Leading in the Global Business Environment

Abstract

Worldwide cross-cultural trade is not a transitory phenomenon. Throughout human history, people have exchanged goods and services from one person or group to another. Gradually, currency was introduced as a standardized means of payment to provide a better guarantee on the transfer of goods and services. Buyers and sellers met each other in a physical place which was later called the market. Even in early history, trade was not limited to people within a tribe or to certain locations. There is evidence for ancient long-range trade routes and the development of cross-cultural trade networks with people in distant lands. Sumerians in Mesopotamia traded with other civilizations; Phoenicians travelled across the Mediterranean Sea and a trade route called the Silk Road emerged between Europe and Asia. There was also a trade route for the transfer of amber (the Amber Road) from coastal areas of the Baltic Sea to the Mediterranean, and also a route for the transfer of salt (the Salt Road). The Greeks, Romans and Vikings expanded trade across Europe as well as into Asia. In the sixteenth century, the Portuguese intensified long-distance trade and explored new trade routes to the East Indies as well as landing in America. In the seventeenth century, the Dutch Republic dominated trade in the East Indies. The Dutch East India Company (in Dutch: Verenigde Oost-Indische Compagnie), one of the world’s first multinational companies, flourished at that time but went bankrupt in 1799. The British gradually took over control of early global trade in the eighteenth century. In the same period, authors started to write on global trade and so helped further encourage cross-cultural trade. In 1776, Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations, and in 1817, David Ricardo and other authors showed that free trade would benefit the industrially weak as well as the strong. Two countries would gain from trade between each other, even if one were more efficient in all aspects. In the nineteenth century, the invention of machines and the birth of industrialization propelled the rise of national and international trade. This development is sometimes referred to as the starting point of globalization. Global markets in brand name packaged goods started to emerge. For example, twenty years after its introduction in 1886, Coca-Cola was marketed in the USA, Canada, Britain, Cuba, and Mexico; in the early twentieth century it was bottled in 27 countries and sold in 78. Other multinational companies followed, such as Remington (typewriters), Nestle (condensed milk/baby food), Lever Brothers (soap), Siemens (electrical equipment), and Singer (sewing machines). The gold standard and colonialism encouraged a number of commercial banks to develop networks of overseas branches. The range of global products and services continued to grow in the early twentieth century until a major economic recession, the Great Depression, caused a collapse of trade in 1929, followed by the outbreak of World War II in 1939. From 1950 until today, trade has been rapidly increasing, although it has been predominantly taking place between developed countries. Consequently, cross-cultural business was limited to between Western countries. However, the second half of the twentieth century showed a rise of globalizing Asian companies bringing trade to a global level and intensifying cross-cultural business contact. Today’s business is characterized by an increased interconnectedness of business and social relations. As a result, the impact of culture on organizations and individuals has increased dramatically.