to or far away from natural resources. For
example, semiconductor firms requiring large amounts of water probably will not locate
in Saudi Arabia or arid parts of Mexico. However, they may locate in one of the Asian
countries to be close to available supplies of water as well as expanding markets.
The advantage of saving labor costs is often overemphasized when deciding to
change the physical environment. Cost savings are often offset by low levels of
productivity levels and high shipping costs.
The task environment of the firm has to do with the operating structure that the firm
encounters when globalizing. The economic structures, employee skills,
compensation structure, technologies, and government agencies all vary when
globalizing. The regulatory structures that firms encounter when globalizing require an
understanding of international law. Although many view the U.S. government as
somewhat regulatory, many times firms find themselves having to deal with very
complex regulatory structures when establishing operations in countries such as
Germany, Japan, or India.
Technological choices vary as firms globalize. What works at home may not serve
customers adequately abroad. For example, tobacco producers who globalize find that
mass-production technologies used in the United States are not flexible enough for
the European Economic Community, in which regulations concerning tobacco
products vary a great deal from country to country.
The social environment facing globalizing corporations refers to cultural factors such
as language, business customs, customer preferences, and patterns of
communication. The cultural factors facing globalizing firms are often the most
complex and difficult issues they will encounter.
For example, the American businessperson who likes to have breakfast meetings will
be frustrated in Spain, where people do not go to work until later in the day.
References:
Foster, S.T. and Gardner, J.W., 2022. Managing quality: Integrating the supply chain.
John Wiley & Sons.