International
Verizon
Drivers of globalization can essentially be separated into five different groups. The first is technological drivers. Technology has shaped and set the groundwork for modern globalization. Enhancement in the transportation technology revolutionized the world. The most important developments among these were the commercial jet aircraft and the notion of containerization in the late 1970s and 1980s. Inventions in the area of microprocessors and telecommunications have facilitated highly effective computing and communication at a low-cost level. Finally the rapid growth of the Internet is the latest technological force that has created global e-business and e-commerce. The next group is that of political drivers. Liberalized trading rules and deregulated markets often lead to lowered tariffs which allow foreign direct investments all over the world. The institution of GATT (General Agreement on Tariffs and Trade) 1947 and the WTO (World Trade Organization) 1995 as well as the continuing opening and privatization in Eastern Europe are some examples of latest developments. The next group is market drivers. As domestic markets have become more and more inundated, the opportunities for growth are limited and global increasing is a way most organizations choose to overcome this position. Ordinary customer needs and the opportunity to use global marketing channels and transfer marketing to some extent are also enticements to choose internationalization. The next group is cost drivers. Sourcing effectiveness and costs vary from country to country and global firms can often take advantage of this fact. Other cost factors of globalization are the opportunities to build global scale economies along with the high product development costs. The last group is competitive drivers. With the global market, global inter-firm opposition increases and organizations are forced to play international. Strong interdependences among countries and high two way trades also support this driver (Bauernfeind, 2005).
In the case of Verizon, their major drivers of globalization include technological, market and competitive forces. There is technological advancement that occurs every day and as long as there is something new people will want to buy it. Verizon has an advantage in many markets when it comes to telephony because there are many markets in which it does not yet exist. These are the places that tend to be very profitable for the first few who tap the market. One the market figures out that they need the product that one is selling then this also has a tremendous force on how it sells in that particular market.
Today business is critically affected by the economic, social, legal, technological and political factors. These factors all together form a business environment. Business environment is the sum of all external forces put together, which affect the organization and operations of business. The environment of an organization has got internal, operational and general aspects that managers must be aware of. These three environmental levels and their relationship along with their importance are vital to a business success. The term business environment entails those external forces, factors and institutions that are outside the control of individual business organizations and their management and affect the business as a whole. It involves all external forces within which a business enterprise controls. Business environment pressures the functioning of the business system. Business environment is often thought to be the total of all the conditions and forces which are outside the business and are beyond the individual business unit, but yet operates within it. These forces are customer, creditors, competitors, government, socio-cultural organizations, and political party’s national and international organizations. Some of those forces affect the business openly while others have a roundabout effect on the business. Business environment is often classified into three major categories:
Internal environment
Operational environment
General/external environment
Both internal and operational environment are the formation of the enterprise itself. The factors of external or common environment are broad in scope and least prohibited and influenced by the management of the venture (Jain, Trehan and Trehan, 2007).
Verizon being in the telecommunications business is always affected by legal forces and in many cases political ones as well. One example is the fact that foreign investment restrictions are precluding Verizon Canada from making direct network investments and offering new services in Canada; the company has said in a submission to the federal government’s consultation on foreign ownership rules in the telecommunications sector. Verizon Canada, which operates under the American communications giant Verizon Inc., supports removing the restrictions on foreign direct investment, saying that the change would establish more competition and encourage innovation (Fournier, 2010).
The global market for telecommunications is increasing quickly. It is not a question of demand pull or supply push anymore as both are happening. The relationship between these two forces has made telecommunications one of the most important growth sectors in the world economy. It has also made telecommunication companies like Verizon one of the most important components in social, cultural and political activities around the world.
On the demand side, growth is pulled by an increasing reliance on telecommunications and information technology in every area of human life, in all sectors of economic and social activity; in government, in the provision of public services, and in the management of public infrastructures; in the pursuit of knowledge and the expression of culture; in the control of the environment; and in response to emergencies, whether natural or man-made.
