Week 2 - Index:

• Following the Phoenicians
• Global Strategies - contradictions and consequences
• The Globalization Paradox: A Marketing Perspective

  http://www.globalpolicy.org/globaliz/politics/

The World Bank   www.worldbank.org/globalization

Excerpts from -- Following the Phoenicians: RIM in a globalized future  Sue Myburgh. Information Management Journal. Lemexa: Sep/Oct 2003.Vol.37, Iss. 5;  pg. 28

ANTECEDENT AND CONTEMPORARY BUSINESS ENVIRONMENTS

In Globalization: Social Theory and Global Culture, Roland Robertson distinguishes several phases in the history of globalization, from the beginning of the 15th century to the 1990s, starting with cross-border trade and encompassing the development of nationalism, international trade agreements, international legislation, improved telecommunications, and the consolidation of global media and markets. While international trade has thrived for centuries - the Phoenicians, the Silk Road, and the British Empire, for example - considerable attention has been paid in recent decades to the ways in which such business is conducted.

C. Taylor and G.D. Foster's "The Necessity of Being Global," a 1994 survey of 1,250 American manufacturers, reveals that companies with global activities grew faster in every industry and in all size categories than those without activity beyond their borders. There is a realization in the present environment that every enterprise is globally competitive and must have an international perspective in order to secure long-term survival and growth.

There are several ways in which businesses act globally, from offering products and services for sale internationally and producing materials offshore to merely being aware of competitive global activity. There is increasing pressure to look beyond domestic suppliers and markets - and even labor - and become responsive to what is available in other countries so that products and services can be produced more inexpensively and sold more profitably. Increasingly, companies are transforming themselves into stateless, transnational enterprises. Such companies locate raw materials, labor, and manufacturing offshore as well as invest in foreign markets.

In the case of the Phoenicians, goods bought in one place were sold in another place at a higher price, the only value-added component being their transportation. In the British Empire, raw goods such as rubber or coffee usually were bought in remote parts with value-added processes taking place in the "home" country, where raw materials were manufactured into products and then sold both at home and abroad. These models are more international than global.

Such models of international trading have now become more complex. Raw goods might be supplied by one country, manufactured in a second, sold in a third - and all these processes can be managed from the company's headquarters based in yet another country. In this way, companies find that they can gain competitive advantage by keeping down manufacturing costs and by increasing sales (and profits) of products in different markets. Robertson criticizes the term "internationalization" as insufficient for describing today's business trends because it describes interactions between only a few nations.

"Globalization," however, describes inclusive, transnational processes that take place - completely or partially - outside the control of the individual nations, such as through multinational companies (MNCs). It implies seeing the world as a global marketplace - and also as a global source of staff, capital, labor, and raw materials. Business can no longer have reference only to political boundaries. Market integration, free-trade agreements, liberalization of trade, and regional trading blocs all have contributed to the declining significance of national boundaries and time zones.

......... What is the "digital economy?" Is it related to the "information society?" How is globalization different from internationalization?......

The Information Society

The idea of the "information society" - a world in which information can be quickly communicated - is obscure and unsatisfying as it does not adequately explain all contemporary phenomena. Yet the information society also can be viewed as a political term with globalization as its expression - a phenomenon that will guarantee economic competitiveness, create new jobs, enable increased environmental sensitivity, and generally improve standards of living.

There is a profound interrelationship between globalization and the so-called information society and, further, between these two events and the rapid development of information and communication technologies (ICTs), which facilitate and support the development of global markets through improved information flows better than mere transport systems could.

The information society is an idea closely linked to that of a global, interrelated economy supported by ICTs. The 1997 Australian Information Policy Advisory Council (IPAC) report even used some of these words interchangeably: "The information economy is a global society which transcends national borders and within which many activities are location-independent and geographically neutral. The governing parameter is globalization, the emergence of institutions which are not primarily defined by their being associated with any particular nation."

A major feature of the information society is its global nature. Globalization both drives and is driven by the new technology that enables a global economy. It is clear that all four concepts - information, globalization, ICTs, and the economy - are closely linked.

Global Economy

In the information society, there are changing social, cultural, and economic structures. Some have referred to this new form of political economy as a "commonwealth of information," suggesting the emergence of new political and economic boundaries and new sources of identity, as the Australian IPAC report noted. To emphasize the difference that ICTs make in the way business is done - a combination of globalized communication and the commodification of information - various terms have been used to describe the new economy. There are, however, subtle differences of meaning among all these terms.

New Economy

"New economy" refers to a post-industrial world where people use intellectual rather than physical skills. In this rapidly changing environment, innovation is viewed as extremely important, markets are seen as global with concomitant global competition, and the economy is supported by ICTs.

