11.2: The Global Firm
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- Ly-Huong T. Pham, Tejal Desai-Naik, Laurie Hammond, & Wael Abdeljabbar
- ASCCC Open Educational Resources Initiative (OERI)
The Global Firm
The new era of globalization allows any business to become international. By accessing this new platform of technologies or network, Castells’ vision (Castells, 2000) of working as a unit in real-time on a planetary scale can be a reality. He believed the collective could benefit society. Some of the advantages of this include the following:
- Access to expertise and labor around the world . Organizations are no longer being limited by viable candidates locally and can now hire people from the global labor pool. This also allows organizations to pay a lower labor cost for the same work based on the prevailing wage in different countries.
- Operate 24 hours a day . With employees in different time zones worldwide, an organization can literally operate around the clock, handing off work on projects from one part of the world to another. Businesses can also keep their digital storefront (their website) open all the time.
- Access to a larger market for firm products . Once a product is being sold online, it is available for purchase from a worldwide consumer base. Even if a company’s products do not appeal beyond its own country’s borders, being online has also made the product more visible to consumers within that country.
- Achieve a diversity of the market . It helps companies to stabilize their overall revenue sources. The company could be experiencing a gain in revenues in one country and be down the other side of the world, which will help to stabilize their revenues.
- Gain more exposure to foreign investment opportunities . Globalization helps companies to become more familiar with opportunities in the new areas that they are expanding into.
To fully take advantage of these new capabilities, companies need to understand that there are also challenges in dealing with employees, customers from different cultures, and other countries' economies. Some of these challenges include:
- Infrastructure differences . Each country has its own infrastructure, many of which are not of the same quality as the US infrastructure. Americans are currently getting around 135 Mbps of download speed and 52 Mbps of upload speed through their fixed broadband connections — good for eighth in the world and around double the global average. For every South Korea (16 average speed), there is an Egypt (0.83 MBps) or an India (0.82 MBps). A business cannot depend on every country it deals with having the same Internet speeds. See the sidebar called “How Does My Internet Speed Compare?”
- Labor laws and regulations . Different countries (including the United States) have different laws and regulations. A company that wants to hire employees from other countries must understand the different regulations and concerns.
- Legal restrictions . Many countries have restrictions on what can be sold or how a product can be advertised. A business needs to understand what is allowed. For example, in Germany, it is illegal to sell anything Nazi-related; in China, it is illegal to put anything sexually suggestive online.
- Language, customs, and preferences . Every country has its own (or several) unique culture(s), which a business must consider when trying to market a product. Additionally, different countries have different preferences. For example, in some parts of the world, people prefer to eat their french fries with mayonnaise instead of ketchup; in other parts of the world, specific hand gestures (such as the thumbs-up) are offensive.
- International shipping . Shipping products between countries promptly can be challenging. Inconsistent address formats, dishonest customs agents, and prohibitive shipping costs are all factors that must be considered when trying to deliver products internationally.
- Volatility of currency . This could occur when you are buying or selling goods, the currency has big fluctuations in value when converting to a different countries’ currency, such as the euro, yen, and dollar.
Because of these challenges, many businesses choose not to expand globally, either for labor or for customers. Whether a business has its own website or relies on a third party, such as Amazon or eBay, the question of whether to globalize must be carefully considered.
Globalization has changed greatly in the last several decades. It has seen positive development, with associated costs and benefits such as organizations have seen its fortune changed and progress and modernization are brought into various parts of the world. However, its benefits are not necessarily evenly distributed across the world. With the global pandemic of 2020 (Covid-19), globalization is now viewed by many as risks to the national supply chain of goods and services, job losses, increased gap of inequality, and health risks. It is expected that globalization post-Covid will need to mitigate these risks to move it to a more balanced approach between independence and integration between countries (Kobrin, 2020).
Sidebar: How Does My Internet Speed Compare?
Internet speed varies by geographies, such as states and countries, as reported by Statista.com. For example, as of August 2020, Singapore's internet speed is ~218 Mbps, while Hungary is ~156 Mbps. Please visit Statista.com for more details.
Statista.com also reported that as of June 2020, over 42% of US households did not know the download speed of their household internet service . The download speed varies from 10 Mbps or less to over 100 Mbps. There are several free tools that you can use to test your household internet upload and download speed, such as the app Speedtest , a free download (as of this writing).
References
Castells, Manuel (2000). The Rise of the Network Society (2nd ed.). Blackwell Publishers, Inc., Cambridge, MA, USA.
Kobrin, S.J (2020). How globalization became a thing that goes bump in the night . J Int Bus Policy 3, 280–286. https://doi.org/10.1057/s42214-020-00060-y
Statista. (2020). Countries with the fastest average fixed broadband internet speeds as of August 2020 (in Mbps) . Retrieved December 5, 2020, from https://www.statista.com/statistics/896772/countries-fastest-average-fixed-broadband-internet-speeds/ .
Statista. (2020). Household internet download speed of adults in the United States as of June 2020 . Retrieved December 5, 2020, from https://www.statista.com/statistics/368545/us-state-high-speed-internet-households/ .