Businesses are established with ideas, and sometimes executed with money, with the aim of being sustainable except for changes in their courses which are inevitable in the global business environment. The global changes in the world – changes in environmental, political, economic, legal, social, security and business activities; the development of technology, transport and communication; as well as the change in tastes and preferences of consumers, compel the need for businesses to strive for sustainability, to change their strategies regularly and go out from the confines of their localities. Limited market, competitive pressure, demand for cheaper resources and the dynamics of the modern time, forcing business leaders to change their focus from traditional targets to alternative means for successful business and the entrance of global markets, with the purpose of making competitive advantage, are salient points to ponder.
Due to globalisation resulting in franchising, foreign partnership and representation, businesses are carried out beyond the shores of their countries of origin. There is no business that cannot be internationalised due to trade agreements between nations which make the whole world a single market, and information technology and advanced means of transportation, which make the world a global village. The companies that are active in international business are called multinational enterprises. Multinational enterprises are companies or corporations that own substantial resources and perform various business activities through a network of branches located in different countries and each branch forms its business strategy, based on the different market characteristics. Multinational companies are based in one country but have business activities in several countries. They are different from foreign-owned companies in that multi-nationals can be locally or foreign owned, while foreign companies are foreign owned.
A school of thought believes that a multinational company is one that is structured to conduct business or have presence in many countries or a company that is organised into global production parts in different countries. Businesses become multinational due to either operational needs or strategic needs. Operational needs include providing materials, equipment, technology and management of surplus production; and strategic needs include securing the future of the business due to changes in the external environment, steady growth (maintaining historic patterns of growth, avoiding stagnation caused by saturation, increasing the volume of business, increasing the rate of growth) and improved profitability. Most organisations exiting Nigeria and other nations due to downturn in their activities refused to consider the benefits of globalisation in their decision making. They are organisations that refused to see the light at the end of the tunnel.
Business success is not based on the volume of turnover of products or the value of profit only. They are also influenced by business spread across nations and the ability to withstand business crises while, at least, breaking even. The globalisation of markets refers to the growing economic integration and the growing interdependence of countries worldwide. Internationalisation of companies refers to the tendency of companies to systematically increase the international appearances of their business activities, while globalisation refers to macro-intensive economic relations between the countries in the world. Globalisation encourages companies to internationalise and to substantially increase the volume and types of cross-border transactions in goods, services and capital. Also, globalisation leads to rapid dissemination and diffusion of products, technology and knowledge in the world, regardless of the origin of organisations.
Globalisation is a worldwide trend through which economies in the world open their borders and connect to each other. It means that companies are no longer imprisoned in their localities and can implement a wide range of business activities around the world. There are many companies globally which procure their raw materials or conduct research and development worldwide in different international markets. Trade barriers are falling and global trade between countries in goods and services is growing faster than domestic production. As a result of this, companies should not think that their success in the domestic market will lead to long-term profitability. Globalisation has two main components: the globalisation of markets and globalisation of production. Globalisation refers to the tendency of the companies to find buyers and suppliers of goods and services from different locations around the world.
There are several factors that promote globalisation and guide business organisations to strive for business development. These include: political changes, development of technology, international business climate, market development, expenses and competition.Â
Political changes – The globalisation trend of unifying and socialising the global community, as well as, forming preferential trade agreements and groupings such as African Continental Free Trade Area (AfCFTA) and the European Union (EU), which unite more nations in a single market, allow the companies significant market opportunities. Two aspects of this trend, which contribute to the globalisation of business operations, are: progressive reduction of barriers for trade and foreign investment by most governments backed by World Trade Organisation (WTO), which leads to intense opening of new markets by international companies and the privatisation of most of the industries in developing nations, as well as opening up of their economies to global competition.
Development of technology – The development of info-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. Technology like Zoom Workplace, Zoho Meetings and Google Meet allow international companies to hold corporate meetings among employees from different locations without wasting unnecessary time for travel. Newly emerging markets also recognise the economic benefits, technological development and growth opportunities that globalisation provides them.
Market development – Information and communication technologies have contributed to the emergence of a group of consumers in different countries and regions of the world with similar taste, lifestyle, purchasing power and for good products, as well as, aspirations for high quality. This scenario, in combination with the liberalisation 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 potentials exist outside of the domestic market. That is why the companies go out to foreign markets to generate sales and profit that cannot be achieved at home. One of the reasons that companies join global strategies is the need to maintain or gain a competitive advantage in foreign markets and avoid competition in the domestic market. Competition in international markets is huge, profitable and growing. All businesses that want to be resilient must consider the globalisation of their business.
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