The new global economy
According to Cavusgil et al. (2014), the new global economy of the 21st century has changed the economic, social, educational and political landscape in a profound and indelible way. The new economy consists of a trilogy of interactive forces, including globalization, trade liberalization and the revolution in information technology and communications. Globalization melts borders; free trade promotes economic integration; and the information and communication revolution makes geography and time irrelevant. In addition, the new economy is based on an innovative culture. Indeed, the hallmark of the new global economy is new ideas, new technologies and new initiatives.
According to Cavusgil et al. (2014), there are a set of industry globalization drivers as show in the table above.
- Worldwide reduction of barriers to trade and investment: Governments have been seeking to reduce trade and investment barriers, which has accelerated global economic integration. The World Trade Organization (WTO) has facilitated this. The World Trade Organization (WTO) is a multilateral governing body with the authority to regulate international trade and investment. It has been committed to the sustained liberalization of member economies since the late 1940s. China joined the WTO in 2001, and even China is committed to making the process for the foreign companies easier to enter the market.
- Market liberalization and adoption of free markets: Market liberalization is the lessening of the market barriers in a host country, which allows the free participation of the foreign organizations in the host country and adopt their marketing trends to develop the business.
- Industrialization, economic development, and modernization: The economic and industrial development of a host country can be highly developed by the active participation of the foreign organizations. These participations can bring in the technological advances from a foreign country to the host country. This can lead to a growth in the economy and create a major mark in the societal development.
- Integration of world financial markets: According to Kathmandu (2011), which is famous for travel and adventure outdoor apparel and equipment, the company’s sales has increased by 23.5%. It increased to $306 million during the year. Its Net profit fromforeigners is up by 47% and the gross margin has increased by 65.5%
- Advances in technology: According to Fisher & Paykel (2005),the New Zealander well known for kitchen’s appliance, reduced the cost with outcomes for base pricing. According to Fisher & Paykel (2005), it has achieved Dynamic cooking system and has expanded in the U.S market. The appliance of Fisher & Paykel has sustainability and is environmental friendly.
The integration and interdependence of national economies are achieved by the interaction between the foreign companies and companies from the host country. This helps in the integration of the economies, which helps in the balanced growth of the economies.
The different international business firms insist on the creation of the international bodies which can break the barriers of the international trade. Moreover, this aspects can help in the settlement of the international economic bodies which helps in maximizing the profits of the organizations and the host market at the same time.
Globalization leads to the increase in the flow of the foreign currency. This is a very important factor as in can channelize investments into the host country and help in the economic development of the country.
Overall, it can be understood that globalization has a number of dimensions in which it can influence a certain society. Globalization can change the overall customer preferences. Therefore, it can increase the demands of a variety of products which can lead to the industrial and the economic growth of the society.
Loss of state sovereignty: The activities of transnational corporations may interfere with the government’s ability to control its own economic and social political systems. Some companies have larger economies than many other countries for example, WAL-MART and Shell. However, some companies argue that global competition in the context of global free trade reduces the influence of multinationals (for example, the recession in the U.S. auto industry has brought Japan and Europe into the U.S. market compared with foreign competitors). A large Chinese retailer may replace WAL-MART.
Offshore outsourcing and employment flight: As companies shift production of products and services abroad, jobs are reduced to bring down costs and gain other advantages. Businesses benefit from the disruption of communities and industries.
The integration and interdependence of national economies
The impact on the poor: In poor countries, although globalization usually creates jobs and raises wages, it also tends to undermine local job markets. Multinational companies may pay low wages, exploit workers or employ child labor. The benefits of globalization are not evenly distributed. For example, Nike’s foreign factory, Nike, which owns 100 factories in Asia, Latin America and elsewhere, has been criticized for paying low wages and operating sweatshops. Labour exploitation and sweatshop conditions are real concerns. Many developing economies, however, must consider other options that people can choose from these countries. Nike and many other multinational companies are working hard to improve the working conditions of their foreign factories.
Every year, countless small businesses go global. Like most long-distance journeys, going global can be summed up as a series of steps. Firstly, it is required to assess the needs and set goals by developing an international business plan to start the activities through international expansion. Before beginning, assess the preparation and commitment to international development. Developing foreign market research and identifying international markets is an important step towards globalization. The Ministry of commerce is an excellent source of foreign market information of the goods and services. Evaluate and select ways to distribute products abroad.
