Globalization of Business

Many companies today rely to a large and increasing extent on overseas operations. Table 11 summarizes the percentage of overseas revenues and profits for 10 well known corporations. Very clearly, these 10 “American” companies are really international concerns.

Four factors have led to increased globalization of businesses: (1) Improvements in transportation and communications. which lowered shipping costs and made international trade more feasible. (2) The increasing political clout of consumers, who desire low-cost, high-quality products has helped lower trade barriers designed to protect inefficient, high cost domestic manufacturers. (3) As technology has become more advanced, the cost of developing new products has increased. These rising costs have led to joint ventures between such companies as General Motors and Toyota, and to global operations for many firms as they seek to expand markets and thus spread development costs over higher unit sales. (4) In a world populated with multinational firms able to shift production to wherever costs are lowest, a firm whose manufacturing operations are restricted to one country cannot compete unless costs in its home country happen to be low, a condition that does not necessarily exist for many U.S. corporations. As a result of these four factors, survival requires that most manufacturers produce and sell globally.