The world is changing before our eyes — socially, politically, economically. Only one glimpse at the headlines of major global news sources affirms the increasing realization of both the promises and perils of globalization. Our brave new world is one in which global corporations, populations and markets exist in increasingly dynamic, interconnected economic and political environments. Add in the environmental and ethical dimensions, and doing business in the world is complicated, to say the least.
The following are the key topics and issues that lie at the center of global business, which I will explore further in future posts.
The Multinational Corporation
The rise of the multinational corporation (MNC) lies at the center of global business today. Today, we make a distinction between an international business and a global business. An international business, on one hand, is a business that is primarily based in one country and that either sells to or sources from one or more foreign countries. You might think of the American business that sells into Canada as an international business. The international business retains something of a national identity and the emphasis of its globalization is based primarily on either the search for new markets for existing products or the source of cheap labor for products delivered to the home market.
MNCs, on the other hand, are less centralized in that they often have powerful “home offices” in different regions of the globe, but the key distinction is one of philosophy or approach: a truly global business looks at the entire world and makes its market and sourcing decisions based on its strategic and financial objectives. To the MNC, it is not simply a matter of accessing new markets or finding cheap labor, the emphasis is on growing the business beyond its national identity in a way that is autonomous, flexible and successful around the globe. Therefore, the MNC’s brand portfolio, value chain and product offering will vary across global markets.
Some of the business challenges specific to MNCs include organizational structure, corporate social responsibility and the legal/political environment.
Markets and Competitors
Another distinct area of global business is that of global, regional, national and local markets. Inasmuch as any market is a group of customers, markets around the world are characterized by the diverse people of the world and the local conditions in which they live their lives. Values and tastes vary from place to place and understanding how to appeal and deliver value to global markets requires both consumer research and a fine degree of understanding.
Just as global markets vary, so too does the competitive environment. A company looking to offer its goods or services to a foreign market must compete with, in many instances, with other MNCs, but also with local, national and regional competitors. Also, when one looks at competition broadly, it’s obvious that success means understanding a wide range of competitive offers that are relevant to consumers. For example, Coke in Latin America not only competes with Pepsi, but it also competes with a variety of local beverages that cater to local tastes.
