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An assignment on

The impact of
Globalization on multinational business

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With increased globalization can multinational corporations
simply can sell the same standardized products in all the markets or
it is necessary to vary the goods and services according to local
markets and tastes














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Introduction:
Globalization is defined as the process of social, cultural, financial and economic integration.
Globalization narrowed the gap between the people different nations and combined them under
one purpose of economic and social development. The ever increased globalization is due to the
free flow of factors of production such as labor and capital, goods and services; which are due to
the decline in the cost of production, transportation, increased communication through the use of
technological advancement and decrease trend of reducing different tariffs and non-tariffs
barriers. As a result there is an increasing trend of globalization which is also cause
interdependence among the various nations (Vaara and Tienar, 2008). And the interaction and
relationships among the different people from different countries are increasing at a great rate.
Multinational corporations of England are being affected by globalization. UK based
multinational companies are facing the challenge of increasing diversities among the products
and their marketing strategies. The last decade is characterized by the different obstacles in free
trade and mass volume of different trade barriers. However, the global integration trend has
made free trade possible.


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Globalization and Multinational corporations:
Multinational corporations are now able to operate their business activities abroad freely due to
globalization which was not possible a decade ago. The main causes can be attributed to the
higher transportation costs and undeveloped communication system. But due to sharp reduction
of transportation cost and advancement in communication system brought about by
globalization, one country is selling its excess goods abroad and purchasing the goods that are
not available in the country. And the firms are finding it more profitable and getting growth
opportunity by doing business in different countries (Teichmann, 2002). But increasing the
MNCs are finding the problem of providing the same products across all the markets or
customizing their products and services to responds to each local markets, demands and tastes
(Pieterse, 1994).

With increased globalization, MNCs are changing their production and marketing strategy. They
are adopting different strategy to produce and sell their products in different region.
Globalization integrates the whole world. Though globalization has integrated the countries into
a single point, there are concerns regarding the differences of great extent in the socio-economic,
cross cultural aspects. So there can be need of customizing or modifying the same product across
different markets of different countries. By providing the same generic products or services
across different nations it may not be possible for a MNC to meet up the need of different people
in various nations where culture can differ significantly (McGregor, 2008). For example, MNCs
are producing mini pack shampoo for developing countries as the economic condition is not as
good as western countries. To be profitable and successful in the increasing competition in
global as well as in local markets, MNCs must focus on the differing taste, demand, income level
across different cultures. So they are producing different types of products in different regions to
satisfy their unique needs rather than producing and selling same quality goods all over the world
(Lane, 1998).

Consumer behavior and buying pattern is completely different in one country from that of other
country due to the significant variation in the socio-economic and cultural factors. According to
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a current research, large multinational corporations which are the main forces entering into new
markets for capturing the market share are moving to a great variation in products and services
and increasingly responding to the local markets with the degree of increased globalization. Most
of the countries imposes differing degree of restrictions on the quality of products (Jansson,
2007). For example, to sell any product in America, it must be approved by the FDA.
SomeMNCs try to maintain the same quality all over the world though there are some variation
in product types.

Successful MNCs like Unilever, Proctor and Gamble, Nestle, Coca-Cola, PepsiCo, Samsung, LG
and many others are also trying to provide products and services specifically designed to each
individual market. MNCs like Samsung, LG are providing higher end specification of smart-
phones for the market of developed countries whereas to capture the entry level market of the
developing and underdeveloped market of the countries of Asian and African continents
providing entry-level, lower end smart-phones. The companies are focusing on economic
perspective. The manufacturers of consumable products and services should pay attention to the
local demand, taste pattern, income level. They should diversify their product line based on local
demand. With the varying degree of socio-economic and cultural differences among different
parts of the world, the MNCs operating in different countries need to consider these differences
for gaining market shares (Humbert, 1993). The MNCs must abide by the rules of the different
countries in which they operate and produce products based on differing cultures and values or
they will face significant loss of profit and market share in those market.

For some products and services, MNCs are not required to focus on local markets and tastes and
they dont need to diversify their product line to incorporate regional differences. They can
market the same quality products for the different countries as they are of generic nature or
standards across all the markets (Healey, 2001). For examples software is a product category
which have the similar features or characteristics which are applicable across different markets
and these need not be customized or varied to a great extent in different markets. These products
are generally new and innovative in nature and customer has little knowledge about the products
before actual marketing.
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MNCs are reviewing and redesigning their production and marketing strategies to adjust with the
degree of globalization. Companies have developed many strategies to deal with the diverse
conditions in different countries. Major three strategies taken by MNCs are given below:
Generic strategy: Under this strategy companies emphasizes on home market rather than
international market. But there can be different strategies for the international market
(Ghauri and Powell, 2008). They normally do not consider the differences in different
markets.
Transnational strategy: Under this strategy, MNCs formulate different marketing
policies for specific market. It focuses on the differences on the tastes and culture
(Cantwell and Iammarino, 2003).It takes different competitive positioning strategy for
different countries.
Inclusive strategy: Under the strategy, the entire globe is considered as a single market
and the company can produce and market products and services little or no varying
characteristics. Competitive positioning is done on global basis (Asgary and Walle,
2002).


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Summary and recommendation:
Globalization has affected several countries in several ways. MNCs are also affected by this.
Some MNCs need to change their product and marketing strategy to responds to local tastes and
needs. As a result they produce different types of products in different regions. On the contrary,
some companies are suitable for producing and selling the same quality, standardized products
across all the markets and there are little needs to respond to local demands. The appropriate
strategy taken by MNCs depends on several factors including characteristics of the products,
consumers views to the products and the strategies followed by the competitors. MNCs
producing goods that have universal demands should produce standardized products ignoring
differences in countries and regions. On the other hand, Companies producing products whose
quality and qualities vary from country to country need to produce customized products and
services.

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References

Asgary, N. and Walle, A. (2002). The cultural impact of globalisation: economic activity and
social change. Cross Cultural Management: An International Journal, 9(3), pp.58--75.
Cantwell, J. and Iammarino, S. (2003). Multinational corporations and European regional
systems of innovation. 1st ed. London: Routledge.
Ghauri, P. and Powell, S. (2008). Globalisation. 1st ed. London: Dorling Kindersley.
Healey, J. (2001). Globalisation. 1st ed. Roselle, N.S.W.: Spinney Press.
Humbert, M. (1993). The Impact of globalisation on Europe's firms and industries. 1st ed.
London: Pinter Publishers.
Jansson, H. (2007). International business strategy in emerging country markets. 1st ed.
Cheltenham, UK: Edward Elgar.
Lane, C. (1998). European companies between globalization and localization: a comparison of
internationalization strategies of British and German MNCs. Economy and Society, 27(4),
pp.462--485.
McGregor, H. (2008). Globalisation. 1st ed. London: Wayland.
Pieterse, J. (1994). Globalisation as hybridisation. International Sociology, 9(2), pp.161--184.
Teichmann, I. (2002). Globalisation. 1st ed. London: Watts.
Vaara, E. and Tienar, J. (2008). A discursive perspective on legitimation strategies in
multinational corporations. Academy of Management Review, 33(4), pp.985993.