Firms develop through interactions with their environment. In fact, eighteenth-century firms were as well designed to adapt to their environment as those of the twentieth century (Boyce and Ville, 2002). Due in large part to the innovation of social systems and changes in the external environment, firms have evolved over time to the point where they stand today.
Not until a combination of legal and economic changes took place beginning in the mid-nineteenth century did the modern corporation begin to take shape (Langford, 1989). Prior to that point, few opportunities existed for such large-scale production as mining, brewing, trading, and iron making. Small and scattered populations with heterogeneous taste caused market fragmentation. Technologies and transportation had not developed yet. A common form of enterprise was the small family farm (Boyce and Ville, 2002).
By the beginning of the twentieth century, a larger scale corporation gradually became a more common and permanent feature across many industries. One explanation of this significant change is Chandler’s Strategy and Structure (1969) and The Visible Hand (1977). According to this, the development of communication and transportation enabled the growth of large, modern corporations and ushered in the age of mass production and mass consumption. This significant change first transformed the U.S., U.K., and Germany, and then spreading to other countries. As a result, the worldwide system of production and distribution evolved in much the same way as the national markets evolved, from local networks into international ones (Chandler and Hikino, 1990).
After the holdback periods of World War I, Great Depression, and World War II, the introduction of GATT in 1947 swept away large segments of the tariff barriers; firms re-started their overseas expansion (Micklethwait and Wooldridge, 2005). Multi-National Corporations emerged and established their operations across countries by building local production, sales, and R&D centres. It is true that a network of inter-firm cooperative arrangements was becoming one of the forms of economic organization (Reich, 1992). However, most of these corporations continued to organize production and marketing in a market-by-market structure within the boundaries of each nation or region until the 1970s.
From around the 1980s, a number of important changes, the so-called globalization, began to emerge. Globalization is a force reshaping modern industrial societies and the new patterns, structures and relationships (Hall et al., 2001). It is not only the geographical extension of economic activity across national boundaries, but also the functional integration of such internationally dispersed activities (Dicken, 1988). Although some argue that societies with different institutional arrangements will continue to reproduce varied institutional systems with different economic and social capabilities, and others suggest that growing convergence and the globalization of managerial structures and strategies will shrink the national differences (Whitley, 1999), at minimum, the speed of technological change and the growth of global financial markets have produced a world economy which places a premium on all parties for their reaction speed and their adaptability to technical change (Crouch and Streeck, 1997).
As a consequence, globalization has transformed the business environment. Firstly, the marketing opportunities have changed. The development of technology, global media and logistics made the world small, increased the attractiveness of overseas marketing and decreased the difficulties of managing it. While national differences still exist, the converging consumer tastes have shaped an easier-to-reach, globally unified market (Levitt, 1983). Secondly, deregulation, technologies, and advanced logistics lowered the cost of and difficulty in using the increasing abundance of production and management resources across the world. International sourcing networks have emerged (Gereffi and Korzeniewicz, 1994). Global sourcing, the worldwide integration of engineering, operations, and procurement centres, within the upstream portion of a firm’s supply chain, is becoming mainstream (Trent and Monczka, 2003).
To capture these new opportunities, international firms started to reconstruct their value chain and exploit the best resources across the world. The concept of the Global Commodity Chain (Gereffi et al., 2005, Jacobides and Billinger, 2006) explains the processes, structures and governance, by which different skills, resources and costs of countries around the world can be exploited in order to locate each element of the commodity chain in the specific country where it can be conducted most effectively and efficiently. In fact, international expansion has a different meaning to that of decades ago. Mergers, acquisitions, outsourcings, and spinoffs have reorganized the traditional market-by-market value chain into a cross-border global value chain that consists of several different locations and entities. Palmisano (2006) illustrated this new form of organization as an Globally Integrated Enterprise. The geographical extent to which a firm can separate out its component units and their precise geographical configuration has been transformed significantly (Dicken, 1988).
This drastic change has not only occurred in large firms. Since the late 1980s, the business press has reported the establishment of new types of ventures that are international from their inception (Brokaw, 1990; The Economist, 1992, 1993b; Gupta, 1989; Mamis, 1989). This new form of small organization, “Born Global” or “Global Entrepreneur”, is differentiated in its strong technological competitiveness, niche focus, and widespread use of advanced communication technology (Aspelund and Moen, 2001). These organizations typically seek to derive a significant competitive advantage from their use of resources and the sale of output in multiple countries (Oviatt and McDougall, 1994). They leverage the best of the world from day one, entering those markets it believes to be the best for maximizing both profit and revenue (Isenberg, 2008). What we observe is that the small firms attract a competitive advantage by utilizing their abundant external resources and embark on international expansion from day one. The traditional definitions of the firm are under discussion.
