MING CHUAN UNIVERSITY
Theories Of Multinational Enterprise
Dr. Rolando Chang
* Topic: Please explain the different forces driving globalization. If you are running a business and attempt to globalize your business, what approach will you adopt to build your business model (please describe your business).
Apple’s iPhones being sold in Europe, designed in California and manufactured in China is just one of the millions and millions of examples of globalization that we encounter on our daily lives. According to Thomas Friedman, Globalization is the interweaving of markets, technology, information systems and telecommunications systems in a way that is shrinking the world from a size medium to a size small, and enabling each of us to reach around the world farther, faster, deeper, and cheaper than ever before, and enabling the world to reach into each of us farther, faster, deeper, cheaper than ever before. The rate at which the world is going through globalization has increased almost exponentially over the past decades. The reason for this is the way all the different forces that drive globalization have increased as well. The main forces that drive globalization is: the reduction of trade and investment barriers; and technological advancements. The first force that has propelled globalization is the reduction of trade and investment barriers. International trade occurs when a firm exports goods to other countries whereas foreign direct investment occurs when a firm invests resources into business activities outside their base country. The barriers are policies and restrictions that governments implement in order to “protect” domestic industries from foreign companies Barriers come in the form of tariff that are taxes on imported products or in the form of non-tariff restrictions such as subsidies, currency devaluation, embargos. FDI barriers include taxation, disclosure requirements, restrictions on entry and ownership, technology transfer requirements and performance standards. . Barriers however affect globalization because it prevents foreign companies from extending their operations into a different country other than its home country. This will result in reciprocal response from opposing governments in the end affecting both countries’ companies’ growth. By reducing, or even eliminating if possible, these barriers companies can benefit from the market of the entire world. People also benefit from a larger variety of products available from anywhere in the world. Competition between companies will become stronger thus in most cases driving prices down for the end consumers. The second force that promotes globalization is the change in technology. Technology affects globalization through two different aspects: transport and communication. Technology has allowed for transportation to become more efficient and effective. It requires less time to move a product from one country to another while maintaining the quality of such. Products and even services can be produced or offered to any country from one location. For example, Indian call centers provide their services to American customers. Technology also helps with communication. Internet, smartphones, emails provides better control of operations outside of the country. Globalization is believed to continue increasing but at slower pace since the impact of technology on globalization will be much less substantial.
If I were running my own financial consultancy firm, a firm that offers assistance to other businesses and individuals with their finances for a fee, a specific approach would be required in order to globalize my business. Since a service business, which requires direct contact with the client I would enter different countries through either acquisition of smaller firms...
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