The Internet is making the business world over, and one of its greatest impacts is in unifying many countries' markets. It has become as easy to sell halfway across the world as it is to sell across the street. Indeed, the world has been shrunk to a very small size... and placed in the monitor in front of your PC. Many people are seeing the logic in dealing with the global market as a unified market, in the same way as Europe saw the need for breaking down country boundaries in the last few decades, and formed the European Union.

The drive for globalization is being promoted through more free trade, more Internet commerce, more networking of schools, communities and business, more email, so that we can ultimately have global integration 24 hours a day, across 24 time-zones and into cyberspace. According to a recent survey, globalization has become the top priority for 80% of American CEOs. If your company has any chance of having a competitor from another country, you have no choice but to take globalization seriously. Very seriously... before your competitor does.

The best explanation of how the Internet and globalization intertwine to give a backdrop for today's world is to be found in Thomas Friedman's book, "The Lexus and the Olive Tree". (Friedman is a long- time correspondent of the New York Times). Friedman starts his book by showing that the current movement towards globalization is an extension of an earlier era of globalization that ended with World War I. Great Britain was the hub of globalization at that time:

"...with the invention of the steamship, telegraph, railroad and eventually telephone, it is safe to say that this first era of globalization before World War I shrank the world from a size 'large' to a size 'medium'. Now, we have the next round of globalization, thanks to the Internet, starting in the early '90s. The big difference being the intensity of our current globalization, because vast numbers of people have access to the information and technology to become a player (unlike Globalization I)." (p. 388)

The basic point of Friedman's book is that, since the fall of the Berlin Wall in 1989, the world's modus vivendi is no longer shaped by the tension between East and West, but rather by what he calls the "Electronic Herd".

"The Electronic Herd is made up of all the faceless stock, bond and currency trades sitting behind computer screens all over the globe, moving their money around from mutual funds to pension funds to emerging market funds, or trading on the Internet from their basements. And it also consists of the big multinational corporations who now spread their factories around the world, constantly shifting them to the most efficient, low-cost producers. This herd has grown exponentially thanks to the democratizations of finance, technology and information -- so much so that today it is beginning to replace governments as the primary source of capital for both companies and countries to grow. Indeed, as countries increasingly have to run balanced budgets to fit into the Golden Straitjacket, their economies become ever more dependent on the Electronic Herd for growth capital. So to thrive in today's globalization system a country not only has to put on the Golden Straightjacket, it has to join this Electronic Herd. The Electronic Herd loves the Golden Straitjacket, because it embodies all the liberal, free-market rules the herd wants to see in a country. Those countries that put on the Golden Straitjacket and keep it on are rewarded by the herd with investment capital. Those that don't put it on are disciplined by the herd -- either by the herd avoiding or withdrawing its money from their country... This interaction among the Electronic Herd, nation-states and the Golden Straightjacket is at the center of today's globalization system." (p. 109-110)

Countries of every shape and color are changing fast. Even third-world countries are gradually upgrading their infrastructure and even harnessing the Internet. For example, many Muslims are using the Net today to state their case. The Internet allows many budding entrepreneurs in poorer countries the opportunity to develop economically in ways that would have never been available to them if they were not wired. The Internet simply puts them in touch with opportunities and resources that they have never had before.

Business has expanded the notion of country markets into what Friedman calls "Super Markets", i.e. globalized versions of markets that used to be limited to one country or continent. The interaction between the Electronic Herd and the Super Markets is at the center of today's globalization system. If anything, the Internet has become the planetary nervous system for the global economy. Connectivity is the central issue of globalization. Before the Internet became popular, the flow of funds that make up business transactions and investment was only for large companies (or countries). Now this flow of funds has come down into small and medium companies and even into the home, as numerous articles in magazines testify (across North America and Europe). The Electronic Herd has now descended even into the public.

According to Friedman, no one has more of a choice about the primal rule of the Herd than over death or taxes, as the joke goes -- the Herd determines the success or failure of a country or company... and it works already on a global level, online. A world where we will all be able to be online all the time is shaping up, and this networked world has become the trunk of the tree for a new online world order. Ignore it at your peril. Swim or sink.

Kenneth Lay, CEO of Enron (top B2B portal) says "There are strong advantages to being the first mover in these sorts of global markets. When you are first, you get scale very quickly, and with that comes economies that lower your transaction costs... it's pretty much a winner-take-all environment. The early entrants into these markets will in large part determine how they are shaped. And once an entity establishes a strong market position in this kind of global market, it is awful tough to overtake them." (Friedman, p. 387)

This is indeed what American companies are finding now that they are moving into Europe: it's too late to be market leader now -- they waited too long. (According to a report from the marketing research company International Data Corporation (IDC), American businesses are missing the boat in the international explosion of e-commerce. 70% of American e-commerce Websites sell less than 10% outside the U.S. -- http://www.galaxie.fr/news/2000053120.shtml).

European companies in the same market sectors are already well entrenched in these sectors. eBay will have a very tough time surpassing QXL in the online auction business in Europe, where QXL is leader. Amazon has an uphill battle against the FNAC in France for selling books and CDs. The lesson is to expand into international markets fast and take market share as quickly as possible.

"John Chambers of Cisco likes to say that the companies and countries who will thrive in this Internet economy are those who will grasp its importance first, and get wired before the rest of the world realizes that they have to change. If you do that faster than your competitors, says Chambers, there's only thing you'll have to say to them: 'Game over'." (p. 199)

The conclusion is that there is no way to avoid plugging in to the new online world order, as long as a business (or individual) wants to be successful and grow. And there is no sense in resisting tendencies this massive. Recently there was more fighting against globalization in the streets (in Prague, this time). There's no sense in fighting against either globalization or the Internet. They're coming, whether you want it or not. To be against either is like being "against the sunrise" -- you know the sun will be coming every day, there's not much you can do about it, and you learn to live with it. The real issue is to learn to use globalization to your advantage. Companies need to learn how to mobilize global clients through the Net. It isn't as hard as it looks, but a global perspective is definitely needed.

Oct., 2000

Written by Bill Dunlap, Managing Director
Global Reach
Tel./fax: 1/415/680-2423 (U.S.) or 888/942-6426 (toll-free)
+331/5301-0741 (Europe)
email: info@glreach.com
Web: http://glreach.com
Autoresponder: eng@glreach.com

Back to Article selection

Last revised on 30 Oct., 2000
URL: glreach.com/eng/ed/art/rep-eur22.php3