2.1 Globalization

The concept of globalization refers both to the compression of the world and the intensification of consciousness of the world as a whole (Robertson 1992).

The processes and actions to which the concept of globalization refers have been proceeding, with some interruptions, for many centuries. However, for the present purpose, globalization refers to the increasing acceleration in global interdependence and consciousness of the global whole in recent times.

Globalization is a consequence of a number of factors including the elimination of trade barriers, widespread electronic networking, increasing reach of the mass media and rapid changes in technology.

The end of the Cold War, the disintegration of the Soviet Union, the creation of the European Community, the emergence of new, rapidly growing markets in Asia and the (impending) signing of GATT (General Agreement on Tariffs and Trade) has resulted in an unprecedented opening up of world markets. Consequently, corporations, both big and small, are being forced to widen their horizons and focus on new and diverse markets across the world. The main objective of this is to create new opportunities for growth and profit. This strategy helps them counterbalance against cyclical swings by spreading risk during economic downturns in individual markets (Daniels and Daniels 1993). Another reason is the fact that there are no more "safe" markets: competitors from astonishingly far away places may appear suddenly on the scene; to cope with this possibility, a corporation must find new markets or go under (Czinkota, Ronkainen and Tarrant 1995).

Electronic networking, in its many incarnations, has created radically new ways of doing things that would have been inconceivable just a few years ago. Examples include the widespread use of plastic money, the introduction of cyber-cash or electronic money and the practical disappearance of "real" money, particularly in developed countries; the tremendous reach and growth of the Internet and its increasing use as a means of communication and a medium of business; and the emergence of the concept of tele-commuting, i.e., the use of networking technologies to allow people to do their jobs without being physically present at the workplace. According to Judy Hillman (1993), the ability to transmit and receive information by telephone and computer in split seconds, anywhere in the world, is bound to change people's perceptions and behavior. Taken together with other social and economic forces, the use, and sometimes the abuse, of these technologies have the capability to influence the pattern of human development as much as did the motor car in an earlier era.

The increased reach of the electronic mass media has resulted in an environment where information can be disseminated practically instantaneously to an extremely large and physically distributed audience. This has resulted in major changes in peoples' lifestyles and cultural perspectives as well as in their dreams, hopes, aspirations and expectations. An example is the case of the rapid Westernization of urban society in India in recent times which may be largely attributed to the influence of satellite television. This electronic flow of information has also had negative effects, bringing differing societies into abrasive contact on a global level, occasioning frequent worldwide value collisions and cultural irritation of an arcing nature (McLuhan and Powers 1989). A manifestation of this aspect is the reemergence of Islamic fundamentalism.

Rapidly developing technology has resulted in a drastic shortening of product life cycle time- the period between introduction and maturity of a product. The duration of exclusivity of a product is also decreasing. A new entry to the market place enjoys a much shorter period before the competition catches up or comes up with an equivalent or more advanced product. This is particularly true in the electronics industry where product life cycles have come down from years to months; but this trend is becoming increasingly prevalent in all fields of manufacturing.

2.2 The Need for a Global Business Outlook

Corporations all over the world, large and small, are being forced to generate new business strategies, to evolve a global vision.

Since the 1970s, waves of change have been rolling over business. First, there was down-sizing, followed by the wave of quality. Next came the wave of customer focus and then the wave of life cycle time compression. Today the wave that is building is that of globalism and globalization.

These waves of change coming one after another are really an indication of a much larger transformation that is occurring throughout the world- the end of the industrial economy and the beginning of the information economy. (Daniels and Daniels 1993).

There are several drivers forcing businesses to become global in their outlook:

Market Factors

According to Czinkota and Ronkainen (1995), the concept of the world customer is gaining new meaning. For example, there is a new group of customers emerging in North America, the European Community and the Pacific Rim whom marketers can treat as a single market with similar spending habits. At the same time, channels of distribution are becoming more global, making it possible to target all these markets even from a single manufacturing base.

Other reasons for business globalization cited by Daniels and Radebaugh (1995) include:

Expansion Of Technology

In recent years, the pace of technological change has accelerated at a dizzying rate, while knowledge of products and services is available more widely and quickly because of tremendous strides in transportation and technology. This has resulted in an increase in the demands for new products and services and opportunities for international business transactions. Also, improved communications technology, such as telephone and data transmission via satellite has made it possible to speed up interactions and improve managers' ability to control foreign operations.

Liberalization Of Cross-Border Movements

Initiatives like GATT have resulted in the lowering of government barriers to the movement of goods, services and resources. This has enabled companies to take better advantage of international opportunities. At the same time, countries benefit by allowing their citizens access to a greater variety of goods and services at better prices and by motivating domestic producers to become more efficient.

Increase In Global Competition

Because of the factors mentioned earlier, companies are now able to expand business into international markets much more easily. Today companies can respond rapidly to foreign opportunities, shift production quickly among countries, distribute component and/or product manufacturing to take advantage of cost and technology differences.

For example, it is now possible to conceive of a scenario where an American corporation designs a product in Italy, engineers it in Germany, sources components from Taiwan, assembles the product in Brazil and sells it in India.

Thus there are a number of trends and factors that make it increasingly essential for companies to get away from a purely domestic approach to business and to take a global approach.

2.3 The Challenge of Global Business

The potential rewards of a global approach to business are tremendous. The benefits that a company may get from a global approach include:

Expansion of Sales

Targeting global markets expands the customer base and thus has the potential for increasing sales.

Acquisition of Resources

Manufacturers and distributors seek out products, services and components produced in foreign countries as a means of achieving more cost effective production as well as to gain access to technology resources that may be unavailable in their home countries.

Diversification of Sources

To avoid unpredictable swings in sales and profitability that may occur due to business cycles such as recessions, market demand etc., companies may choose to distribute their sources of components and services among different countries.

Though the benefits of a global approach to business are tremendous, it is a complex task with a high degree of risk. There is fierce competition from all over the world. Different world markets have their own peculiarities, their own preferences, their own regulations and their own problems. Failure at the global level can ignite a backfire that can consume existing brands and business relationships. But holding back inevitably will mean losing out permanently to competitors who are ready to act (Czinkota, Ronkainen and Tarrant 1995).