Both small and large businesses appear to change their organizational structure and strategy due to the change of external environment. Globalization made it easy to construct and manage a globally distributed value chain. As shared business practices spread, along with shared modes of connecting business activity, a number of outsourcers developed in the market. These specialized outsourcers provide economy of scale and the necessary skills to all types of organization, even within the market. Thus, the two most important strategic decisions regarding international exposition have to be examined in the face of these drastic changes. Should we refine our theoretical lens on the location and boundaries decision? If so, how do we modify our understanding of the two decisions in the light of the changing realities of the world economy?
By the beginning of the twentieth century, a larger scale corporation gradually became a more common and permanent feature across many industries. One explanation of this significant change is Chandler’s Strategy and Structure (1969) and The Visible Hand (1977). According to this, the development of communication and transportation enabled the growth of large, modern corporations and ushered in the age of mass production and mass consumption. This significant change first transformed the U.S., U.K., and Germany, and then spreading to other countries. As a result, the worldwide system of production and distribution evolved in much the same way as the national markets evolved, from local networks into international ones (Chandler and Hikino, 1990).
After the holdback periods of World War I, Great Depression, and World War II, the introduction of GATT in 1947 swept away large segments of the tariff barriers; firms re-started their overseas expansion (Micklethwait and Wooldridge, 2005). Multi-National Corporations emerged and established their operations across countries by building local production, sales, and R&D centres. It is true that a network of inter-firm cooperative arrangements was becoming one of the forms of economic organization (Reich, 1992). However, most of these corporations continued to organize production and marketing in a market-by-market structure within the boundaries of each nation or region until the 1970s.
From around the 1980s, a number of important changes, the so-called globalization, began to emerge. Globalization is a force reshaping modern industrial societies and the new patterns, structures and relationships (Hall et al., 2001). It is not only the geographical extension of economic activity across national boundaries, but also the functional integration of such internationally dispersed activities (Dicken, 1988). Although some argue that societies with different institutional arrangements will continue to reproduce varied institutional systems with different economic and social capabilities, and others suggest that growing convergence and the globalization of managerial structures and strategies will shrink the national differences (Whitley, 1999), at minimum, the speed of technological change and the growth of global financial markets have produced a world economy which places a premium on all parties for their reaction speed and their adaptability to technical change (Crouch and Streeck, 1997).
As a consequence, globalization has transformed the business environment. Firstly, the marketing opportunities have changed. The development of technology, global media and logistics made the world small, increased the attractiveness of overseas marketing and decreased the difficulties of managing it. While national differences still exist, the converging consumer tastes have shaped an easier-to-reach, globally unified market (Levitt, 1983). Secondly, deregulation, technologies, and advanced logistics lowered the cost of and difficulty in using the increasing abundance of production and management resources across the world. International sourcing networks have emerged (Gereffi and Korzeniewicz, 1994). Global sourcing, the worldwide integration of engineering, operations, and procurement centres, within the upstream portion of a firm’s supply chain, is becoming mainstream (Trent and Monczka, 2003).
To capture these new opportunities, international firms started to reconstruct their value chain and exploit the best resources across the world. The concept of the Global Commodity Chain (Gereffi et al., 2005, Jacobides and Billinger, 2006) explains the processes, structures and governance, by which different skills, resources and costs of countries around the world can be exploited in order to locate each element of the commodity chain in the specific country where it can be conducted most effectively and efficiently. In fact, international expansion has a different meaning to that of decades ago. Mergers, acquisitions, outsourcings, and spinoffs have reorganized the traditional market-by-market value chain into a cross-border global value chain that consists of several different locations and entities. Palmisano (2006) illustrated this new form of organization as an Globally Integrated Enterprise. The geographical extent to which a firm can separate out its component units and their precise geographical configuration has been transformed significantly (Dicken, 1988).
This drastic change has not only occurred in large firms. Since the late 1980s, the business press has reported the establishment of new types of ventures that are international from their inception (Brokaw, 1990; The Economist, 1992, 1993b; Gupta, 1989; Mamis, 1989). This new form of small organization, “Born Global” or “Global Entrepreneur”, is differentiated in its strong technological competitiveness, niche focus, and widespread use of advanced communication technology (Aspelund and Moen, 2001). These organizations typically seek to derive a significant competitive advantage from their use of resources and the sale of output in multiple countries (Oviatt and McDougall, 1994). They leverage the best of the world from day one, entering those markets it believes to be the best for maximizing both profit and revenue (Isenberg, 2008). What we observe is that the small firms attract a competitive advantage by utilizing their abundant external resources and embark on international expansion from day one. The traditional definitions of the firm are under discussion.
Both small and large businesses appear to change their organizational structure and strategy due to the change of external environment. Globalization made it easy to construct and manage a globally distributed value chain. As shared business practices spread, along with shared modes of connecting business activity, a number of outsourcers developed in the market. These specialized outsourcers provide economy of scale and the necessary skills to all types of organization, even within the market. Thus, the two most important strategic decisions regarding international exposition have to be examined in the face of these drastic changes. Should we refine our theoretical lens on the location and boundaries decision? If so, how do we modify our understanding of the two decisions in the light of the changing realities of the world economy?
タグ：English version FIRM location Globalization strategy corporate boundaries how to be international
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