Business Globalization

1. Answer my questions.

1. What was your dream when you were a child?

2. Who dreamt to be a leader or a president?

3. Did you dream to have your own business in your childhood?

2. Today we will speak about the problems of business globalization. We will discuss its advantages and disadvantages and its future perspectives. But before it let’s pronounce together some new phrases which will be useful in our discussion.

Business globalization, economic integration, transnational corporation, multinational company, market research, joint venture, possible reorganization, financial analysis, preliminary figures, complete restructuring, board of directors, information technology, trade liberalization, lowering of costs, competitive advantage.

Now read them in turn and give the Russian equivalents.

3. Your home task was to find some information about business globalization and problems with which businesses face on the way to globalization. Are you ready with the task? Answer the questions then.

1. What does the term globalization mean?

2. What is the difference between a multinational and a global company?

3. When was it introduced?

4. What factors lie in the tendency of globalization?

5. What are the advantages of globalization?

6. Are there any negative effects of globalization?

8. What are future perspectives of globalization? What will it lead to?

9. Are there any alternatives to globalization?

Problems of Small Business Globalization

During the last decades the world economy has extremely changed. The restructured process occurs. It takes a form of movement from economic systems with the isolated from each other national markets, where the main obstacles were trade barriers, cultural and temporary differences of national countries, to the system, where national markets are turned to the one global market. In modern economic literature this process is called globalization of markets.

The term "globalization" was introduced by an American economist, T. Levitta (1983). He denoted the phenomenon of market merging that appeared at the beginning of the 80-s of the XX century. Later a Japanese K. Ome, a consultant of Harward business school, pointed out in his book "World Without Frontiers": "… economical mechanism of some countries has become senseless, the parts of strong actors on the world stage are played by "global" firms".

According to his theory, preferences of consumers of different nations begin to change on the basis of some global norms. And many branches of industry are not oriented only on German, American or Japanese markets.

The global market becomes their object. There are numerous examples: the global strategies of Coca-Cola and Sony, Mc Donalds, Levi’s and many other companies the products of which the consumers of almost all countries consider as their own traditionally used goods.

"The most amazing phenomenon of globalization", according to an Israilian Zh. Ada, is the spreading of the market mechanism on the whole planet. Two factors lie in the basis of this tendency:

-removal of barriers from the way of free movement of goods, services and capital; this process began to develop rapidly after World War II;

-rapid development of the means of communication, information and of passing technology as a new spire of revolution in science and technology (RST).

The spreading of market mechanisms of the economy practically in all countries of the world on the one hand, qualitative changes of the role of the state in the national economy on the other hand, and appearance of super national bodies that influence the development of separate economies and the whole world economy as well give the reason to believe that the term "mixed economy" has a new content and the process of globalization in the world economy gives an impulse to a new understanding.

Globalization is a very complicated process. Firstly, it is not an abstract thing; it is expressed in concrete facts (sale of jeans and computers, popular pop-music discs etc). The driving factors for it are a constant search for comparative advantages, minimization of costs through relocating of production through new combinations of labor division etc. Secondly, globalization is not linear, but a wavy developing process having already covered many stages: from the period of geographical discoveries to the capitalist colonization of the world, from the crisis of the 70-80s to the ruin of the socialist block. Thirdly, globalization is a dual process, expressed in two main forms – intergovernmental and transitional.

The complexity of this phenomenon brings forward the plurality of subjects, i.e. according to the definition of Kuznetsov V., "actors", who promote, directly participate and embody the process of globalization. They are international organizations (IMF, World Bank, WTO and others), regional organizations, transnational corporations, institutional investors (investment funds, insurance companies), big cities and some individuals (Soros, B. Geits).

As we see, the actors in the global market become bigger and more powerful. They create telecommunication, transport and financial networks in the area of their activity. However, small business is inculcating and successfully functioning. Moreover, in modern conditions, the interest of governments and international organizations to the possibilities of the further growth of small and mid-size enterprises is growing.

The game rules in the global market are changing for all the participants, including the enterprises of small business. Decision making in the economic sphere on the level of a country and company is under great influence from outside. At that time it’s impossible to ignore trends and tendencies that are formed outside national boundaries.

Under such conditions the question arises: what directions small business takes while penetrating into global markets? What niche does it take there? It is believed that there is no precise answer for the enterprises of small and mid-size business in the developed, developing countries and in the countries with the transition economies as well. Because there are no similar conditions for their functioning, as each of the groups of the countries has its own peculiar economic environment. However, there is every ground to state, that small and mid-size enterprises (SME) of the developed countries are in the vanguard of the global change. It is in these countries, where the so-called "globalization" of small business is developed in the deepest and the most detailed way. Let’s view their experience.

Firstly, one the tendencies of the last decades is a very high export orientation of the SME of the developed countries. The production share of the SME of the West-European countries is 20-47 %, this share in the machinery industry of Japan and the USA equals to 30 and 40 % correspondingly.

Secondly, the SME are practicing the transactions on technology transferring and foreign investments as well. In the majority of the developed countries the small TNC (transnational corporations) amount to Ѕ of the total number of the firms that have investments abroad. The role of the SME in the foreign economic relations has grown with the transition from the inter-departmental international specialization to the inner-departmental one.

Thirdly, it’s difficult to imagine the process of international development of scientific and technical ties without small companies. The share of the US small businesses in 50 % of export licensed transactions, concluded by the American companies.

Fourthly, the realization of foreign trade strategies of the SME supposes the usage of a set of different forms and methods of penetration into the world market. Having stable customers abroad, the SME themselves carry out export and conclude direct contracts. The formation of private small foreign trade organization is not excluded.

Fifthly, small business also uses such a method of decreasing production-commercial risk while entering the external market as formation of joint ventures with local partners. The financial parity of partners becomes one of the possible conditions of cooperation. The contribution of the either side by the preliminary agreement can be in the form of material resources, facilities, equipment, intellectual property, technical information, licensing, production sectors and perspective scientific elaborations.

The above enumerated tendencies are characteristic features mostly of the industrially developed countries. In the developing counties and in the countries with the transition economy one can observe only some elements of the processes, observed in the developed counties. But even they with their peculiarities, exist, function and have a tendency for growth.

Thus, small businesses in every country are the driving forces of the economy. Under the present conditions the principal component of success is its internationalism and creation of favorable conditions for small JVs to join the process of market globalization. The practice of the recent years has shown that the economic policy in the field of small businesses cannot be let drift. If needs support both from the entrepreneurial unions and industrial chambers, and from numerous politicians, national and international institutions of the economic development and managerial bodies.