The Impact of Globalization on the Business

Introduction
The global changes in the world, changes in political, economic and business activities as well
as the development of technology, transport and communications, impose the need for
enterprises in its struggle for survival, to change their strategies and go out from the borders of
their own country. Limited market, competitive pressure, demand for cheaper resources and the
dynamics of the postmodern era, forcing business leaders to change their focus from traditional
targets to alternative measures for successful business and the entrance on global markets, with the
purpose of making competitive advantage.

The impact of globalization on the business

International business is a term used to describe all commercial transactions, in general,

(private and governmental, sales, investments, logistics and transport) which occur between
two or more regions, countries and nations beyond their political borders (Radebaugh &
Sullivan, 2007).
The companies that are active in international business are called multinational enterprises.
Multinational enterprise is an enterprise or corporation that owns substantial resources and
performs various business activities through a network of branches located in different countries
and each branch form its business strategy, based on the different market characteristics
(Cavusgil, Knight, & Riesenberger, 2008). Multinational company is based in one country but
has business activities in several countries. There are opinions that the multinational company
is one that is so structured that conducts business or property held in many countries or a company
is organized into global production parts.
Globalization is a worldwide trend, through which economies in the world lose their
borders and connect to each other. The companies are no longer imprisoned in their borders and
can implement a wide range of business activities around the world. Many companies are
present in markets around the world, procured their raw produce or conduct research and
development worldwide. Trade barriers fall and global trade between countries in goods and
services is growing faster than domestic production. As a result of this, companies can not afford
the luxury to assume that the success of the domestic market will lead to long- term profitability
(Cullen & Parboteeah, 2010). The flow of money across national borders is freer, and companies
seek better financing rates in the world and investors everywhere are looking for a more

1|Page
favorable return on investment.
Globalization, developed from economic aspect, has two main components: the
globalization of markets and globalization of production.
The globalization of markets refers to the merging of historically different and separate
national markets into one big global market. In recent years, constantly is discussed that the tastes
and preferences of consumers in different countries and nations begin to resemble on a global
level and the way that they help in the creating of a global market. The companies that offer
standardized products worldwide, help in the creation of a global market. The most common
global markets are not the markets for mass consumer products, because there are still
differences between countries in terms of tastes and preferences, which still have great meaning
and a sort of brake on globalization, but these are the markets for industrial goods and materials
that have universal need the world.
The globalization of production refers to the tendency of the companies to find suppliers of
goods and services from locations around the world, in order to realize the advantage of national
differences in price and quality of the factors of production. Companies do this in order to
reduce overall costs and thereby to improve the quality or to improve the functionality of their
product offering to compete more effectively (Hill, 2008).
• Political changes. The globalization trend of unifying and socializing the global
community, as well as, forming preferential trade agreements and groupings such as NAFTA
and the European Union, which united more nations in a single market, allow the companies
significant market opportunities. Two aspects of this trend, which contribute to the globalization
of business operations are: progressive reduction of barriers for trade and foreign investment by
most governments, which leads to intense opening new markets by international companies,
which also exported them and build production facilities in them, and the privatization of most
of the industry in the former communist countries, as well as opening up their economies to
global competition.
• Development of technology. The development of computing and communication
technologies has enabled increased flow of ideas and information across the borders of the
countries, providing introduction of the consumers with the goods worldwide. Internet and
networking have enabled smaller companies to compete globally, as a result of the rapid flow
of information, regardless of the physical location of the seller or buyer. Also, allows
international companies to hold corporate meetings among managers from headquarters and
branches, without wasting unnecessary time for travel.
 • International business climate. The development of communication and information
technologies have contributed to the process of globalization, but also provided instruments that
facilitated the processes of globalization. Newly emerging markets also recognize the economic
benefits, technological development and growth opportunities that globalization provides them.
• Development of markets. Information and communication technologies, the rapid
development of international tourism, widespread cultural exchange and improved the living
standards, in many developing countries have contributed to the emergence of a group of
consumers in different countries and regions of the world with similar educational profiles,
lifestyle, purchasing power and for good products, as well as, aspirations for high quality. This
scenario, in combination with the liberalization of international trade and the availability of
global distribution channels, opens great opportunities for companies that want to offer their
products to global markets. Large market potential exist outside of the domestic market, that is
why the companies go out on the foreign markets, generate sales and have opportunities for
profit that cannot be achieved at home.
• Expenses. The liberalization of trade and investment flows, which emerged in the 80s of the
last century, which inexorably moved forward, is a stimulus for globalization of the businesses.
Trade liberalization, global consumer habits, rising development costs and the need for
economies of scale, pressure from foreign competitors in the domestic market as well as the
development of information and communication technologies, are considered drivers of the
globalization. Because of the need to introduce new products and investment in research,
development and innovation, achieving economies of scale, reduce costs and access to cheaper
raw materials; companies are forced to plan activities, taking into consideration the global
market. Economies of scale and cost reduction are the main goal of management. That is why
companies decide to locate production in countries where the cost of developing and producing
are smaller.
• Competition. One of the reasons that the companies join global strategies is the need of
maintaining or gaining a competitive advantage in foreign markets and avoiding
competition in the domestic market. Competition in international markets is huge and
growing, with more multinational competitors who win markets worldwide. The companies
improve their competitive position by opposing competitors in international markets or
premature intrusion into the domestic market of the competitor in order to destabilize or to
suppress its development.
As the globalization increases the speed and prevalence, and for the companies more

