Business Beyond Borders

“Today in the era of globalization there is no such issue as borders between states of the same nation”
Fatos Nano 

Nowadays, globalization took over the world. Increasing economic interdependence of national economies across the world began through rapid increase in cross-border movement of goods, service, technology and capital. In other words, economies went global and the ever-growing process of interchange of worldviews, products, ideas, and culture burst into business.

As soon as the world step into the era of modern logistics in 1980’s, the disintegration of vertical production has begun, which lead to the depreciation of reliable transportation costs. In the long run, globalization has taken away all the limitations and boundaries, investment funds moved far beyond domestic and national markets, opening new dimensions of opportunities for economies and businesses. However, was it a next stage in the development of world economy or a simple profiteering?

According to the Investopedia financial resource, globalization is a double-edged sword. On one hand, cheaper labor overseas enables business leaders to build production facilities in locations where labor and healthcare costs are low, and then sell the finished goods in locations where wages are high. At the same time, globalization does not only affect CEOs and business owners. Competition for jobs stretches far beyond the immediate area in a global marketplace. From technical support call centers in India, to automobile manufacturing plants in China, globalization means that workers must compete with job applicants from around the world.[1]

Nayan Chanda from the Yale Center of the Study of Globalization estimates that globalization began 8000 years ago, and at those times all the forces that would push globalization forward were already in place. Other possible starting dates can be named when Christopher Columbus discovered the New World in 1942, the first time someone circumnavigated the world in 1522, the Industrial Revolution that began in the late 18th century, and the fall of the Berlin wall in 1989. The World Bank states that there have been three 'waves' of globalization. The first began in 1870 and ended at the beginning of World War I in 1914.  The next wave occurred from 1950 to 1980 during which multiple trade agreements occurred between developed nations, which left out the developing world. The final (and current) wave of globalization (beginning 1980) in contrast has been characterized by the willingness of developed nations to remove trade barriers in order to attract foreign capital. [2] Still, the debates about the goodness of globalization are still taking place today, which, however, doesn’t slow down its development.

In its modern state, globalization arises another important question. Marc Levinson, finance and economics editor of “The Economist” in London marks an interesting issue: “Are there anymore economies of scales?”

In point of fact, during initial waves of massive globalization, companies were saving money using low-rate transportation and cheap labor force, moving production lines to China and diversifying production chains all over the globe. As a result, strong dependencies between companies and their suppliers has formed. However, taking into account recent contingencies, which took place in the world, such as cataclysms in Japan, airline strikes in Germany, dock strikes in China etc. CEO’s have concluded that it is necessary to diversify risks. Now, the opportunity of using economies of scale has eclipsed by the challenge of finding a middle ground between having huge factory in China and having several plants closer to the “home” market instead. Classical risk problem occurred: to spend more money and make it safe or to take a chance and economize, using Eastern Asia opportunities. As they say, tastes differ, still, companies has to develop new strategies, considering risks and adapting to the latest market shifts.

Despite certain benefits associated with the placement of production in Asia, in the last 5 - 10 years there is a trend that companies increasingly prefer to locate their production in Eastern Europe, which is becoming more and more attractive for business, which is proven by following extensions:

  • Daimler opens first Mercedes-Benz plant in Hungary (car factory, 2012);[3]
  • Optogan opens largest LED production in Russia (light-emitting diode factory, 2010);[4]
  • BMW wants to open a new factory in Romania, who already host Renault and Ford (car plant, 2012);[5]
  • Chinese opens first car plant in Bulgaria (Great Wall Motor Company, 2012);[6]
  • Dell opens second factory in Europe (computer-making plant, 2008);[7]

Concluding, there is a tendency for globalization to become a determinative issue for companies in reinforcing the businesses and revising the strategies. Globalization may also be considered as a "next stage" of world business development, because it has not only diminished the borders between counties but also gives possibility to look at the business from the very different angle.

Advanced Development Consulting keeps in step with the times and offers its Clients a complex set of services to diversify risks, create incentives for advanced and sustainable development. Having wide international experience, we conduct substantial market analysis and consult on business strategies, assisting in finding reliable partners throughout our wide base of business connections of the TOP level in various industries, provide legal support for business transactions, assist in attraction of investments for projects and preparation for M&A transactions.

“Business Beyond Borders” – it is the creed of our company. Since the world business is globalizing, Advanced Development Consulting provides its services not only in Ukrainian market, but also in global. Analyzing the country market and helping organizations to enter the foreign market smoothly and rapidly, we provide practical assistance in developing business opportunities all over the world. In modern business, borders are just formalities. We strive to provide the highest quality services independently of your location and we guarantee that working with us your business will know no borders.

“Smart people are a dime a dozen. What matters is the ability to think different... to think out of the box”
Walter Isaacson