How the rise of the `Born Global best be explained? Illustrate your answer relevant examples. Introduction Most global companies, such as Microsoft, Apple, Sony and Mercedes grew big in their domestic markets before they emerged overseas and became global. For some companies this is ideal, but for others they have to go global from they start up. This essay will explain and examine the rise of born global firms. This essay is divided into four different sections. The first will give an introduction of born global phenomenon.
Subsequently the next section will examine the rise of born global firms. Furthermore the characteristics and constraints with born global firms will be presented. The final section of this answer will then discuss and conclude the role of born global phenomenon in a global market. Throughout this essay a number of examples will be provided to back up and explain the findings. Born global firms Most companies that deal and work globally follow the same sequence of internationalisation.
Often these companies start with developing their domestic market and then enter the domestic market with exporting their product. If their international sales increase, these companies progressively market and production in these domestic markets. There is however some firms that are going global before they have gone through various stages of development, these are called born global (Gillespie, Jeannet & Hennessey, 2011). The concept of born global was first used in Australia in the early 90’s (McKinsey & Co. , 1993).
Madsen & Servai (1997) defines global firms as: ”firms that seek to derive significant advantages from the use of resources or from the sales of outputs to multiple countries/continents right from their legal birth”. The model of born global has much in common with the internationalisation of SME’s. The born global firms are in able to apply a unique mix of orientations and strategies to succeed in international markets (Onkvisit & Shaw, 2009). An example of a typical born global firm are Logitech, which was founded by a Italian and a Swiss citizen, they were also ater joined by a Italian third member. Although Logitech is a Swiss based firm the manufacturing and engineering process of the products are located in the US, Europe and Far East, their research and development are situated in Silicon Valley (Deese, 2010). Logitech is now one of the worlds leading PC mouse manufacturers, operating in 100 countries worldwide (Gillespie, Jeannet & Hennessey, 2011). The rise of born global firms The born global phenomenon is an artifact of a new global market.
The possibility of this phenomenon can be linked to the globalisation and the development in technology (Cavusgil, & Knight, 2009). Could it be possible for firms to be born global before the late 19th century? During the modern era of globalisation and advances in the technology, changes in the global environment has allowed firms to go global and internationalise themselves within the first year of start up (Oviatt and McDougall, 1994). The rise of the born global is much because of the globalisation.
Today’s world is “smaller” than 30 years ago, borders have opened up and there is no restrains if a product is sold in another part of the world, manufacturing technology, shipping opportunities, regulations in tariffs and trade have also played in an important role in the rise of born global. Some of the main drivers of globalisation have been the reduction of barriers to trade, advances in technology, growth in the financial market, industrialisation and modernisation worldwide, free trade to India, China and former Soviet countries.
These key drivers have contributed to globalisation, which has opened the possibility for born global firms (Cavusgil, & Knight, 2009). Because of the significant change in the environmental conditions to creating a new firm it has become much easier to start a global firm. The firms is often specialise in order to be competitive, that meaning that they enter a niche market and are going global to increase the size of their market. Advances in technology regarding production, shipping, transportation and communication have been crucial for the rise of born global firms.
This generations entrepreneurs have more international experience and knowledge about foreign market than previous, this they have obtain from studies and working abroad. Global networking have also been a key factor to born global firms rise, it wouldn’t be possible to start a global firm without having a somewhat global network to use, this again brings us back to advances in communication which have made it easier to build a global network (Cavusgil, & Knight, 2009). Networking is one of the distinguishing traits of a born global entrepreneur.
By building relationships with key persons and potential partners this can help born global firms with gaining access to key complementary assets. Networking is a key factor for internationalisation for companies, due to governance structure, licensing, franchising, co-sharing or the lack of resources to control own assets this is necessary for born global firms (Oviatt & McDougall, 1994). Motives and characteristics of born global firms Born global are often created by entrepreneurs who have a strong international view and these firms have a number of characteristic in common with each other.
These firms have recognized that their product is likely to have a shorter life cycle and therefore causing them to adopt an international perspective regardless of their age and size (Ohmae, 1990) Born global firms costumers are located worldwide and their competition is international, this especially is the case for high-tech start-ups (Gillespie, Jeannet & Hennessey, 2011). Within a few years most born global firms have begun to export their product or services (Cavusgil, & Knight, 2009).
Many born global firms are able to create a sustainable competitive advantage based on innovation (Dana et al, 2008). Amazon, E-bay and Yahoo are good examples of born global firms, which have adapted an innovative business model and have used IT as a tool to promote their E-commerce business (Salazae & Sawyer, 2007). Many of the firms are operating in dozens of countries worldwide (Cavusgil, & Knight, 2009). Oviatt and McDougall (1995) identify some main characteristics that successful born global firms share.
A born global firm must have a clear global vision from the beginning. Managers of a born global firm must have international experience and have a understanding of exchange rates risks, communication and cultural differences. Furthermore, a born global must have a strong international business network as previously explained. Born global must have ha superior technology or marketing strategy in order to overcome the economic handicap that they are likely to have when entering an international market, and with having continual innovation allows the firm to fully exploit the niche market.
Subsequently with having a strong top management team the firm can coordinate the research and development, manufacturing, marketing or sales from wherever they are located in the world (Oviatt & McDougall, 1995). Born global firms face many restraints especially the smaller ones. Lack of finances, lack of financial knowledge and aversion to risk taking are just some of the restrains. However, these restrains can be solved through alliances with suppliers and manufacturers and partnership (Onkvisit & Shaw, 2009).
Born global firms usually have limited resources in the sense of finances, employees and other tangible resources. Born global firms are highly active within international market from they start up, they have limited resources, although often in technological based markets they are found in most industries, often emphasizes superior quality (Cavusgil, & Knight, 2009). An example of this is born global firms in Denmark where they can be found in many different sectors, including industries as metal fabrication, processed food, consumer product and furniture (Madsen & Servai, 1997).
Conclusion Most firms that choose to be born global show a niche market approach and choose to be born global because their domestic market is to small or there is much greater potential for them at a global market. Emerging markets provides born global firms with great opportunities for born global firms that have founders that holds the characteristics that are presented above, with possibly strong network being one of the most important ones. For a firm to choose to be born global the entrepreneur must understand the risks involved.
In order for the business to be successful the firm must be superior in either the product or the marketing process as the firm have restrains. Most born global firms have rather limited finances and therefore it can be hard to compete with large international corporations who already are in the market. The born global phenomenon has been influenced by the globalisation in the late 19th century and there are a number of factors that have had great influence in the rise of the phenomenon.
Advances in the technology, shipping, transportation and communication have been crucial for the rise of born global. References Cavushil, S. & Knight, G. , 2009. Born Global Firms: A New International Enterprise, 1st edition, Business expert press, New York Dana, L. , Welpe, I. , Han, M & Ratten. , Handbook of Research on European Business and Entrepreneurship, 1st edition, Edward Elgar, Cheltenham Deese, W. , 2010, Small & Meium-Sized Enterprises: Characteristics and Performance. U. S. International Trade Commission, No 332-510
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