At Coca-Cola headquarters in Atlanta, where the soda giant operates its World of Coca-Cola Museum, you can taste more than 100 different kinds of beverages the company makes, including many only available on other continents. You might try Inca Cola, a golden, fruity Peruvian soda; Thums Up, a strong, “mature” cola that’s the best-selling soft drink in India; or Bibo Candy Pine-Nut, an African favorite that tastes like pineapple and coconut. It will do you no good to fall in love with Fanta Melon Frosty; that’s only made for Thailand.
This is a great example of a company’s globalization in action. Alternatively, if a soft-drink company sold cola in two countries, it would be an example of international business. So what is the difference between globalization and international business?
International Business vs. Globalization
International business, says Belgium taxation professor Ghislain T.J. Joseph, is “business activities that involves the transfer of resources, goods, services, knowledge, skills or information across national boundaries/borders.” Those activities could be conducted by individuals, companies, governments or international institutions. Anyone with a domestic company or service who has the necessary economic and cultural resources can expand internationally.
Globalization is the bigger picture, the one into which international business fits.
“Globalization may be defined as the process of integration and convergence of economic, financial, cultural and political systems across the world,” Joseph explains. It is “brought about by the enormous reduction in the costs of transportation and communication and the breaking down of artificial barriers to the flow of goods and services, capital, knowledge, and (to a lesser extent) people across the borders.”
Globalization: A Driving Force in the 1990s
Globalization has become a popular buzzword in the last two decades as trade restrictions eased and internet commerce grew.
“National economies are undoubtedly becoming steadily more integrated as cross-border flows of trade, investment and financial capital increase,” wrote The Economist in 1997. “Consumers are buying more foreign goods, a growing number of firms now operate across national borders, and savers are investing more than ever before in far-flung places.”
The effects were monumental, certainly to an extent few could have imagined.
Globalization “was upheld as a beacon of hope, the promise of economic and social salvation, the wondrous solution to the ills that plagued our society, the key force that was going to allow us to finally unshackle us from an oppressive colonial past,” wrote Usree Bhattacharya about her experiences in India in the 1990s.
“Technology suddenly intervened in the daily lives of upper and middle class Indians in unimagined and unanticipated ways: electronic mail, dial-up Internet, cell phone service, ‘hip’ FM radio, and cable television offering a plethora of foreign programming. Coke, McDonald’s, and Pizza Hut billboards plastered the metropolitan cityscapes. Overseas travel was suddenly infinitely more affordable, and high school graduates began leaving in droves for American, Canadian, British and Australian universities.”
Example of Globalization and International Business
The Swedish home-furnishings giant, IKEA, started out as one store in Sweden. Founded in 1943, it sold pens, picture frames, jewelry and accessories. The company published its first catalog in 1951, opened its first furniture showroom in 1953, and its first full-fledged store – as a domestic company – in 1958. Twenty years after its founding, the first IKEA store outside Sweden opened in 1963, in Oslo, Norway, making the company an international business.
By 1984, IKEA had 167 stores in 16 countries, and by 1985 it opened in the United States. Among many designs still in production today, the company introduced a simple, easy-to-assemble bookcase called the Billy. Customers worldwide were now buying the same Billy bookcase that Swedish customers had purchased for decades.
Today, the IKEA Group is a prime example of globalization, owning and operating 276 stores throughout the world. And the Billy bookcase – which now comes in four colors and 14 configurations for prices ranging from $49.99 to $544.97 – is such an iconic piece that Bloomberg used it as an economic indicator in 2015, tracking its price around the world.
Taking Business to a Global or International Level
The possibilities of success from taking a business to an international or global level can be intoxicating, but it’s a complicated journey that often ends in failure. Expanding to other countries will affect resources, staff and marketing, capital, operating, travel and training budgets; and, perhaps most importantly, company culture. There may be language or cultural barriers to manage, as well as different currencies, tax laws and online regulations. If you sell a product, you may need to follow different labeling and packaging standards in other countries.
The Toyota company is worth $177 billion and is No. 12 on the Forbes June 2018 list of the world’s most valuable brands today, but the company was founded in 1937 in Japan, a country where drivers drive on the left side of the road. Clearly, before it could ever hope to go international and then global, Toyota had to make a substantial adaptation to its product, producing cars for drivers who drive on the right side of the road instead.
Advanced Education with an International Business Concentration
Done poorly, globalization of a company can be fraught with problems. Without doing due diligence, you may not understand another country’s demographics as to whether a big enough customer base exists, or whether shipping rates are prohibitive. It’s easy to overextend resources during an expansion, which can make even a company’s original core financially vulnerable. Negotiating international tax codes and financial transactions can be challenging for a company that previously only had to manage its affairs domestically.
If you believe that international business is a part of your future, consider an MBA degree from the University of Delaware online. The Lerner College of Business and Economics offers five majors and 12 concentrations, including one in International Business.
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