In a major trading nation such as the United Kingdom, few companies can afford to ignore the international dimensions of their marketplace. For several decades now large multinational corporations, mostly from North America and Europe such as Ford, Shell, BP, Texaco, Unilever and Coca Cola, have established operations on a worldwide basis, often taking with them their own management styles and business attitudes. In recent years these have been joined by a number of major Japanese companies, mostly in electronics and motor vehicle manufacture, such as Nissan, Sony, Honda, JVC and Toyota. The Japanese have established production facilities as well as marketing and distribution operations overseas, both in the USA and in Europe.
Other international influences, especially on British companies, include the changing and developing nature of the European Union (EU), which, with its movement towards free trade, is slowly but surely increasing the competition in UK domestic markets as well as in the EU itself. On the other hand the EU is also increasing opportunities for combinations of European companies to work together in joint ventures, such as aircraft development (such as Airbus Industrie, Panavia). Nowadays, the costs of many industrial developments are so high that individual businesses cannot undertake them on their own. Aircraft development and production is one such industry, and in addition to mainly European joint ventures, such as the European Airbus (civil airliners) and Euro fighter (military), there are growing collaborative ventures with other nations. For example, McDonnell Douglas in the United States collaborates with British Aerospace in the design and manufacture of military aircraft such as the British Harrier jump-jet.
Such agreements not only enable development and manufacturing costs to be shared, but also provide market entry opportunities for the leading partner. The pay-off for the receiving company (or nation) includes:
- The creation of jobs in high technology areas
- An influx of valuable technical and systems know-how
- The prospect of either earning foreign currency, or engaging in barter-type deals (especially where the business or state corporation concerned has something valuable to bargain with, e.g. oil, minerals and fresh foodstuffs)
- The prospect of building on the experience of operating large-scale collaborative projects to developing a national industry
Even a company as large and powerful as BP (British Petroleum plc), which is the third largest oil producer in the world, cannot undertake safely on its own all the development projects that it perceives as contributing to its global competitive advantage. Thus it looks for joint ventures, perhaps through part- ownership, perhaps by means of a collaborative project, to further its work in various parts of the world. For example, BP Exploration, one of its three core businesses, obtained such agreements in nations as diverse as the USA, Colombia, Vietnam and Papua New Guinea.
Another important development in the world economy is taking place in the so called Pacific Basin, where relatively undeveloped nations such as South Korea, Taiwan and Malaysia are joining their smaller but experienced rivals from Hong Kong and Singapore to supply high quality goods at very competitive prices to the Western nations. Such goods range from ships and motor cars to electrical goods and clothing. Together with Japan, such a grouping provides a major challenge to the UK and its European neighbors, as well as to the other major world economic grouping the North Americas (the United States, Canada and Mexico). The nations of the Pacific Basin have shown themselves capable of manufacturing goods to the highest of standards and at a lower level of costs than their counterparts in Europe and North America. They have thus become an attractive prospect for Western firms wanting to share production costs and development risks, whilst gaining possible new markets. Since most of the goods manufactured in that area are exported to developed nations, there is considerable benefit to the host nation in terms of overseas earnings and/ or preferential trade deals.
Finally, there are the activities of businesses, which, while not international conglomerates, are major international companies in their own right, such as British Airways, Singapore Airlines, Cunard and TWA. The activities of such companies are as much constrained by national politics as they are by competitive pressures. However, due to the enormous increase in demand for air travel, airline businesses, in particular, are beginning to benefit from a reduction in controls by national governments all over the world. Deregulation, or the so-called ‘open skies’ policy, is gradually being extended from the USA and UK domestic markets to Europe as a whole (via the EU). It is likely that this process will continue apace, enabling airlines to compete freely on routes, both regional and international. Because of the costs and sheer scale of global air transport operations, there is a growing trend towards mergers and joint agreements between -existing carriers. British Airways, for example, already has global alliances with US Air, Qantas, TAT European Airlines and Deutsche BA, which are intended to provide a ‘network fit’ in which route structures complement each other. Such alliances enable the participants to gain access to routes and/ or markets which are at present denied to them -because of current restrictions imposed by the nations concerned. Other benefits include access to development finance and a share in a larger market. Deutsche BA, formed by British Airways and a consortium of German banks, purchased Delta Air, a niche carrier, principally serving a local business market until linking up with British Airways, the world’s leading international air passenger carrier. Following the purchase, Delta’s fleet expanded significantly, staff numbers doubled in 12 months and passenger numbers rose from under 700,000 to over one million in less than two years.
