Name, discuss, and assess core issues of globalization that have an influence on the conduct of multinational corporations

Seminar Paper 2005 7 Pages

Business economics - General


Basics and development of globalization

Globalization covers more and more countries and markets with increasing speed.[1] Globalization is one of the most often used words of the present,[2] but a clear definition is missing. Most of the times globalization is seen as a strong increase of the worldwide trade activities which includes the transboundary exchange of goods, services, capital as well as manpower.[3] The structure of national barriers is broken up within the process of globalization to strengthen free trade and competition.[4] Improvements in transportation, production and communication brought about new possibilities in the international division of labor, which brings along advantages to use scarce resources.[5] Technological, political and institutional changes pushed the process of globalization through easier and faster access for market participants to goods, services and information from outside the home market.[6]

Globalization was not growing all by its own, but next to the improvements in technology the prerequisites were built by political initiatives like the GATT (General Agreement on Tariffs and Trade) or the liberalisation of the goods and financial markets.[7]

Core issues of globalization

The first point to mention is that technical progress in the area of information and communication as well as in transportation lead to a decrease in transaction costs. This offers the possibility for companies to sell their products cheaper. New information systems, especially the internet, lead to a massive reduction of transaction costs by offering faster and cheaper information resources. Messages to members of the companies as well as to trade partners can be sent and received within seconds all over the world via email or phone. Transportation systems improved during the time of globalization. Goods and services can be delivered faster to the customers. National as well as regional economic areas are merging and create a single world market, due to the decrease of transportation costs. What can be observed is an integration of factor and goods markets. As a consequence, multinational companies have to reconsider their market strategy. As the new markets with its great amount of new demand offers further selling opportunities companies have to be careful by picking the markets where they want to do their business and expect the best selling opportunities.


[1] Vgl. SCHNEIDER (1998), S. 265; KAPILA (2002), S. 426.

[2] Vgl. SCHMIDT (1998), S. 7.

[3] Vgl. SOUNDARAPANDIAN (2003), S. 456; KAPILA (2002), S. 426.

[4] Vgl. SOUNDARAPANDIAN (2003), S. 455; SANGMEISTER (2000), S. 9.

[5] Vgl. ESCHENBURG/DABROWSKI (1998), Vorwort; SANGMEISTER (2000), S. 9.

[6] Vgl. VANBERG (1998), S. 1.

[7] Vgl. KÖSTERS, S. 377f.; SCHMIDT (1998), S. 33.


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Institution / College
European Business School - International University Schloß Reichartshausen Oestrich-Winkel
Name Managing Global Economy



Title: Name, discuss, and assess core issues of globalization that have an influence on the conduct of multinational corporations