Globalization Vs Internalization

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Based on Barney (1991), Resource-Based View should be founded on the VIRO framework to determine if identified resources can truly aid the company in obtaining sustainable competitive advantage. The VRIO framework examines if the resources are Valuable, Rare, costly to Imitate and if the company is Organized to make use of these resources.

Toyota is one of the examples that uses resource-based view to obtain sustainable competitive advantages throughout its global target audience. Toyota differentiated itself from other competitors by providing superior quality and productivity of its products. It utilizes its internal technology to increase the durability of their products. Further examination of their production system continues to reduce cost for their customers.

While both Institutional-Based View and Resource-Based View each has their individual benefits and key to success, there had never been a definite answer which view would be more important or beneficial. However, it might just be the best approach to combine both views to achieve an examination of both internal and external factors for sustainable competitive advantage.

4. Challenges Faced By Managers

4.1 Currency Rates

In a multi-national company, price setting is one of the major considerations and with it brings the challenge of currency rate and its fluctuations. Major fluctuations in the currency can bring about great loss and expenses if not accounted for in the proper manner. Such volatility in the business environment makes it difficult for Managers to accurately predict profit levels.

Monitoring exchange rates closely is the most basic cornerstone of all multi-national companies to ensure profitability. In addition, one proposal to counter this problem is to do all transactions be they payment or receipt in the same currency. However, this places the problem of exchange rates to the customers, which may or may not be welcomed.

4.2 Communication

Effective communication with suppliers, employees and customers is essential for success in a multi-national company. Language, first and foremost, is one of the most crucial factors of communicating with suppliers, customers and potential business partners. Internal communications with employees of different nationalities is also important to achieve cohesiveness and a common goal. Companies would need to determine if they would utilize a common language – English, in all its businesses and communications. Another alternative would be to have individual regions learn the country’s own language and have the individual regional sections base their strategies on the different languages.

Communication is also not just about the language, but also about nonverbal communication such as body language and the culture of the different countries. Companies should be aware of the different social etiquette of the different countries and how the diversified cultures can influence or affect the business communications.

5. Conclusion

Globalization continues to bring about massive changes to the global business environment by eliminating national boundaries at rapid speed. However, it is essential for companies to recognize that Globalization and Internalization are entirely separate concepts that require in-depth understanding. Internalization and Globalization should come hand-in-hand to ensure that the eradication of national borders come at a rate that is productive and progressive for all parties. In addition, multi-national companies should obtain individualistic sustainable competitive advantages through a combination of both Institution-Based and Resource-Based Views. Only through an examination of both views would a company be able to thoroughly understand the internal and external factors that a company faces. Furthermore, competing in a global business environment brings about its own challenges such as currency exchange rate.

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