Knowledge Economy

The "knowledge economy" relies on the knowledge that people cultivate through experience and learning. Knowledge is a key resource, and knowledge workers are a dominant force. As stated in "The Knowledge Economy," New Zealand's 1999 report, "[m]ore than 50 percent of Gross Domestic Product (GDP) in the major Organisation for Economic Co-Operation and Development (OECD) economies is now based on the production and distribution of knowledge." The knowledge economy is characterized by

* borderlessness because of the ease with which knowledge can travel

* upward mobility because of access to knowledge through education and training systems

* an easily accessible means of production, though this does not guarantee equal success for everyone

Because knowledge is expensive to gain, specific, mobile, intangible, and possibly dated or lost, such an economic model creates great interest in the discipline of knowledge management.

Digital Economy

"Digital economy" focuses on goods or services whose development, production, sale, or provision is critically dependent upon digital technologies. In the digital economy, ICTs are used to eliminate barriers and boundaries, make information ubiquitous, and increase access to people, goods, and markets. Such an economic model does, however, raise issues of privacy, security, and intellectual property.

Information Economy

The "information economy" includes the manufacture and exchange of all information goods and services, such as publishing, entertainment, documents, and their transmission. The information economy concept enforces the idea that information itself is the most important world commodity, but the fundamental nature of information is complicated.

Information has characteristics that distinguish it from physical objects. Information is quite difficult to value in that it has value on a subjective, relative, and existential level, never in an absolute sense. Its value is totally dependent on the use that someone may make of it at a particular moment in time and space. Information cannot be consumed or moved from place to place and, therefore, it cannot be owned in the normal sense. Only information artifacts (e.g., records) can be owned. There is widespread confusion between information itself and information artifacts or documents, such as CDs, Web pages, books, and those technologies that facilitate communication, including telephones, DVD players, and the Internet. The term "information economy," therefore, better describes an economy where information technology goods and services are bought and sold, rather than an economy based on the buying and selling of information itself.

COMMON CHARACTERISTICS

All these concepts all have a great deal in common. For example, the new global economy means increased competition, improved collaboration, wider-ranging legislation and standardization, and the elimination of boundaries in a 24/7 world. It also focuses attention on issues of access to information, competitive intelligence, privacy, security, and intellectual property. ICTs are used to facilitate most of the objectives of this economy, and they operate globally, eliminating not only geographical and time boundaries but also cultural, commercial, technical, and social boundaries as well.

Is there really something new about this economy, or is it the same old economy in new clothes? Despite the information society being considered post-industrial, it works just like industrial societies have always worked, economically, socially, and culturally. The developed world remains concerned with consumption and capitalist markets. However, accelerated by the development of ICTs, the commodities that flow through the international spaces include information. Information enables such economies to exist.

GLOBALIZATION

Globalization is the process that defines the global economy. If it is viewed simply as describing the phenomenon of international trade, globalization has been taking place for centuries. Recently, the phenomenon has been formalized and encouraged by various free or liberalized trade agreements, such as the 1948 General Agreement on Tariff Trade (GATT) and the framework determined by the World Trade Organization (WTO). Such trade (which includes the exchange of capital, information, and people) is "free" in the sense that it is not under the control of any one state. Globalization can also be understood as a holistic phenomenon related to general systems theory, where business arrangements and transactions concluded in one domain will have effects in others, whether these are requested, invited, desired, or otherwise.

The term "globalization" indicates a complex topic, however, and one that can be interpreted in many different ways, each of which reveals different facets of its complexity, including:

Change

The word "globalization" describes processes of social change having any kind of international dimension: changing economies, power relations, communication, cultures, and organizations.

It is one of two major narratives of transition: (1) transformation and process, and (2) postmodernism. Forces of change located in the expansion of market relations - ubiquitous commodification and the communications revolution in particular - are described as "globalized."

Economic Aspects

One of the primary senses of the term "globalization" is economic, referring to, or measured by, flows of trade and investment between countries. Society has been globalized not necessarily because human beings thought or acted globally but because of a number of economic factors, largely profit and wealth creation. R.W. McChesney describes globalization as referring to "the process whereby capitalism is increasingly constituted on a transnational basis, not only in the trade of goods and services but, even more importantly, in the flow of capital and the trade in currencies and financial instruments."

However, according to J. Brown, globalization is seen as an "interconnection between overlapping interests of business and society," which means that we cannot ignore wider cultural or environmental issues. In The Global Shift: Transforming the World Economy, P. Dicken defines economic globalization as "...not merely the geographical extension of economic activity across national boundaries but also - and more importantly - the functional integration of such internationally dispersed activities." While Dicken refers essentially to dealing with this phenomenon as a whole in terms of management, the idea of integration indicates that globalization necessitates a social, cultural, and political awareness. It must be noted that the "integration of internationally dispersed activities" will certainly affect an organization's RIM program.

Boundarylessness

By its very nature, globalization has international characteristics. It emphasizes technical, economic, and cultural transformations that undermine the significance of boundaries among nation-states. In fact, globalization as a concept can be used to indicate the absence of borders and barriers and the dissolution of hindrances to free trade. Globalization thus creates a condition known as "boundarylessness." In Globalization and Business Practice: Managing Across Boundaries, B. Parker defines this phenomenon: "... boundarylessness is ... described as more than a question of nations and economies; it refers to an ability to cross other traditional borders of time, space, scope, geography, functions, thought, cultural assumptions, and the self in relation to others and to permeating boundaries within organizations." Transparency of time and distance are, therefore, characteristics of globalization, based in particular on holistic geographic views and easily facilitated communication networks.

