John Gray defines globalization as the intensification of worldwide social relations which link distant realities in such a way that local happenings are shaped by events occurring miles away and vice versa. ” (Gray, John: p57). The web definition of globalization is the development of extensive worldwide patterns of economic relationships between nations. In other words, globalization is an overall expansion of international economic activity such international trade, international investment, international migration and transfer and exchange of technology among different countries of the world.
In short, globalization is the global integration of markets for goods, services, labor and capital. (Web Definition: Globalization) “Globalization refers to the worldwide phenomenon of technological, economic, political and cultural exchanges, brought about by modern communication, transportation and legal infrastructure as well as the political choice to consciously open cross-border links in international trade and finance. It is a term used to describe how human beings are becoming more intertwined with each other around the world economically, politically, and culturally.
” (Wikipedia Online) Theoretically speaking, globalization is the process which helps create wealth and solidarity, spreads market oriented policies, democratic policies, and individual rights and promotes the well being of billions of people. (Lechner, Frank) With increasing globalization, the concept of marketing products and services and catering to customers has also changed drastically. In today’s day and age, there is no localized or domestic brand of goods. Most products and services today are global and are produced on a mass scale with no specific identification with any single country.
Even if national cultures are considered, they are only to gauge and determine customer preferences in order to mould the product and/or service accordingly. (Gray, John: p67). Globalization is not a new phenomenon. It is merely a new word for an old process. It was initially launched in Europe nearly five centuries ago. However, globalization has really expanded today through the use of technology. Computer technology especially the Internet has played tremendous role in overcoming the previous barriers to globalization.
Moreover, dismantling of trade barriers and expansion of political and economic power of multinational corporations has also contributed to spreading the wave of globalization. (Ellwood, Wayne) A prime example of globalization is the structure of corporations today. There is no major local corporation anymore. Most large corporations today are transnational. Research indicates that there are approximately 60,000 plus transnational corporations today, most of them having developed in the latter half of the last century. Today, there is a global influence on nearly all elements of an organization: from production to finance and to trade.
(Zhongying, Pang: 2005) The opportunities through globalization are immense especially with the rapid expansion of the Internet and the development of hundreds of websites which offer products and services online. Globalization has now opened avenues for human beings which they did not have before. For example businesses today have more opportunities for increased trade and foreign investment and this is further enhanced by the ongoing advancements in technology and the expansion of information, media networks and new communication technologies.
In fact, because of the impact of globalization technology has developed more rapidly and has seen more breakthroughs then ever before. (Yach D, Bettcher D). Globalization partnering with technology has enabled countries to grow much more quickly than ever before. As a result of this growth, living standards have increased and quality of life has improved. Moreover, a large number of countries in the developing world now have more access to better products and services and advanced technology.
Globalization has reduced the sense of isolation felt in much of the developing world and has given many people in the developing countries access to knowledge well beyond the reach of even the wealthiest in any country a century ago. (Stiglitz, Joseph) Dismantling of trade barriers along with the boom in information technology has really helped in the acceleration of globalization. Agreements like FTA, NAFTA and GTA, the emergence of multinational corporations and the World Wide Web have played a major role in this economic upheaval.
(Ellwood, Wayne: 2001) Overall, globalization can be seen as a way of creating more wealth and solidarity, spread of standard and democratic policies beneficial for all and an overall goal of bringing well being to society as a whole. (Lechner, Frank: 2003) The Internet has played a major role in eliminating barriers to internationalization. That is because the Internet is used by more than one billion people today and has completely changed the lives of most individuals on this planet. In his book “The World is flat”, Thomas Friedman talks about how the Internet has penetrated our lives.
There was a time hen we used to go to the post office to send mail but now communication has become so much simpler with the introduction of email -a fast and convenient way to communicate. Similarly, there was a time people visited bookstores to browse and buy books but now everything can be browsed and purchased online. From music to movies to even our groceries there is really nothing that a person cannot do online. According to Friedman, the Internet has also played an equalizer effect in the process of globalization.
