Global Experience Industries. Jens Christensen
fields of life into commodities. This is a so-called market system that works by way of industrialization. The market system has two main actors: One the companies that produce goods to be sold on the market, competing to meet the demands of the other part, the consumers. The industrialization process has immensely changed the nature of world societies. A group of developed countries have been transformed from a state of poverty and dictatorship to that of welfare and democracy. At the same time, capitalist industrialization caused developed nations to be increasingly interdependent and integrated in matters of economy. Furthermore, capitalism spread from its Western origin to eventually all developing countries and created for the first time in history a globally interlinked world. Those societies that managed to drive or actively participate in this globalization process improved conditions of life dramatically, whereas those who did not manage to industrialize remained in the gutter. In this way, a hierarchy of societies at different levels of development arose, including leaders at the top (North America, Western Europe, Japan, South Korea, Taiwan, Hong Kong, Singapore, Israel, Australia, and New Zealand), up-comers in the middle (for example China, India, Brazil, Russia) and laggards at the bottom.
In recent years, capitalism has expanded to such a degree that, what used to be called internationalization is now being described as globalization. What is economic globalization? Globalization is a new phase in the history of capitalism. In spite of increasing international economic relations since the Second World War, modern industrial capitalism of the 20th century was basically national in nature. Many restrictions and interventions to support national companies hindered international trade in the developed world and even more between the developed and developing countries. Furthermore, on the whole one-third of the world was cut off from the market economy by communism. The crisis-ridden decades of the 1970s and even more the 1980s made Western leadership realize that radical changes were needed. Leading companies in North America and Western Europe and eventually Japan initiated a profound business transformation process.
Three radical business changes took place. 1. What used to be highly specialized and layered bureaucratic organizations, including often many secondary activities, were switched into lean companies that outsourced all non-core business activities. Instead of doing many secondary things themselves, management chose to buy such products and services in the marketplace while focusing determinedly on core competence. 2. To add value to core competence and stay competitive, all activities from sub-suppliers via internal value adding to customers were linked in a market driven network organization. This was done to secure not only increased productivity and knowledge content in products but also to build flexible organizations capable of adapting quickly to a rapidly changing world. 3. The reorganization of business reached out globally. The focus on core competence and the emergence of global markets made management apply a global strategy. Sub-supplying and even end-production was placed wherever in the world that cost, market access and other strategic considerations were best fulfilled.
Two consequences resulted from this global reorganization. First, the previous national division of labor was turned into an international division of labor. R & D, manufacturing, distribution, marketing, sales, IT, and other links of the so-called value chain of creating market goods eventually were spread all over the world. Competitive and strategic considerations determined whether activities were done inside the organization or left to be bought in the marketplace. As a consequence, all value adding business activities were increasingly turned into industries of their own providing all the products and services needed to run a company. Everybody concentrated on their core competence, and therefore an expanding number of industries and firms emerged. Direct international investments skyrocketed and grew even more than international trade, indicating that international production had taken over the dynamic role of international trade. The majority of this so-called ‘foreign direct investment’ (FDI) took place within the three leading economic centers of the world, North America, Western Europe and Japan. An increasing share went to the most dynamic emerging countries such as China, Russia, India and Brazil, the so-called BRIC countries, too. Next in line followed some expanding Latin American (Mexico, Argentina, Chile), East European (Poland, Hungary, Czech), and South East Asian (Thailand, Vietnam, Indonesia, the Philippines) countries. In this way, globalization spread throughout the world like rings of water.
Secondly, a globalization of markets and industries took place. Companies organized globally, they marketed and sold their products globally and consequently, they had to be able to compete on a global scale. Leading companies in all developed nations and all industries were being faced with the need to globalize or die. An international process of selection started. What happened was that in order to survive, the predominant national companies had to upgrade to a global level. Some gave up pretty soon and many merged, while others decided to go for it. Those companies that came out as winners always built on strong national clusters that gave the sources and strength to compete on a global scale.
During the 1990s, a rush to globalize took place in all industries and by the turn of the century, a consolidation process had created a new global business picture. In all industries, future expansion and even survival depended on the ability to become one of a few companies that came to dominate their respective markets. Besides the stop-or-go choice when confronted with global consolidation, you might also choose to move into another link of the value chain that was more adaptable to the individual company’s core competence, for example from end-producer to sub-supplier or from a mainstream producer to a company focusing on front-line innovation. Moving around in the value chain and taking advantage of rapid changes in the world corresponded well with a new era of globalization and innovation, leaving much room to innovating entrepreneurs, too.
The accelerating growth of capitalism throughout the world was evident in the way each and every company reorganized and endeavored to adapt to globalization. Globalization did not move on simultaneously and at the same pace in all industries, however. In some sectors such as pharmaceuticals, IT, communications, transportation and business services, globalization came swiftly, while regional consolidation within North America, Europe and Eastern Asia prevailed in other sectors of the economy, for instance construction and cultural industries. Regional consolidation was not the terminal point, but just a stepping-stone towards final globalization. Globalization was the megatrend that drove all kinds of business activities since the 1990s and increasingly in the new millennium.
The radical transformation and globalization of business could not have taken place without additional profound changes in other sectors of the world, including politics, technology and social and cultural affairs. While corporate America and Europe revolutionized their organizations and strategies, the Atlantic political leadership likewise took radical steps to regain economic growth and prosperity. They began to tear down restrictions and introduced open competition and trade, instead. Monopolized sectors of the economy were privatized and direct intervention in business affairs was replaced by a framework of fair competition rules and improved infrastructures. Liberalization was enforced on a global and regional level, too, based on World Trade Organization (WTO) and regional units such as the European Union (EU) and The North American Free Trade Agreement (NAFTA). Still in spite of worldwide and regional agreements and organizations, the nation state remains the cornerstone of world politics. Neither has the United Nations (UN), including its councils or agencies, any authority over national affairs. The EU is the only international organization to have assumed some sovereignty at the expense of its member states.
In social matters, globalization and increased regional liberalization and cooperation have led to improvements in life conditions, not only in developed countries but also in emerging countries. Still, while two-thirds of the developed population may be considered well off and only one-third is below average living conditions, it is the reverse situation in emerging countries, at best, whereas the majority of inhabitants in poor nations live under miserable conditions. Roughly speaking, two thirds of the world 6.5 billion people are poor, while one-third is a well off middle class. The majority of the global middle class lives in the Atlantic community, Eastern Asia and Oceania, but increasingly in emerging countries in Asia, Europe, and Latin America, too.
In statistical numbers, the global dominance of developed countries is declining from a 55 percent GDP share in 1990, via 50 percent in 2005 to 45 percent in 2015, and from a population share of 17 percent in 1990 to 14 percent in 2015 (Table 1). Measured