On the supply side, growth is affected by quick technological developments which are continuously improving the efficiency of existing products, systems and services, and offer the groundwork for a continuing stream of innovations in each of these areas. Particularly of interest is the union of telecommunication, information, broadcasting and publishing technologies, which have greatly improved the communication choices accessible to consumers (Trends and developments in the telecommunication environment, 2004).
In the framework of business, the environment refers to the sum of internal and external forces that work on an organization. Managers must recognize the elements, harshness and impact of these forces upon the organization. They must be able to identify, evaluate and react to the forces generated by the external environment. These forces are usually beyond the control of an organization and its managers. As a result, the factors of the environment have to be measured as inputs in the planning and forecasting models that are developed by an organization (Jain, Trehan and Trehan, 2007).
It is possible that some large organizations themselves comprise a greater part of the business environment. An organization often functions within the larger framework of the external environment that shapes its opportunities and causes threats to the organization. The external environment is a set of difficult, rapidly changing and significant interacting institutions and forces that pressure an organization’s capability to serve its customers. External forces are not limited by an organization, but they may be influenced or affected by that organization. It is vital for organizations to understand the environmental circumstances because they interact with strategy options. The external environment has a chief impact on the willpower of marketing decisions. Triumphant organizations examine their external environment so that they can react profitably to unmet needs and trends that are in the targeted markets (Jain, Trehan and Trehan, 2007).
Verizon is exposed to various types of market risk in their normal course of business, including the impact of interest rate changes, foreign currency exchange rate fluctuations, changes in investment, equity and commodity prices and changes in corporate tax rates. They utilize risk management strategies, which often include the use of a variety of derived including cross currency swaps, foreign currency and prepaid forwards and collars, interest rate and product swap agreements and interest rate locks. They do not hold derivative for trading reasons. It is their general policy to enter into interest rate, foreign currency and other derivative transactions only to the extent necessary to achieve our desired objectives in limiting our exposure to various market risks. Their goals include preserving a mix of fixed and variable rate debt to lesser borrowing costs within reasonable risk limits and to protect against earnings and cash flow instability resulting from changes in market circumstances. They do not evade their market risk exposure in a manner that would totally eliminate the effect of changes in interest rates and foreign exchange rates on earnings. Companies do not anticipate that their net income, liquidity and cash flows will be significantly affected by these risk management strategies (Management’s Discussion and Analysis of Financial Condition and Results of Operations, 2009).
Internally, an organization can be looked at as a resource adaptation machine that takes inputs such as labor, money, materials and equipment from the external environment like the world outside the boundaries of the organization, and converts them into useful products, goods, and services, that are then made available to customers as outputs. The organization must constantly monitor and adapt to the environment if it is to stay alive and flourish. Conflict in the environment may have deep threats or new opportunities. The triumphant organization will recognize, assess, and respond to a variety of opportunities and threats in its environment (Jain, Trehan and Trehan, 2007).
Labor influences vary from labor quality, quantity, labor unions, labor markets labor mobility and minorities. All these affect the international market differently. The quantity and quality of labor force are of great importance in the international business due to the profitability, efficacy and competition the employers should uphold and depict. Many countries want to purchase labor as cheaply as possible and also maximizing on the quality. Consequently, factors such as adaptability especially to new environments, managerial skills, ability to learn new things, and knowledge are highly considered when hiring candidates (Ball, 2006).
Labor quality can be termed as education, skills, and attitudes of potential employees which vary with regions and countries. It’s an essential aspect and component to be considered in the planning stage. It should be considered to ensure that the right skill level is available to conduct business gainfully. In developing and poverty stricken areas where education and globalization lacks, labor quality suffer. Labor value leads to the importance of labor quantity. Labor quantity is the number of potential employees available who posses the necessary skills to be efficient and productive. Labor quantity is an aspect of international business that can have either positive or negative influence. Lack of information on labor quantity leaves international business without a competitive edge and paying high wages to the only available skilled workers (Ball, 2006).