For example you could be a poor child in Asia or a University professor in a first world country you would have access to the same information online. Anyone, anytime, anywhere can access information on the Internet. This has played a major role in breaking barriers to globalization. (Anderson, Kerby: 2008) Globalization has primarily benefited from the Internet in the following ways: (Anderson, Kerby: 2008) 1. The Internet has provided the opportunity to build a global information infrastructure that links the world’s telecommunications and computer networks.
2. The Internet has promoted the concept that neighboring countries are not enemies but partners and are part of a vast and interconnected human family. 3. The Internet has made it much easier to move information around the world. 4. The Internet has accelerated the speed of transmission and has made the world much smaller and has created a global information infrastructure. 5. As per Thomas Friedman the Internet and other technologies have flattened the world “without regard to geography, distance, or in the near future, even language. ” 6.
Internet has lowered the cost of moving information and has increased the amount of information shared. 7. Internet has made life much easier for consumers with virtual portals such eBay and Amazon. Friedman describes eBay as a “self-governing nation state – the V. R. e i. e. the Virtual Republic of eBay. ” The Internet has greatly facilitated in reducing and/or eliminating trade barriers such as complexity of foreign distribution channels, limited information to analyze and locate markets, identification of foreign business opportunities and dealing with inadequate or untrained personnel.
The Interned has practically eliminated these barriers since it allows users to research and identify areas of opportunities; the virtual online stores has solved the problem of distribution channels; market analysis and locating new markets has become much easier with the amount of information available online and since the Internet is a medium that allows users to work from anywhere anytime, dealing with untrained or unskilled personnel has become quite minimal. Moreover, the Internet also helps in identifying new and lucrative product areas for foreign markets as well as reduces excessive transportation and insurance costs.
Interne has also removed time zone barriers and communication problems by making it easier to get in touch with anyone anytime. Thus technology based solutions can be attained for most barriers to globalization such as information about lucrative markets, identifying and developing new products for new markets, overcoming problems associated with socio-cultural traits, different customer habits and attitudes, communication issues with overseas customers and transportation and distribution costs.
Some of the different ways in which the Internet has provided ease in communication is through email which is now extensively used for not only communicating with colleagues and business partners but also for direct marketing initiatives. (Hardaker and Graham: 2001) The core advantages provided by email include immediacy, targeting, accountability, and low cost. (Chaffey et al: 2003) Email is also an effective tool for direct marketing campaigns as well as for follow up promotional activities and reminders.
The fact that email does not require the presence of the receiving party in real time and thus eliminates the problem of differing time zones. (Hamill: 1997) Globalization and International Trade has really benefited from the Internet in the following ways: (Hamill: 1997) 1. It has helped standardize prices across different borders. 2. It has removed the use of traditional intermediaries and has provided more direct access between producers and consumers. 3. It is a potential networking tool for organizations for both internal and external purposes.
4. It is a very effective communication tool. 5. It is a strong tool for conducting market research and other search activities. 6. It is a unique and effective marketing and promotion tool with the ability to reach audiences all over the world. In order for organizations to be successful in today’s highly technological age, it is imperative that they move along as fast as technology. E-commerce is now the rage and is the most effective way that businesses can market and sell their products and services.
“E-commerce (or electronic commerce) is the term used to denote commercial (usually contractual) transaction that takes place between two or more people using the communications infrastructure known as the Internet. ” (Carey, Peter: 2001) Examples of typical e-commerce transactions include purchasing of books from websites such as Amazon or Barnes & Noble, subscribing to newspapers or magazines online, ordering stationery from company websites, shopping online at websites such as e-bay etc.
There are two types of e-commerce transactions: business to business or business to consumer. Both involve the use of buying and selling of goods and services as well as transfer of funds through digital communication. E-commerce activities can also be implemented on most inter and intra company functions such as manufacturing, marketing, finance and selling. Overall, any activity that involves an exchange of electronic data, a connection to another computer for the purpose of business, or a file transfer for related reasons comes under the classification of e-commerce.
