Globalization - The World is not as Flat as Some Believe
Flattened World, Flattened Competitive Landscape
Thomas Friedman declared in a May 16, 2005 address at MIT, “The global economic playing field is being leveled.” Friedman heard this report from an Indian leader in the Bangalore software industry. “The world is flat,” Friedman concluded. He went on hiatus, researched, and then dissected business history into three periods. The first, 1.0, state of increasing world connectivity was nation-state exploration such as Spain sending Columbus to the New World. Phase 2.0 was 1800 to 2000 AD. This second phase involved corporation-driven internationalization in pursuit of markets and labor. The third phase, 3.0, is underway and began in 2000, according to Friedman’s framework. World 3.0 is a level playing field. It is individuals who drive the 3.0 phase. The shift from 2.0 to 3.0 transitioned in the latter half of the last thirty years. Critical aspects which have flattened the world involve Internet infrastructure and innovations which did not at all exist thirty years ago.
Stephen Tallman, author of Global Strategy, makes the same point as Friedman, in an extended explanation: “However, asset-seeking investment has been transformed in the modern era beyond the search for location-based comparative advantages tied to natural resources and inexpensive labor to a search for the best, most competitive worldwide source of new skills and knowledge as embodied, for instance, in Porter’s model of created advantage in national clusters.” Tallman agrees that globalization is a move from location to talent. Globalization is the move of business potential mining from geography and labor to talent and is not limited by distance. In this 3.0 phase, knowledge has increased.
What Porter Really Said
Michael Porter of the Harvard Business Review has certainly written on the topic of globalization. In this case, Porter’s idea that advantage is created in regions developing and possessing expertise (a talent pool) benefits the firms situated there. This returns us to “location” as an advantage. Globalization is “leveling the playing field” in many areas, but not all. In fact, Porter said:
“In theory, location should no longer be a source of competitive advantage. Open global markets, rapid transportation, and high-speed communications should allow any company to source any thing from any place at any time.”
Immediately after this quote, Friedman continued, “But in practice, location remains central to competition.” In Porter’s cluster analogy, those who are physically located close to specialized talent, such as IT firms in Bangalore and investment consulting in the American northeast, will have an advantage because of their location.
Barriers to Globalization
Barriers will continue to block complete globalization. Islam will continue to push for control of legal matters to Sharia law. It is a mandate of the religion that this should be pursued. There will continue to be sufficient leadership within Islam to push for this. Traditionally equal and free societies like Britain, Germany, France, the United States, Canada and others will be less than receptive to Sharia. Islamic law is anathema to equality, and, in practice, anathema to government of the people, by the people, and for the people. One barrier to the entrance of Turkey to the European Economic Union is the abduction and sexual enslavement of tens of thousands of women from Eastern Europe each year. In Pakistan, an aspect of Sharia law called hadood and zina make it virtually impossible for a woman to report a rape. Under hadood, conviction requires four male witnesses who are citizens and muslims in good standing. However, under Sharia zina laws, if a woman reports a rape, that is enough to convict her of adultery. "Religious" standards like these will continue to limit complete globalization.
Another barrier is organized corruption. When the former USSR dissolved, the eastern bloc nations claimed independence one by one. Hungary and the Czech Republic immediately adopted laissez-faire free market systems. Those nations have prospered. Romania and the Ukraine, contrarily, wither under the tight control of oligarchies. Powerful families in these nations control prices and wages.
Another barrier to complete one-world market creation will be political ideals. Religious ideals alone will not prevent total globalization. China, an atheist nation (Almond, Powell, & Dalton, 2008), has a political idea: the “One China” policy. To compel the Chinese people to support the government and a “manifest destiny” of a single world under control of one seat of power within China, The People’s Republic keeps tight control over socialization means such as the Internet. The PRC even hacked into Google’s secure servers and stole important algorithms, and attempted to gain access to gmail accounts belonging to human rights activists in China (Drummond, 2010). Friedman said, “Whatever can be done, will be done” (2005). But, not everything can be done.
The theories of Porter and other economists are really just single equations affecting a large pool of complex algorithms. Globalization may increase. But, it will never be level. Greed, religion, and power mongering will continue to keep some geographical regions down.
The Competitive Landscape
Globalization leveled competition. Tallman said that industries are now pressed to simply remain level with the field. In the past, firms worked to find and exploit competitive advantages. In today’s global economy, many advantages are available to many corporations. Keeping up with globalization is powering fast-moving markets and fast-growing corporations and nations. Profitability is tighter and more competitive in the global marketplace. A town coffee roaster a hundred years ago competed locally. Today’s coffee roasters compete with roasters all over the nation and internationally. Productivity is pushed by globalization to greater stages of efficiency. Operating manufacturing facilities at more efficient scales of economy is more critical. Every aspect of the value chain must be explored to gain competitive advantage. Profitability has exceeded a focus on sales. Profitability in the global market requires focus on all aspects of operations.
Almond, Gabriel A., Powell, G. Bingham, Jr., Dalton, Russell J., & Strom, Kaare. (Eds.) (2008) Comparative Politics Today: A World View, (9th ed.). New York, NY: Pearson Longman.
Tallman, S. (2009). Global strategy. Padstow, Cornwall, UK: Wiley.
Friedman, T. (2007, June 27). Southeast Asia::India. CIA world factbook. Retrieved October 31, 2011, from: http://www.youtube.com/watch?v=EcE2ufqtzyk
Porter, M. (1998). Clusters and the new economic competition. Institute for strategy and competitiveness. Retrieved October 31, 2011, from: http://www.isc.hbs.edu/econ- clusters.htm
Drummond, D. (2010, January 12). A new approach to China. Google blog. Retrieved October 29, 2011, from: http://googleblog.blogspot.com/2010/01/new-approach- to-china.html