10.8.3 Globalisation
Globalisation is a term used to describe the process of integration on a worldwide scale
of markets and production. The world is moving away from a system of national markets
that are isolated from one another by trade barriers, distance or culture towards one
where there is one huge global market place. This is certainly true for goods such as
Coca-Cola or McDonald’s although it is not true for all products. The globalisation of
markets has been intensified by the globalisation of production where firms disperse
parts of their production process to different parts of the world. It is not just the large
multinational enterprises that are becoming global; many small and medium-sized
enterprises are also engaged in global production and marketing.
The two main reasons for the increased globalisation of both markets and production are:
● the decline in barriers to trade and investment that has occurred over the last half-century.
Each day over $1.5 trillion are exchanged in foreign exchanges and international
trade accounts for one-third of the world’s output. New markets that were formerly
protected, like the Soviet bloc, have opened up for competition;
● the dramatic developments in communication and information technologies which
not only facilitate global production through the transfer of information between different
parts of a company, but also allow the transfer of ideas and beliefs around the
world. The so-called ‘global culture’ makes it appear as if the same trends occur in
many parts of the world at the same time. Developments in transportation technology,
such as the jet engine, have also served to make the world a smaller place.
Globalisation has meant that firms face an increasingly complex environment. For
example, there are new markets to be captured, increased competition to be faced from
abroad, an understanding needed of the workings of foreign exchange markets, and a
knowledge of the differences which exist between countries. Despite what has been said
about globalisation, there still remains a great diversity in the world – different countries
have different cultures, political systems and legal systems. Global production and marketing
require a knowledge of all of these.