“E-commerce evolved from electronic data interchange (EDI) that facilitated electronic exchange of business documents in grocery and transportation industries in the 1970s. ” Over the years, it expanded to other industries and more and more companies started exchanging data through computers. This not only reduced paper work but also helped cut costs as well as the number of people handling purchase orders and communicating with suppliers. (Shalhoub, Zeinab K: 2002)
A large number of organizations today are practicing e-commerce activities and are involved in using customer led e-business practices to gain improved access to greater markets and larger audiences. These practices are now being applied over a wide variety of product categories such as computer products, music, books, entertainment, electronics, gifts, financial services, apparel, toys, travel, tickets and information. Customer led e-business has really developed e-commerce over the last few years. This development can be determined from the following important statistics (Brian, Marshall)
• Estimated U. S. retail e-commerce sales for the third quarter of 2005 was $22. 3 billion, an increase of 5. 7% from the second quarter of 2005. • 2004 online retail sales increased by 23. 8% to $89 billion representing 4. 6% of total retail sales. Including travel, online sales rose 23. 8% to 141. 4 billion. Online retail sales were expected to reach 109. 6 billion by 2005. • Online ad growth was estimated to bring revenues of $9. 5 billion in 2004 and was expected to grow by 33. 7% to $12. 7 billion by 2005.
The Internet today is the fastest medium of communication and those organizations and businesses who have the ability to capitalize on this medium are the ones who will be successful in future. The Internet offers several advantages. First, it enables all companies to compete with each other in the same arena; it allows companies to reach a large number of customers locally as well as internationally; it offers a convenient and easy way of doing business 24 hours a day and it allows significant cost savings and reduced paper work for most businesses.
Businesses today utilize their corporate websites for many productive activities. However, it is a given fact that the initial cost of setting up a website and a complete system are quite staggering especially for small businesses. The system has to be maintained on a regular basis and usually includes monthly maintenance costs. For new businesses taking on this venture, return on investment is neither immediate nor guaranteed. Moreover, when dealing with the World Wide Web, there is always a security risk due to online fraud, hackers and viruses.
Nevertheless, it is important for businesses to overcome these barriers so that they are able to capitalize on the success and benefits of modern technology. The success of Amazon and E*Trade highlights the huge potential that is offered by the Internet. These two companies are industry leaders today and have been successful in leaving their competitors far behind. Amazon was established in 1994 and launched its website in 1995. Initially, the website was nothing more than a regular website offering a modest discount.
Over the years however, Amazon established its reputation as having the largest selection of books online with nearly 1. 1 million titles available. In 1998, its website diversified into music and currently, Amazon offers products in thirteen primary categories and has a selection of nearly 18 million items. The secret of Amazon’s success is its sound marketing strategy and well planned affiliations. These include the Amazon Associates program which directed customers to Amazon through other content sites while these affiliates received 5 to 15% commission.
Similarly, its Advantage program allowed independent publishers to sell their books on Amazon and receive 45% off the list price. Amazon also created a strategic alliance with Toys ‘R’ US to provide logistical support for a co-branded website. Through this partnership, Amazon handled site development, order management and customer service while Toys R Us handled inventory. Amazon did the same for Borders. com and CDNow. All these affiliations increased the web presence of Amazon and provided Amazon the opportunity to gain maximum exposure both online and offline.
It also became known for its superior customer service. Amazon offers dedicated email addresses that deal with specific customer topics, areas and other functions. It offers attractive shipping rates and even offers free shipping on large orders. The success of Amazon lies in its e-commerce strategy which resulted in its huge growth. By 2003 Amazon had 37 million customers and is clearly on the path to success. (Epstein, Marc J: 2004) This is only because they chose to adopt the new technology while their counterparts chose to stay traditional.
Dell is another major example of a company which has been hugely successful and is today one of the leading virtual organizations in the world. (Epstein, Marc J: 2004) It goes without saying that the future of business in on the Internet. E-commerce is not going to take over traditional shopping but will play a great role in providing both customers and merchants an alternative avenue to obtain goods and services. It is expected that business to business transactions will flourish in the future.
“Business-to-business e-commerce is the largest gold rush international commerce has seen for decades. It may be the largest ever. Forrester Research now estimates that the business-to-business marketplace will exceed more than $2. 7 trillion by 2004. The growth of B2B e-commerce in the United States alone is larger than the gross national product of many small countries. (Cunningham, Michael: 2001). It is evident that E-commerce is the way to go in future if businesses want to keep themselves competitive and successful.