Financing has always been a problem for globalization. Although the government’s interest in promoting exports and centuries of financial innovation has made it easier to get capital and pay than ever before. It is necessary to move the goods to the international market and ensure that they are packaged and labeled in accordance with the requirements of the market. The globalization of transportation system is helpful here, but laws vary everywhere
According to Cavusgil et al. (2014), people play their role in cultural duties though values, ideas, attitudes, behaviors and symbols. Here are some example that when people misunderstood the cultural aspects and got into trouble in understanding the value at stake and it affected the business. For example, Nephrite Jade, known as Green Stone and Pounamu (Mountain Jade 2018), played an important role in Maori culture. It is defined as a Taonga (treasure) and is protected under the Treaty of Waitangi. This is usually considered to be a prized possession and is passed from generation to generation. However, if Canada Jade is sold to the Maori, it might be a misunderstanding of their culture, because the Maori buy jade as a gift while the Chinese buy jade as protection.
New Zealand Maori culture: Maori’s business might be initially to hold, manage, develop and/or increase profits from Maori resources, such as people (e.g., young or old people or whnau, HAP or iwi groups), land, water (lakes, rivers), farms, forestry or other collectively owned resources. Other entities, such as companies or trusts, can be created to manage and develop a particular enterprise under the protection of the original business or entity (Ministry of Education 2013).
Creation of international bodies
Language barriers can have negative impact on the business, for example, different countries have different culture and different languages. It is simple to realize that language is a prime barrier in the process of cross-cultural risk. Assumptions about specific target audiences or markets are flirting with marketing disasters. It may be more important when marketing crosses cultural barriers, which may include language barriers, socioeconomic status, religious beliefs or other forms of restriction, ignoring important components of people and specific circumstances.
In any society which have a cultural heritage, it stipulates some broad patterns of behavior. These patterns extend to different areas such as sexual roles, clothing, eating habits, entertainment, authoritative patterns, status symbols, artifacts, attitudes, motivations, spatial use and linguistic meaning. We are accustomed to the practice and disposition of our own culture, and when deprived, we often fail to deal effectively with our environment. (N. N. & run). Alvin Toffler calls cultural shock a sudden discovery of one’s own psychological effects without the support of habitual culture.
The reorganization of social values brings three challenges to marketing experts. The first is to monitor changes so that companies can understand what is happening in society. The second is to create products and services that are compatible with changing values. The third is to design and reflect the marketing information of value target market and individual customers. (Kenneth Clow and Donald Baack).
The cross-cultural risk can defined in many ways, such as Dad’s Pies, set up business in New Zealand and explored their first business in Australia, as the owner believed their cultures are the same. If Dad’s Pies expands their business to India, it turns into a risk, as the cultures are different. However, if Dad’s Pies can change their pies as curry chicken pie, redang pie or others, it will reduce the risk of expanding their business to India.
When an organization tries to extend its geographical location to more than one country, it tends to become a multicultural organization. The biggest challenge for the organization at that time will be employees with different cultural backgrounds. Staff interaction from two or more cultures. They regularly integrate with each other to form multiculturalism. As the employees enter another country, they need to adjust their leadership styles, communication patterns and other practices to suit their styles. Sometimes employees from their home countries come to the foreign country. They are called expatriates as they belong to other countries. However, the primary requirement of the organization is cultural integration. This cultural integrity can ensure higher productivity from the employees.
In the stage of intercultural negotiation, when two people communicate, they seldom talk about the same subject, because effective meaning is preferred by each person’s cognitive world and cultural conditions. In international negotiations, this can be related to culture-related ideas that are most likely to be understood by people of a particular culture. There are few stages of cross-cultural negotiations.
The first stage is the preparation stage. To understand the cultural differences in negotiation styles, managers must first understand their own styles and then determine how they differ from the norms of other countries. Managers should learn as much as possible about possible requirements, the composition of the opposing team, and the relative authority of the members.
The second stage is to establish relations. Before starting a business discussion, it takes time to build mutual trust. Prior to commencing business discussions and transactions, it is important to obtain contacts and build mutual trust among insiders in the host country. Managers need to be prepared in order to wait for the other side to start business negotiations. Effective negotiators can set aside enough time to establish relationships with bargaining partners. This process is more important in Asian or Arabian countries than in western countries.
References
‘Hold this specialist retailer’ 2011, Money (Australia Edition), 136, p. 75, Business Source Complete, viewed 13 August 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=62852908&site=ehost-live>.
‘Kathmandu’ 2011, New Zealand Management, 58, 11, pp. 36-37, Business Source Complete, viewed 13 August 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=69807678&site=ehost-live>.
‘Fisher & Paykel Expands in U.S. with DCS Acquisition’ 2005, Kitchen & Bath Design News, 23, 5, p. 12, Business Source Complete, viewed 15 August 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=17150125&site=ehost-live>.
Ministry of Education 2013, viewed 19 August 2018, <https://seniorsecondary.tki.org.nz/Social-sciences/Business-studies/Maori-business/Culture-and-values>.
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