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What is Globalisation?

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CONTENTS * Introduction to Globalisation Page 2 * Varying Levels of Globalisation Page 2 * Change in Management Structures Page 4 * Management Controls Page 5 * Transfer of Information Page 6 * Evolution of the Global Firm, Product or Geography? Page 6 * Conclusions Page 7 * References and Bibliography Page 8 * Appendices Page 9 Globalisation Globalisation is defined as "tightening international linkages on a world-wide scale". (De Wit and Meyer, 1988). As barriers to the movement of capital and tariffs are eliminated, some global organisations providing typically standardised products to world markets have in the extreme, become more powerful than nation states. (Dicken, 1998). The global firm, as opposed to the multinational firm operates with resolute consistency, at low relative costs, as if the entire world, (or major regions of it) were a single entity; in other words it sells the things in the same way everywhere1. Global Integration is leading to the promotion of international best practice through the sharing of knowledge and experience. Traditional business practices have disappeared as individual preferences have become similar, leading to the standardisation of products that, inevitably has a profound impact on organisational design. In the past there were huge inefficiencies in the flow of information around the world, however due to technological advancements in communication methods, information now flows with relative freedom resulting in the old geographical barriers becoming irrelevant. Almost everyone, everywhere wants all the things they have heard about, seen, or experienced via these new technologies. The mobility of people around the world is also increasing due to a falling cost of travel. ...read more.


This maybe by Greenfield development or by acquisition and may include a variety of joint ventures.9 In all organisations managers have to establish structures and provide a basis for the co-ordination and control of activities and these structures become more important the more global an organisation becomes. As these corporations expand their operations into different environments, they increase the level of uncertainty associated with their investment as well as facing complex issues of organisational control in order to ensure that the different parts of the enterprise are contributing as required to the overall goals (Change and Taylor, 1999). It is due to this reason that Kamoche, (1996) argues that the relationship between the corporate centre and the country-based subsidiaries is one of the most significant issues for global firms. It is said that structure and control has to be consistent with strategy and global firms tend to choose either a multidomestic or a global strategy. This choice will be strongly influenced by the industry the firm is in. * Multidomestic - Local responsiveness with a structure that gives a great deal of autonomy to local subsidiaries. * Global - Emphasises efficiency and requires a structure that provides varying degrees of co-ordination of policy and operations. Firms operating in such a global market realise that they must be able to co-ordinate their strategy and activities across nations. The demands of standardisation, centralisation and strategic alignment are best met by a global orientation, with strong centre, rather than a multidomestic orientation with fairly autonomous national subsidiaries. ...read more.


The multidomestic structure however, experiences little or no communication in either direction. The information that is transferred is likely to be about "how" parent company systems are used and the learning is unlikely to benefit the organisation. The Evolution of the Global Firm. Product or Geography? The multidomestic, polycentric style of firm may be successful if the structure is appropriate for the industry. Increasing international competition point to the increasing pressure on multidomestic firms to turn to global product standardisation in order to achieve economies of scale and thus, competitive advantage. As customers continue to look for the most cost effective suppliers, looking abroad is putting pressure on firms to converge practices to maintain consistent levels of quality. The consequence is that global firms are switching from an organisation based on countries to one that emphasises product divisions. This is a knee-jerk reaction to the concept of globalisation. Globalisation is considered as marketing to customers regardless of their geographical location, thus leading to the view that customers are based in industry sectors and not in countries. Secondly the concept that manufacturing should be integrated across countries to obtain scale economies and consistent quality. The product-based subsidiary is epitomised by the automotive industry when factories are used for the manufacturing of all variations of a given model and then exported to the markets where they will be adjusted for local preference, for example Vauxhall Astra at Ellesmere Port, Cheshire. This at the expense of arbitrage practice such as production switching as it is not easy to move production if the production line is different. Furthermore, the organisation only obtains leverage opportunities in the host country, not necessarily in the all the markets where the product will be sold. ...read more.

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