Mastering the Globalization of Business

Mastering the Globalization of Business

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Mastering the Globalization of Business Roger Cartwright, PhD Business Series Editor Richard Pettinger palgrave macmillan

Roger Cartwright 2004 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2004 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y.10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin s Press, LLC and of Palgrave Macmillan Ltd. Macmillan is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 978-1-4039-2149-9 ISBN 978-0-230-80202-5 (ebook) DOI 10.1007/978-0-230-80202-5 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. 10 9 8 7 6 5 4 3 2 1 13 12 11 10 09 08 07 06 05 04

Contents Acknowledgements x Introduction 1 What is globalization? 1 Trade and foreign direct investment (FDI) 2 The aims of this book 3 How to use this book 3 The relevance of globalization to individuals and organizations 4 The relevance of this book to small businesses 5 Statistical information 5 Summary and key learning points 5 Recommended further reading 6 1 A brief history of globalization 7 Definitions 7 The development of globalization 7 European venture capital and exploration 15 The industrial revolution 18 Imperial preference 18 J P Morgan 19 Between the wars 20 Post 1945 21 Implications for small businesses 22 Case study: Microsoft 22 Summary and key learning points 25 Recommended further reading 25 2 A shrinking world 1 global governance 26 The United Nations (UN) 28 The governance of international trade and finance 32 The International Monetary Fund (IMF) 32 The World Bank 35 The World Trade Organization (WTO)/General Agreement of Tariffs and Trade (GATT) 36 The International Labor Organization (ILO) 39 Non-governmental organizations (NGOs) 40 Implications for small businesses 43 Case study: Oxfam 43 Contents v

Summary and key learning points 45 Recommended further reading 46 3 A shrinking world 2 global markets 47 Markets 47 Customs unions 51 Regional trade groupings 52 The European Union (EU) 52 Banks and the euro 56 The European Free Trade Association (EFTA) 59 North American Free Trade Agreement (NAFTA) 62 Other customs unions 64 Implications for small businesses 65 Case study: The US EU banana war of 1999 65 Summary and key learning points 67 Recommended further reading 67 4 A global takeover? 68 Globalization and development 71 Attracting companies 73 Export processing zones (EPZs) 75 Child labour 75 The threat to democracy 76 Ethical investments 77 Green issues 80 Fair trade 80 The future 81 Implications for small businesses 81 Case study: The consumer reaction 81 Summary and key learning points 82 Recommended further reading 83 5 Think global, act local 84 Why act locally? 85 Culture 85 Pricing 88 Parallel importing 89 Implications for small businesses 90 Getting it right 90 Case study: Ford 90 Case study: Coca-Cola 95 Case study: Carnival Corporation 98 Summary and key learning points 102 Recommended further reading 103 6 Globalization and the human resource 104 The sensitivity needed towards human relations in globalization 105 The need for a global human resources policy 106 vi Contents

Recruitment issues 106 National and organizational norms 107 The need for cultural sensitivity 107 The importance of national laws relating to employment 108 The issue of wage rates 109 The importance of both skills and other forms of training 110 The need to develop talent and potential across a global enterprise 114 Implications for small businesses 116 Case study: Kodak 116 Summary and key learning points 119 Recommended further reading 119 7 Finance and globalization 120 Foreign direct investment (FDI) 120 Why is a rise in foreign direct investment around the world important? 122 FDI and poverty 122 Attracting FDI 123 Portfolio direct investment 124 Capital 124 Government control 127 Interest rates 127 Tax 128 Tariffs 128 Stability 128 Implications for small businesses 128 Case study: Canon 128 Summary and key learning points 130 Recommended further reading 130 8 Global communications and the impact of e-commerce 131 The Internet 132 Communications 133 The Internet and travel 135 Finance 136 Retail 136 Marketing 137 Language 137 Visuals 137 Currency 137 Domain names 138 Delivery of product/service 138 Service 139 Manufacturing 139 Just in time 141 Training 142 Partnerships 142 Home working 142 Contents vii

Implications for small businesses 142 Case study: Amazon.com 142 Summary and key learning points 146 Recommended further reading 147 9 The global customer 148 The customer at the centre of an organization s objectives 149 Competition 149 Public and private sectors 150 The changing attitudes of customers 151 Loyalty, satisfaction and delight 152 Products from around the globe 154 Loyalty 154 Brand names 155 Generic branding 157 Badge engineering 157 Counterfeiting 157 Types of loyalty 157 Customer behaviour 158 Consistency 162 Implications for small businesses 162 Case study: McDonald s 163 Summary and key learning points 164 Recommended further reading 165 10 Growth and globalization 166 How organizations can grow to enter a more global market 166 Organic growth 166 Diversification 167 Agents 168 Franchising 169 Subcontracting 170 Mergers and acquisitions 171 Alliances 171 A business plan 172 Organization structure 173 Implications for small businesses 174 Case study: Starbucks 174 Summary and key learning points 178 Recommended further reading 178 11 Key thinkers on globalization 179 James C W Ahiakpor 179 Patricia L Anslinger 180 Philip Bobbitt 180 Thomas Copeland 181 Arnold C Drainville 181 Anthony Giddens 181 viii Contents

Philip R Harris and Robert T Moran 182 Noreena Hertz 182 Will Hutton 183 Nordstrőm Kjell and Jonas Ridderstrale 183 Naomi Klein 184 David C Korten 184 Richard D Lewis 185 Peter Lorange (and Johan Roos) 185 Grady E Means 186 Mike Moore 187 Michael Porter 187 Alan M Rugman 188 Saskia Sassen 189 Joseph E Stiglitz 190 Noel M Tichy 190 Fons Trompenaars 191 George S Yip 192 Bibliography 193 Index 199 Contents ix

Acknowledgements Grateful thanks are due to my series editor, Richard Pettinger, and Suzannah Burywood, my editor at Palgrave for their assistance and patience in the writing of this text. x Acknowledgements