Globalization is the key feature of the new competitive landscape within which the M&A frenzy is taking place. It is important to bear in mind; however, that globalization is a trend and not necessarily an already extant condition. As Guillén (2001) points out, many unsubstantiated and sweeping claims have been made about globalization, and we should treat these with caution. In particular, globalization is not spreading evenly across the globe and have some general knowledge it is more evident in certain areas of activity than in others Secondly, most cross-border integration, through both investment and trade, is actually focused on regional trade blocks Nonetheless, whatever the exact spread of globalization or the balance between global and regional business, its connection with the rapidly growing trend of cross-border M&A remains essentially the same. We shall therefore use the term 'globalization' to refer to the trend towards cross-border economic and technological integration.
Globalization has been applied in a variety of ways to describe how the traditional divisions between world markets based on culture and taste are observed to be in decline as communications have improved, and as national trade barriers have been steadily falling through the activities of the World Trade Organization and regional agreements. Globalization is taking place through the international expansion of markets, through the impact of new communication technologies, and through growing economic interdependence with the liberalization of revenue, capital, and trade flows across borders. Globalization is therefore associated in many people's minds with a growing convergence in economic systems, cultures, and management practices as point out, globalization can be defined in terms of different levels of focus. At a worldwide level, it refers to a growing economic interdependence among countries that is reflected in increasing cross-border flows of goods, services, capital, and know-how.
At the second level, globalization refers to the interlink ages a specific country has with the rest of the world, or the extent to which the competitive position of companies within a specific industry is interdependent with that of companies in other countries. The third level is that of an individual company. Here, globalization refers to the extent to which a company has expanded its revenue and asset base across countries and engages in cross-border flows of capital, goods, and know about general knowledge across subsidiaries. The expansion of its revenue and asset base through international M&A increases the globalization of the acquiring company. To maintain a leadership position in any one developed country a business increasingly has to attain and hold leadership positions in all developed countries world-wide. It has to be able to do research, to design, to develop, to engineer and to manufacture in any part of the developed world, and to export from any developed country to any other.
It has to go transnational. Today, this transnational imperative extends beyond developing countries to encompass the emerging markets of transition and developing countries. Given this strategic requirement and the time pressures to achieve it quickly, acquisitions often appear more attractive than arm's-length arrangements for purposes of strategic positioning and synergy capture. The homogenization of markets, and advances in IT support, are also expected to facilitate problems of managing the larger units created by M&A. International acquisitions are therefore seen to be inevitable in order to respond to the increasingly powerful drivers of globalization. These are market drivers, cost drivers, competitive drivers, and government drivers.
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