The Globalization of Business
cooperating really competing? In certain industries, the answer is yes. For instance, companies in the defense-aerospace industry used to prepare proposals on their own to bid on large military contracts. As military hardware has become increasingly complex and expen- sive, the cost to vendors of prepar- ing such proposals has over time soared to many millions of dol- lars, exposing them to greater risk. This in turn effectively raised the cost of such contracts to the mili- tary. In response, pairs or consor- tia of competitors got together to bid together on such contracts to lower the risk and costs. The mili- tary allowed such cooperation as it also reduced its own costs. The Boeing Company and Northrop Grumman Corporation have collaborated on many large military contracts that would be prohibitively expensive for a single company such as the Ground-Based Midcourse Defense (GMD) component of the United States ballistic missile defense system. Such an instance of cooperation is described as an agreement or strategic alliance, where two firms partner for their mutual benefit but retain their distinct corporate identity. There are other kinds of strategic alliance, discussed in Section 1.6, including simple contracts for services rendered at one end of the scale (minimum commitment) to minority ownership of another firm or joint ven- ture at the other (heavy commitment).
1.3 The Globalization of Business The world today is a lot different than it was just a decade ago. The global human population has surpassed 7 billion people (U.S. Census Bureau, 2011), and technological advances have pro- foundly affected our daily lives. New York Times columnist Thomas Friedman describes the arrival and spread of the Internet as “flattening the world,” meaning that the reach of every individual
Associated Press/Azamat Imanaliev
Today, many companies are increasingly cooperating through partnerships, agreements, and joint ventures rather than com- peting with each other. A recent example of this is the coopera- tion of aircraft companies Grumman and Boeing to build the U.S. Air Force’s KC-135 tanker planes.
Discussion Questions 1. You own a small firm selling grass seed. Who might your competitors be? (Think about factors other
than other firms selling grass seed.) How might you cope with some of these competitive threats? 2. Competitors are usually thought of as other companies like yours producing similar products for
the same market. Would any factor that reduced overall demand for your product also be viewed as a competitor? Why or why not?
3. Over the last 10 years or so, do you believe more companies are cooperating with one another? Why or why not?
4. Why do you pay exorbitant prices for concessions at movie theaters and sports venues?
CHAPTER 1Section 1.3 The Globalization of Business
has become global and the power of consumers equalized (Friedman, 2007). We have all heard the expression, “the world is shrinking,” alluding to the fact that international travel is easier, and we have instant access to news about events in just about every corner of the earth.