Strategic Management: Formulation and Implementation

Changes And New Developments

Traditional ways of doing business have rapidly been rendered obsolete by the development of a global economic order.

Tom Petersdescribed a number of dramatic changes between the "old" way of doing business and the "new" way. In the "new" way, international operations were described as a primary activity.

Over the last several years, more and more business have become increasingly involved in the international arena.

Why Have Industries Become More International?

There are several contributing factors. First, barriers of distribution between countries have been reduced substantially by technological improvements in transportation and communication. Second, the world demand for products has changed significantly. Third, institutional barriers to international (for example, tariffs and quotas) have declined since World War II.

Formation of trade groups such as the European Community and development of the General Agreement on Tariffs and Trade (GATT) have worked to lower national barriers to trade. Fourth, technological advances in product and process development have helped to internationalize markets.

The high costs of technological advances have forced many companies to look to international markets as a way of achieving the economies of scale to pay off large research and development investments. Finally, international competition has increased and improved in quality in recent decades and has caused dramatic shake-ups in some industries.

According to Theodore Levitt, technological, social, and economic developments over the last decades have combined to create a unified world marketplace in which companies must capture global-scale economies to remain competitive. Thus, firms are being forced to manage their businesses in a more globally integrated manner in order to secure the benefits of efficiency.

Globalization, a term used somewhat loosely to describe business response to the shrinking world, became a common expression in the late 1980s.

The multinational enterprise (MNE) is the leading actor on the stage of international business. Exhibit 1-1 reports data on the sales, profits, and employees of the world's 500 largest industrial corporations.

The key areas of the field of international business need to be evaluated against of efficient management of the MNE. This involves the determination of optimal strategy in the main functional areas of management.