British Telecommunications and the Drivers of Globalization

Globalization is a phenomenon most often discussed among economists. Most of us have often heard that business is no longer restrained by political or cultural boundaries. Multinational Enterprises (MNEs) expand with little regards of geographical or cultural distance among their target markets. All decisions within a company are made with the additional consideration of how the international world will affect the results of that decision, a factor that most businesses ignored in some earlier decades.

As indicated above, discussions about globalization are mostly about its effects toward the business environment, rather than its causes. Companies are more interested toward how a phenomenon will affect their financial conditions rather than where or what the phenomenon is actually coming form. Within this paper however, I will discuss several drivers of globalization. The drivers will be taken from various perspectives about globalization. To provide more connection to the international business environment, we will use the British Telecom, one of the most successful MNEs in the global communication industry, as a reference to help define and justify the drivers of globalization.

Furthermore, this paper will discuss the view of whether MNEs are actually competing globally or only regionally. There are arguments among scholars that the global economy do not actually existed. Globalization has taken us through national boundaries but it stopped in regional limits. In other terms, MNEs are not actually operating with global factors within their considerations, but rather regional factors. This view will be examined as we discuss the development of British Telecom.

I. Literature Review

II.1Corporations as Principle Drivers

According to Ron Blackwell (2002), corporations are the principle drivers of globalization. In the process of increasing their market share, corporations found that they need to expand further that their national boundaries allowed. While rapidly internationalizing their operations, most corporations fundamentally altered their structure and strategies, boosting the change of their national economy into a more globalize economy.

This phenomena might not be observable in the US or European soil, because the process of corporations breaking through national boundaries have occurred several decades ago. However, the phenomenons are still happening today within the Asian and other developing economies. Economist have long predicted that Asia will be the center of massive economic growth in the near future, and the prophecy is fulfilled as China and India are increasingly integrated to the global economy.

II.2Political, Technological and Social Conditions

III.2.1 Market Oriented-Policies

Beside the principle factor mentioned above, many arguments brought forward other causes of globalization. One of the popular ones is the influence of market-oriented policies. In China for example, the change of governmental policies regarding foreign investment and trade was the greatest factor that supported growth of the economy. Several decades ago, China was a country considered to have a ‘closed economy’. Today, the country is the largest recipient of the world’s Foreign Direct Investment and recognized as the most potential market in Asia (Diaz, 2001).

III.2.2 Communication and Transportation Technology

Technological changes have also contributed to the process of turning the world into a single global economy. The internet spawned the e-commerce, which displayed a tremendous increase in its role in business and trade. As people in modern countries crave the ease of trade provided by the internet, the growth of e-commerce is predicted to last indefinitely. Furthermore, advanced transportation equipment also has a significant role in accelerating the globalization process.

II.2.3   Global Phenomena

Social conditions that supported globalization process consist of several important phenomena. One of those phenomena is the end of the cold war. The reduction of conflicts causes competitive environment for business development and population growth. It was recorded that the number of people on the planet is more than doubled since the 1960’s (Kohl, 2000). Both the reduction of conflicts and the increasing population created more economic, social and environmental linkages, which in the end, spawned globalization. Further analysis and identification of the drivers of globalization will be performed using the British Telecom plc.

II. British Telecommunications

III.1    Corporate Background

British Telecommunication Plc is responsible for approximately 25 million telephone lines in the United Kingdom. The company is an international corporation which own and runs most of the telephone exchanges, trunk network and local loop connections for the vast majority of British fixed line telephones. The company, British Telecom is formed in 1981 and has developed itself into five large business divisions today, they are: BT Retail, BT Wholesale, Openreach, BT Global Services, BT Exact/One IT. The divisions provide communication services ranging from retailing telecoms to consumers to research & development and consultancy.

There are several reasons why the observation on British Telecom is connected to the study of globalization and considered interesting by many. First, the UK telecommunication market was among the first telecommunication market that was deregulated in the early 1980’s. Several of the most influential regulatory innovations, like the price cap regulation was also developed and first implemented in UK telecommunications. Second, the British telecom was the first communication company in the world that was privatized in the early 1980’s. Third, because the UK market was the first to be exposed to public interference, communication within the industry is ten years ahead of other European countries.

III.2 Corporate Internationalization

III.2.1 Role of Government Policy

According to the theories mentioned in the second chapter, there are several drivers of globalization with different emphasize on their significance. Generally, economists acknowledge that companies are the strongest driver of globalization and its processes. Despite the fact that this statement might be true for most MNE’s, regarding the British Telecom, I found that governmental policies are the most influential factor comparatively.

Before its privatization in 1984, the British Telecom was granted the right for a monopoly over the fixed line network operations. This boosted the development of the company long enough to provide itself with strong infrastructure to face competitions. Having a major early start at the game, since its privatization, the company has been known as one of the strongest companies in UK. Government monopoly policies which then followed by the market oriented policies helped brought the company to its current position as a market leader in communication (Summanen, 2002).

II.2.2   The Role of Corporate Expansion

The second largest factor, which I believe was the effort within the corporation itself, came in some time after the company was privatized. In 1993, the company announced a joint global alliance through a new joint venture company. This new company is considered as the bridge which leads British Telecom into leading the global telecommunications operator. In order to expand the business by obtaining multinational clients, BT formed and acquired stakes of several joint venture companies overseas. Some of them were Albacom in Italy, Viag Interkom in Germany, Telenordia in Sweden, Dacom in Korea, etc. All of this was performed after there is a leadership change from Sir George Jefferson to Sir Iain Vallance as chairman of the group. This displayed the tremendous role of managerial decisions in the process of BT’s internationalization (Summanen, 2002).

II.2.3   Role of Technology and Social Factors

The changing culture and the increasingly rapid growth of the economy boosted telecommunication business. The 2001residential fixed telephone volumes were recorded to double as much as it was in 1996. Within the same period, local call volumes decreased and national and international call volumes increased. Furthermore, the role of technology in the development of British Telecom can be observed through the statistics also. From 1997 to 2001, calls to mobiles have been recorder to increase tremendously. This increase continues until today (Summanen, 2002).

II.2.4   Competing Globally

In terms of strategic market share, the British Telecom displayed a global approach throughout its lines of business. BT’s overseas activity targets were set to various markets in the world, divided into three segments: the North America market, the Mainland Europe market and the Asia-Pacific region. In North America, the company partnered with MCI to support growth. The largest focus is still in its home market and the mainland Europe using its core brands and the market Asia-Pacific region is still being developed (Sumanen, 2002).

Bibliography

Blackwell, Ron. 2005. ‘Hearing before the US-China Economi ad Security Review Commission Regarding Corporate Globalization Strategies China and the Future of Globalization’.

Diaz-Bonilla, E and S Robinson eds. 2001. ‘Shaping Globalization for Poverty Alleviation and Food Security’. 2020 Vision Focus * Washington, D.C

Kohl, R and K, Orourke. 2000. ‘Whats new About Globalization: Implications for Income Inequality in Developing Countries’ Paper for Organizations for Economic Cooperation and Development Conference on’ Poverty and Income Inequality in Developing Countries’ Paris.

Summanen, Tuamo. 2002. ‘British Telecom: Searching for a Winning Strategy’. Available at: msl1.mit.edu/CMI/furd_2002_a/btcase.pdf