Globalization in Business

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Understanding how to operate in a global environment is a must for today’s businesspeople.

Globalization, according to Investopedia, can be defined as “the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade.”

In the most basic sense, the process of globalization began about 4,000 years ago, during the Bronze Age, when the world’s first commerce-driven cities emerged. Long-distance trade proved to be profitable for all involved, and the practice increased steadily over the eons. It picked up speed during the 1400s and 1500s—the era of great European exploration and expansion. But this movement was just a start. The trend toward globalization has continued to the present day and is now a virtual juggernaut, blurring borderlines worldwide for large and small businesses alike. The era of global business has arrived, and there is no turning back.

Understanding how to operate in this environment is a must for anyone wishing to enter the business world. The knowledge and skills to do so can be obtained through academic programs such as Washington State University’s Online Master of Business Administration. Offering both a general MBA curriculum and a concentration in international business, WSU’s Online MBA degree program prepares candidates to juggle the skills of business management and international business.

4 Phases

The modern globalization process has not been a steady progression; rather, it has taken place in several phases with their own defining characteristics. Richard Baldwin, professor of international economics at the Graduate Institute in Geneva, Switzerland, explains that the modern world has seen 4 distinct phases of globalization:

  • Globalization 1.0. This phase began prior to World War I. It was the result of steam and other mechanical power that made long-distance trade easier and cheaper than ever before. It was a period of economic free-for-all, with little to no government regulation or assistance. Bold businesspeople took advantage of the situation to make vast amounts of money; their more timid counterparts saw their fortunes tumble correspondingly.
  • Globalization 2.0. This phase began in the wake of World War II, when hostilities eased and global trade started to pick back up. Recognizing the need to regulate the situation, international organizations such as the United Nations, the World Bank, the International Monetary Fund, and many others sprang into existence. Organized globalization started to take shape.
  • Globalization 3.0. Sometimes called “offshoring,” this phase has occurred during the last two decades or so. It is characterized by large firms moving some of their functions across international borders to maximize economic gains. A common example is establishing a factory or call center in a lower-income nation to save money on salaries.
  • Globalization 4.0. This phase is just beginning, and according to Baldwin, it may bring the most explosive change yet. Globalization 4.0 is what happens when digital technology enables service-sector workers anywhere in the world to work anywhere else in the world—without ever leaving their office desk. “Hundreds of millions of service-sector and professional workers in advanced economies will—for the first time ever—be exposed to the challenges and opportunities of globalization,” Baldwin explains.

Taken as a series, these 4 phases of globalization have presented a long and ongoing adjustment challenge to businesses everywhere. If economists and historians are to be believed, the pace of change could continue unabated.

Organizations that wish to thrive must be prepared to face the imminent challenges of the “new” globalization—and talented, knowledgeable executives are needed to lead the charge.

Impacts on Business and Consumers

The impacts of globalization on business have been pervasive and far reaching. Although pinpointing every effect would be impossible, a recent study by the European Centre for International Political Economy (ECIPE) summarized the main economic benefits of globalization for consumers and businesses alike, particularly in Western economies.

  1. Globalization has boosted output. The ECIPE study found that businesses today are more productive than ever before, thanks to several factors:
  • Globalization has allowed businesses to specialize. Focusing on limited areas, in turn, has enabled businesses to increase the intensity of their R&D (research and development) and innovation. It has also permitted more targeted capital output.
  • Globalization has made competing with well-established players much easier for new companies.
  • Employment in the trade sector has increased, as more workers are needed on both the import and the export side.
  1. Globalization has led to increased household income. This shift has taken place for many reasons, including:
  • Falling inflation rates in Western countries, which has increased consumers’ buying power.
  • A decline in the cost of consumption, which increases workers’ buying power even if their wages don’t change.
  • Greater affordability of formerly expensive goods, which makes items such as mobile phones and computers increasingly common in most households.
  1. Globalization has provided new opportunities for economies and individuals, including:
  • Spurring the spread of new technology, with many benefits, such as making economies greener and more productive.
  • Reducing gender wage disparities and providing new opportunities for women.
  • Improving management quality within firms and encouraging better working conditions for employees.

Success in International Business

To take advantage of these benefits and others, businesses must be prepared to compete on today’s global playing field. The website The Business Journals lists 4 consistent best practices of companies that have achieved successful international growth.

  1. They choose the right international location. Going global is a major decision, and location can make or break a company. Factors to consider vary from one company to another and include geography, the national infrastructure, workforce makeup and availability, economic climate, government regulation, and local culture.
  2. They adapt their products and marketing campaigns. Consumer preferences and styles vary considerably from one culture to another. The most successful international businesses take these differences into account and adjust their local approaches accordingly.
  3. They work with local partners. Partnerships with local or regional organizations can expand a business’s capabilities and significantly increase growth in distant markets.
  4. They devote resources and time to international travel. Leaders must have a regular presence in international locations to form relationships, solve problems, and generally keep a finger in the company’s operations. Absent leadership allows things to slip through the cracks and generally leads to poor results.

Personal Development

Along with these corporate characteristics, international business leaders must cultivate personal skills and qualities that will be useful in managing both globalization and business. According to a study by international leadership development organization Duke Corporate Education, the 5 most important personal qualities are:

  1. Uncertainty resilience. Effective international leaders function well in unclear situations and do not become paralyzed. They enjoy diverse perspectives.
  2. Team connectivity. International leaders are focused on the success of corporate teams, not their own hierarchy. They have the ability to create, support, and disband teams as needed to accomplish goals.
  3. Pragmatic flexibility. International leaders adapt well to working within other cultures. They can expand their own thinking to accommodate diverse values and get the job done.
  4. Perceptive responsiveness. International leaders anticipate changing needs and act quickly, using a combination of intuition and fact. They value the differences between their various stakeholders and work to satisfy them in culturally appropriate ways.
  5. Talent orientation. Great leaders everywhere know that talented employees lead to organizational success. They are focused on getting the most out of their staff, both at home and abroad.

Although these types of skills are partly innate, they can be developed and honed in academic programs with an international focus. Some programs, including Washington State’s Online MBA program, even offer in-person foreign study abroad opportunities that allow students to put theoretical education into practical context.

“It is rewarding to talk with people from different parts of the world to get their perspectives on issues that affect all of us,” Josiah Thompson, WSU MBA class of 2015, says about his foreign study trip. “Being exposed to their perspective helps broaden your horizons and gives you a better understanding of how issues affect different parts of the world.”

This type of worldview is an excellent springboard for business students. Whether graduates intend to work for a small, local organization or a huge, international one, the trend toward globalization will have an impact on their work. By understanding the history and current trends of globalization, fledgling leaders can be prepared to compete effectively on the world stage.

About WSU’s Online Master of Business Administration Program

Washington State University’s Carson College of Business delivers one of the top-ranked MBA programs in the nation. WSU offers an online MBA course curriculum designed to equip students with the tactics, knowledge, skills, strategies, and other resources utilized by today’s high-profile business leaders.

WSU’s Online MBA degree program offers several MBA concentrations—marketing, finance, hospitality business management, international business, and general MBA. For more information, visit WSU’s Online MBA website.

 

Recommended Reading:

Importance of Cultural Fluency in International Business

3 Things You Need to Know About Studying Abroad While Earning Your MBA

Five Characteristics of Successful Global Business Leadership

 

Sources:

Globalization definition – Investopedia

Globalization history – Get Smarter

Four phases – World Economic Forum

Success in international business – The Business Journals

Five characteristics of international leaders – Duke Corporate Education

WSU’s foreign study program – Washington State University