Countries with high numbers of educated and qualified employees hire qualified and skilled people at lower wages. For countries with limited number of qualified employees, companies are forced to pay higher wages to employ qualified employees. Discrepancies in labor amount highly influence and determine the production counts, management levels, wage scales and effect training cost. In international business quality and quantity of labor should be considered when determining how competitive and profitable the business will become in the market. Labor mobility refers to the transfer of educated and qualified workers from one country to another in search of employment in a flourishing economy. It consists of position change of employees across a set of jobs and also physical space. It allows improvement of economic conditions of the workers if they live in an environment that does not match their skills (Ball, 2006).
When the telecommunications industry branches out into the global world they are often affected by the socio cultural forces that are brought about by the cultural differences that often exist in foreign markets. A company must be prepared to deal with the differences in the way that they do business and in the products and services that they offer up for sale. Cultural differences can affect the products that are being sold as well as the employees that a company employees in their day-to-day operations.
Political and legal forces include the outcomes of elections, legislation, and court judgments, as well as the decisions provided by various commissions and agencies. The political segment of the environment presents actual and possible restriction on the way an organization functions. Among the most significant government actions are: regulation, taxation, expenditure, takeover and privatization. The distinctions among local, national, and international subsectors of the political environment are often quite spectacular. Political instability in some areas makes the very form of government subject to revolutionary changes (Aswathappa, 2008).
In addition the basic system of government and the laws the system spreads, the political environment might contain such issues as monitoring government policy toward income tax, relative influence of unions, and policies concerning utilization of natural resources.
Political activity may also have important impacts on three additional governmental functions influencing a firm’s external environment in things like:
Supplier function – Government decisions in regards to creation and accessibility of private businesses to government-owned natural possessions and national stockpiles of agricultural products will deeply affect the viability of some firm’s strategies.
Customer function – Government claim for products and services can create, sustain, enhance, or eliminate many market chances.
Competitor function – The government can operate as an almost unbeatable competitor in the marketplace, therefore, knowledge of government strategies can help a firm to stay away from unfavorable arguments with government as a competitor (Aswathappa, 2008).
There are many instances where Verizon is affected by the rules and regulations that are set down by the countries in which they are trying to do business. An example of this is the fact that Verizon Business, a unit of U.S. communications service provider Verizon Communications, has applied for a license to provide international long-distance services in India. The move reflects Verizon’s recognition of the growth potential of Asian markets, Verizon Business said Wednesday (Ribeiro, 2007).
References
Aswathappa, K. (2008). International Business. Delhi: McGraw Hill.
Ball, Donald A. (2006). International business: the challenge of global competition. Columbus:
McGraw-Hill.
Bauernfeind, Markus. (2005). Drivers of Globalization: Integration of Theories and Models.
Retrieved August 16, 2010, from Web site: http://www.grin.com/e-book/57026/drivers-
of-globalization-integration-of-theories-and-models
Fournier, Karen. (2010). Verizon calls for removal of telecom foreign ownership restrictions.
Retrieved from Wire Report Web site: http://thewirereport.ca/reports/content/11133-
verizon_calls_for_removal_of_telecom_foreign_ownership_restrictions
Jain, TR., Trehan, Mukesh and Trehan, Ranju. (2007).Business Environment. Delhi: V.K. India
Enterprises.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(2009). Retrieved August 16, 2010, from Verizon Web site:
http://investor.verizon.com/financial/annual/2009/mda06.html
Ribeiro, John. (2007). Verizon enters India’s long distance market. Retrieved August 16, 2010,
from Info World Web site: http://www.infoworld.com/t/communication-and-collaboration/verizon-enters-indias-long-distance-market-385
Trends and developments in the telecommunication environment. (2004). Retrieved August 16,
2010, from International Telecommunication Union Web site:
http://www.itu.int/aboutitu/strategic_plans/99-03/trends.html