3|Page
opportunities are opening easily, to perform on the international markets. The managers
develop and adapt strategies for internationalization in order to transform their organizations
into globally competitive enterprises. Managers seek to coordinate the supply, production,
marketing and other activities based on international activities. The organization of the company
globally is a challenge and requires strategic positioning, organizational skills, a high degree
of coordination and integration, attention to the needs of individual markets and the
implementation of common processes.
The strategy, in an international context, is an organization plan for positive positioning,
compared to the competitors. This plan lead the company to selected customers, markets,
products and services in global markets, not just a particular international market. The
strategy in an international context should help managers to formulate a strong international
vision, allocation of scarce resources on the World, the participation of the major markets,
implementation of global partnerships, and involvement in competitive activities in response to
global rivals and establish activities that add additional value on a global level (Cavusgil,
Yeniyurt, & Townsend, 2004).
When the companies compete outside of their country, they face a number of challenges and
pressures. These pressures and challenges to maintain competitiveness, require from the companies
cut costs, in order the consumers do not evaluate their products or services as too expensive. This
leads to the need to locate production facilities in places where production costs are lower, and
the development of high standardized products in most countries. In the context of the pressure to
reduce costs, managers must strive to be ready to respond to local pressures to adapt products to
local market requirements, where the company is active.
This requires differentiation of their offer and strategies in different countries, in order to
preserve the tastes and preferences of consumers, but also the differentiation of distribution
channels, management of human resources, and government regulations. Because the strategies
and tactics for differentiation of products and services in local markets create additional costs,
they can also lead to increased costs for the company. These two pressures that enterprises face,
resulting in four basic strategies that the companies use to compete in the global market. These
strategies are: international, global, multi-domestic and transnational strategy (Dess, Lumpkin,
& Taylor, 2004). The strategy that will be chosen by the company depends on the pressure faced
by cost-cutting and the importance of adapting to local markets.
 Conclusion

Today, the word international company is quite a common phenomenon, which reflects
actual business transactions and large expanses between a number of people from different
cultures and with different approaches. What unites them in the complex network of
relationships is the need of development, rapid exchange of resources and tools and
integrated cooperation, which should contribute to ensuring cooperation and ensure the transfer
of capital. Can be concluded that today's decisions for crossing domestic borders and
internationalize the business is a prerequisite for serious growth and development of a business
entity. As such, he is always searching and analysis of potential areas where the company from
small or medium business entity would become a corporate organization striving to constantly
expanding and increasing its own portfolio.
To make a decision to invest outside of the own borders is a complex and comprehensive
process. This process is achieved through several stages and approaches that contain a long- term
comprehensive analysis and scanning newly elected investment location.

References

Ansoff, H. I. 1984. Implementing Strategic Management. Prentice-Hall International, Englewood

Cliffs, NJ.
Ball, A. D., Wendell, H., McCulloch, Jr., Frantz, L. P., Geringer, J. M., Minor, S. M. 2001.
International Business – The Challenge of Global Competition. International Edition, McGraw-
Hill.
Bartels, L. F., Buckley P., Mariano G. 2009. Multinational Enterprises’ Foreign Direct Investment
Location Decisions within The Global Factory. UNIDO, Vienna.
Cavusgil, T. S., Yeniyurt, S., Townsend, J. 2004. “The Framework of a Global Company: A
Conceptualization and Preliminary Validation”. Industrial Marketing Management, 33.
Cavusgil, T., Knight, G., Riesenberger, J. 2008. International Business: Strategy, Management and
the New Realities. Prentice Hall.
Cullen, B. J., Parboteeah, K. P. 2010. International Business, Strategy And The Multinational
Company.
Taylor & Francis.
Daniels, D.J., Radebaugh, H.L., Sullivan, P.D. 2007. International Business: environment and
operations.

5|Page
 Prentice Hall.
Dess, G., Lumpkin, G.T., Taylor, M. 2004. Strategic Management: Creating Competitive
Advantages.
Hill, W. L. C. 2008. Global business today. McGraw-Hill Irwin.
Joshi, M. R. 2009. International Business. Oxford University Press.
Jovanovski, T. 2007. Megjunarodni Finansii. Skopje: Euro-Mak Kompanii.
Katerina, R., & Aneta, R., 2014, The Impact of Globalization on the Business, University Ss. Cyril
and Methodius, Management, Faculty of Economics, Skopje (Economic Analysis (2014, Vol. 47, No.
3-4, 83-89))
Susman, I. G. 2007. Small and Medium-sized Enterprises and the Global Economy. Edward Elgar
Publishing.