In the modern economy virtually no company or business exists that’s not using globalization by itself, or at least that is not benefitting from globalization. It can be said that without globalization most of the consumer products wouldn’t be affordable for this broad part of the population. Additionally, development of new technologies and products would not be as fast as it is now. Globalization affects the life of all, not just the ones of the companies. But how are these things achieved? How does globalization influence the way companies are managed? And what are the benefits a company has from globalization? To answer these questions, the first thing to do is to define the term globalization.
According to businessdictionary. com, globalization is defined as “The worldwide movement toward economic, financial, trade, and communications integration. “. Taking this definition and applying it to the purpose of companies, which is to maximize profit, one can get the definition of globalization as following: “Using international resources and markets in the way that obtains the highest possible profit. ”. According to Robbins, DeCenzo and Coulter (see , p. 70-71) companies use three different approaches for being global. These are marketplace globalization, talent globalization and financial globalization. All three of them have valuable advantages for a company if used wisely. Therefore, they are providing the benefits and will be examined one by one subsequently. Marketplace globalizations is probably the thing that comes to ones mind first when thinking about globalization. It means that a company not only uses their domestic market to sell their products, but rather also other markets, continent-wide or worldwide. This increases the size of the possible customers of the company.
For example, in 2017 Volkswagen AG, a Germany based car manufacturer, sold 10,74 million cars worldwide. In their home market they only sold 1,13 million cars. This shows the advantages of having a bigger market to serve. But not only for selling the bigger market is an advantage, also for buying needed raw materials or parts. Since there is a bigger market, there is more diversity in suppliers and therefore a higher competition. This leads to lower purchase prices and a higher margin. An example for this practice is that big companies like Apple, Nike, etc. are manufacturing their products in Asian countries because the costs for labor are way cheaper than in America. In general can be said that marketplace globalization aims at producing or buying where the lowest possible price can be achieved and selling where the most profit can be obtained (whether with the highest selling price or the highest selling volume). But it always have to be kept in mind that this approach, especially when trying to manufacture at the lowest possible costs, can have a negative effect on the people who work there. Child labor, unsafe working conditions and unreasonable payments may lead to the highest possible profit, but are not acceptable practices in most buying countries and will have a negative effect on sales. Sustainable management with regards to this problem on the other hand will lead to positive image of the company. Another important benefit of globalization is international tenders. They provide companies with contracts from governmental organizations and can be quiet large and long term.
An example for this is the Testfuchs GmbH, an Austrian based company that produces testing equipment for aircrafts, which has a long-term contract with the Royal British Airforce for the supply and maintenance of testing equipment. Talent globalization plays an important role in companies and their rush for the best employees available. Since the educational standard is somewhat on the same level in most developed countries, the search for possible employees is not limited anymore to the domestic country. High educated and talented people are recruited from all over the globe. An example for a company that embraced input from various countries was the Porsche Sport Driving GmbH. I worked for them on several projects, from driving technique events to validation tests for complete vehicles. The team’s language was English, and everyone has had different ideas and inputs. Therefore this diversification led to more creativity and more productivity. Another way of talent globalization can be seen on the example of ZKW Group GmbH, an Austrian based company that produces light solutions and electronic devices for the automotive sector. They offer their employees the chance to work in a company location worldwide, if the demand is given, for a given period of time or unlimited.
For this, they not only provide the place of work, but also support the applicant with all affairs of moving their residence to the other country. This on the one hand keeps talented employees within the organization, who otherwise would eventually leave to another company in the destination country, but also ensures that good trained people from the domestic company location can provide input and new ideas into the other locations. Managers who have to do with talent globalization can reach good results with their diverse team, but they have to pay special attention to the cultural differences that may appear between the employees. The last element of the globalization approaches is the financial globalization. The aim of this part can be one of two. The first is to raise money where it is as cheap as possible and the second is to be taxed as low as possible. Both again contribute to the general goal of maximizing profit. Examples for the first are promotions for certain technologies in a country or a promotion for newly found companies. The second point ensures that companies have to pay as little as possible taxes and expenses. This can be achieved by choosing the country of residence of the company. Very famous examples for this practice are Google and Facebook. They booked nearly all their revenues in Ireland, where the taxation is way lower than in the countries where the revenues were originally earned. This of course reduced the costs for the companies, but on the other hand also caused a lot of criticism against this behavior. In general it can be said that globalization offers a lot of advantages and benefits for companies. Additionally, the customers profit from this too. But companies have to keep in mind that they are responsible for an ethical business practice to not risk loosing customers and damaging their reputation.