What is the impact of globalization and the internet on corporations?

Internet
The impact of the Internet on business is dramatic. It has revolutionized our lifestyle and most everything related to it. It has created the term "global community" where everything and everybody is only a click away.

A 2007 study by Nielsen/NetRatings shows that there are almost 334 million (333,841,523) active internet home users from only 10 countries! Most users are utilizing the Internet to make purchases and/or conduct businesses.

The way business was conducted prior to the internet has completely changed. Web sites, emails and search engines have created, if not demanded, new strategies for businesses. Organizations can advertise aggressively to a much larger, global market. Products and services are marketed virtually to people throughout the world. Almost anything can be bought and sold with the help of an internet connection. This has created new challenges for strategic planning.

“Companies wanting a multinational Internet presence must now try to balance a region's disparate cultural dimensions with the need to present a unified corporate image. A true global web site should relay a message that is clear and comprehensible to all users, regardless of nationalities, yet a successful Internet site must be tailored to match the language, monetary units, and culture of each country.” (The Journal of Computer Information Systems, Stylianou, January 2001 – A1)

The internet has been an enormous asset to business in several ways. Two key characteristics as related to strategy involve information and time. Companies have vast amounts of data more readily available to them than ever before, providing competitive advantages when used for strategic planning and management. Trends in a changing environment can be recognized much more efficiently, providing corporations the ability to implement adjusted strategies in a timely fashion. The internet has allowed corporations to create competitive advantages by establishing knowledge as a key asset.

Evaluating this information can be a big task, but companies like IBM have created programs to gather, analyze and clean available data for useful, related results. The internet has also established a sprinters approach to communication. The internet provides instant communication opportunities with email, data transfers, video conferencing and meetings. Business network sites provide a great opportunity for information sharing. This is very important in today’s fast paced environment which requires efficiency in order to compete in any industry.

In today’s web centered society, we have immediate access to virtually unlimited resources. In the days prior to the internet, people adjusted life around their work related activities. Work days were typically a set time so people could manage their daily responsibilities outside of work. We can pay bills, make reservations, attend college, trade stocks, conduct research, seek entertainment, communicate with family and friends, hold video conferences (and the list goes on) with the use of an internet connection, directly in ones home. In addition, the internet provides cost cutting measures for businesses. For example, companies now have the ability to video conference sales presentations or company meetings, saving on travel expenses.

The Internet has minimized distance and time restraints on people and business. It has given individuals the freedom to be their own boss, work remotely, run a home based business, or simply have a virtual garage sale with the use of sites such as ebay or Amazon. Prior to the internet, stores would service more local markets, have set times of operation and require staff to be present for the stores operation. In today’s market, you can have an e-commerce store that is open 24 hours a day, seven days a week, and have a virtual employee available to handle sales around the world. As a result, stores require less operating expenses (staff salaries), expand their markets (nationally and globally vs. locally) and positively impact customer service.

The internet has also shifted the balance of power towards the consumer. It has decreased the need for distributors as demonstrated by Dell’s business plan, selling custom tailored computers directly to the consumer. Without the internet, this option would hardly be possible without the just in time inventory process.

The power of the internet can also be recognized in its global effect on commerce. This medium is so strong worldwide that it has required a new global commerce for business exchanges known as PayPal. PayPal is recognized as an actual commerce with value around the world, and has provided a system of international monetary exchange. Someone in Europe can purchase a product from the United States and neither party has to struggle with exchange rates or the transfer of money options. It’s amazing. The internet has unwittingly created a global commerce exchange system at a local consumer level.

The internet has earned the reputation to be one of the most significant developments of our lifetime. However, where the internet has tried to level the playing field for small business, it has created some challenges for larger corporations, who must consider cultural issues consistent in their branding approach.

Globalization
The World Bank Group defines globalization as the growing integration of economies and societies around the world. It is a process of interaction and integration among the people, companies, and governments of different nations. This process is driven by international trade and investment and is aided by information technology.

“Since 1950 . . . the volume of world trade has increased by 20 times, and from just 1997 to 1999 flows of foreign investment nearly doubled, from $468 billion to $827 billion. Distinguishing this current wave of globalization from earlier ones, author Thomas Friedman has said that today globalization is farther, faster, cheaper, and deeper.” (The Levin Institute 2008 – A1)

Globalization has created environmental uncertainty for many corporations.

“As more and more markets become global, the number of factors a company must consider in any decision become huge and much more complex. Environment uncertainty is a threat to strategic management because it hampers their ability to develop long-range plans and to make strategic decisions to keep the corporation in equilibrium with its external environment.” (Concepts in Strategic Management and Business Policy, Wheelen & Hunger, 2008, p. 72-73)

According to Porter, world industries vary from multidomestic to global. Multidomestic corporations are specific to a certain country or set of countries, whereas multinational corporations, or global, industries are worldwide. The difference between these two styles is very challenging for a strategic plan, and each offers new challenges specific to its environments. As such, conducting business in a global market requires international societal considerations.

“Each country or group of countries in which a company operates presents a unique societal environment with a different set of economic, technological, political-legal, and sociocultural variables for the company to face.” (Concepts in Strategic Management and Business Policy, Wheelen & Hunger, 2008, p. 78)

Consider the political and social cultures and risks of each country. What may be acceptable in one country may be appalling in another. What might be illegal in one country may simply be a way of doing business in another. An example of this is conducting business in a less developed country or one that focuses on relationships for doing business, which increases the chance for corruption. Many aspects of business demand a heightened level of focus in a global environment. The use of child labor or sweatshops in other countries, used to produce your product, may create enormous social issues in countries where your product is sold.

Globalization has also created trends in sales for many companies based on the monetary value levels of the world. In addition, globalization is responsible for the development of the European Union (EU), the North American Free Trade Agreement (NAFTA), Mercousur, the Central American Free Trade Agreement (CAFTA) and the Association of Southeast Asian Nations (ASEAN).

A good example of this is based on my personal experience of selling products on ebay. Whenever the dollar weakens in value, international sales increase dramatically. Recently, with the lower Euro values, my international sales have dropped. This adjustment of monetary values creates a challenge for strategic planning, and the consideration for adjusting levels is a key factor that must be addresses in any astute plan.