There are a number of factors influencing todays global competition, both positive and negative. The global market has expanded tremendously in the past 20 odd years, according to Kotler & Armstrong (2010, p.578) the number of multinational corporations has grown from 30 000 to over 60 000.
One of the factors that contribute to the global competition is that of foreign legislation and taxes on entering their markets. A particularly extreme example is outlined by Kotler & Armstrong (2010, p.580) where China has imposed restrictions on foreign entities opening banking institutions in China. The Chinese government has put requirements on foreign entities only to have US$ 50 million in operating capital each year per branch as well as limiting the number of branches that are opened to one per year. These limitations have made the idea of expanding into the Chinese banking industry something that is not feasible for a foreign entity.
On the contrary to the above situation which is a negative implication on globalising one’s business, there are also a number of trade agreements that encourage cross-border trade by lowering or removing duties/taxes on import and export or the entry of foreign business into a local sector.
However, these are not considered positive by all; Global Exchange (2011) describes their fight against “bi-lateral trade agreements” as a move towards the vision of “global economic integration that values worker’s rights, fair trade, and environmental protection over corporate profits”. The trade agreements currently in place according to Global Exchange (2011) are:
NAFTA – North American Free Trade Agreement which includes Canada, Mexico and the United States
FTAA – Free Trade Area of the Americas; this is planned to expand NAFTA to include a new zone from Argentina to Alaska.
CAFTA – Central American Free Trade Agreement. This is the same model as NAFTA but for Central America.
AFTA – As above but for the Andean nations of South America.
With organizations trying to stop the free trade agreements due to their claims on job losses and a negative impact on the economy this also increases the risks of moving towards globalization, if the free trade zones are discontinued many globalized businesses will be adversely affected.
Another free trade zone is that of the European Union (EU), Kotler & Armstrong (2010) have described this union as reducing the barriers between member countries on products, services, finances and labour. Another positive movement for the EU has been the recent adoption of the Euro currency across numerous EU member states.
Other factors covered by Kotler & Armstrong (2010) are those of cultural barriers. Cultural barriers include language barriers and there have been a number of cultural and language faux pas from even the largest companies, for example: Nike’s depiction of a famous basketball player “crushing” a number of Chinese cultural figures (Kotler & Armstrong, 2010, p.585).
It is important to understand all of the markets you are entering into, cultural borders and language borders are often very important and firms that include this in their market research and product strategy are definitely intensifying the competition (such as LG distributing their brightly coloured fridges to the Indian public, Kotler & Armstrong (2010)).
Global Exchange (2011) Global Trade Agreements [Online]. Available from: HYPERLINK “http://www.globalexchange.org/campaigns/globaltrade/”http://www.globalexchange.org/campaigns/globaltrade/ (Accessed: 16 July 2011).
Kotler, P. & Armstrong, G. (2010) Principles of Marketing. 13th (Global) ed. Boston: Pearson Education, Inc.