Spatial Concepts

As such, globalization also is closely connected to notions of physical space. In Global Transformations: Politics, Economics and Culture, David Held, et. al., writes: "Globalization refers to an historical process which transforms the spatial organization of social relations and transactions, generating transcontinental or inter-regional networks of interaction and the exercise of power." This is linked to cultural views: it can be understood to imply a common consciousness of human society on a world scale - society constituted primarily by a common human framework, rather than by distinct tribes, civilizations, nations, or religious communities. This may, however, lead to an undesirable cultural homogeneity.

DIFFERENT VIEWS OF GLOBALIZATION

Globalization is highly controversial. In a 1997 Global Finance article, Jim Kelly, CEO of United Parcel Service, took a positive stance: "So why go global? Because any company that can, should. It's not a question of growth for the sake of growth. It's the price of admission to today's marketplace." At the 1996 Inaugural Lecture of Malaysia Fellowship Exchange Programme, Malaysian Prime Minister Dato' Seri Mahathir Mohamad questioned the impact of globalization: "The effect of economic globalization would be the demise of the small companies based in the developing countries. Large international corporations originating in the developed countries will take over everything."

Some say the implications of the globalization controversy can be useful in understanding the trend.

Economic Implications

One advantage of globalization is that consumers have a much wider choice of goods and services. It also enables manufacturers to identify new markets once their domestic markets have reached saturation. Such opening of markets can inspire the development of new products. Businesses can reap increased profits from using cheap foreign labor or importing cheaper foreign raw materials or parts.

However, globalization opens foreign markets to sell cultural resources much more easily, leading to corporate cultural dominance. Global marketing includes political ideas, social understandings, and cultural mores as well as goods and services. It is here that the phenomenon is most frequently criticized because of the social and cultural changes that such an economic model brings about. Critics say that by instilling cultural information values into foreign markets and reinforcing this paradigm over time, businesses are able to perpetuate needs for products, perhaps artificially. Also, most globalization efforts originate in wealthier countries, notably the United States, the European Union, and Japan. The benefits are derived largely by the home country - such as greater choice of goods, employment rises, and profitability derived from exports.

Cultural Implications

Faster and less expensive communication, such as now provided by ICTs, in turn affect cultural boundaries and identities. Today, increased access to information about other nations is available, and individuals have become more aware of cultural diversity and their role as global citizens.

Political Implications

Even though globalization specifically relates to economic events, it is nonetheless involved with other social issues. Many argue that there are only benefits to be gained from more open markets and that global institutions can be used to remedy global inequalities; others believe that this direction might lessen the power of individual nation-states. V. Mosco, in his 1996 book, The Political Economy of Information, notes that others believe that there are deeper rifts of class, gender, power, and wealth than before, disguised by the use of the term "globalization."

Held's Global Transformations: Politics, Economics and Culture describes three views of globalization:

* Hyper-globalizers, who believe that globalization is sweeping away national boundaries, weakening the power of states, and leading to super-territoriality in social relations

* Global-skeptics, who believe that the extent of super-territorialities is greatly exaggerated, that nation-states are still powerful, and that what is really happening is an extension of internationalisation that has been going on for centuries

* Transformationalists, who believe that global change is a reality that is transforming, not weakening, the state

GLOBALIZED BUSINESSES

The major expression of globalization lies in companies, and that emphasizes the importance of this phenomenon for RIM professionals. There are few enterprises today that have no international connections, partly because of the general framework of the global economy. Because of the various modes of international activity, there appears to be a considerable range - from domestic firms to internationalized firms. Such international activities include importing and exporting goods and raw materials, investments, employing foreign labor, and combinations of these.

It cannot be assumed, however, that trade within a national economy is non-global while trade across national state boundaries is global. Many companies are international but not global (e.g., domestic firms with subsidiaries abroad); some are transnational but involve only two countries (e.g., United States and Canada). Others are multinational (involving several countries in various ways); few are global. Few operate totally and exclusively within a domestic market with no imports or exports.

Multinational Companies

It is important to distinguish between multinational and global companies. Many view multinational companies (MNCs) as the driving force behind globalization. An MNC is a company that has established offices in several countries. The countries in which it owns or controls production facilities, the foreign workforce it employs, and foreign ownership of companies all indicate a company's multinational status. The 1999 World Investment Report estimates that there are 63,000 such companies worldwide with about 500,000 foreign affiliates.

Global Companies

Many believe that MNCs are by nature global, although this term is reserved for those companies with activities in all the world's continents or even many countries. There is no doubt, however, that many MNCs are able to distribute their services and products widely across the globe. A global company is also one that is able to shift, with some degree of ease, practices, labor, or production capacity among countries depending on changing local conditions.

Global Strategies - contradictions and consequences  Eleanor R E O'Higgins. Corporate Governance. Bradford: 2003.Vol.3, Iss. 3;  pg. 52