Global Business

Related Terms: Globalization

Global business refers to international trade whereas a global business is a company doing business across the world. The exchange of goods over great distances goes back a very long time. Anthropologists have already established long-distance trading in Europe in the Stone Age. Sea-borne trading was commonplace in many regions of the world in times predating Greek civilization. Such trade, of course, was not by definition "global" but had the same characteristics. In the 16th century all of the continents came to be routinely linked by ocean-based communications. Trading activity in the modern sense rapidly followed at the beginning of the 17th century; it might be more accurate to say that it "returned" again because trading of such character had taken place in Roman times as well.

It is not intended here to discuss another and related subject covered separately in this volume: globalization. Globalization is a long-standing program advocated by the economically advanced nations to free up international trade across the globe through treaties. It has also come to mean the relocation of production or service activities to places that have much lower labor costs. Global business in the past—or currently—does not require what advocates of globalization seek, namely a so-called level playing field. International trade has always had a mixed character in which national organizations and private enterprises have both participated, in which monopolies have been imposed, frequently defended by armed forces, in which all manner of restraints and tariffs have been common and participants have made all sorts of efforts to counter such interference or to profit from it.

GLOBAL ENTERPRISES

Fernand Braudel, a prominent historian of commerce, describes early trading with distant points around the globe—from Europe to the Americas and from Europe to India and Asia—in what then was still called Christendom, as speculative ventures funded by high-interest loans from patrons: traders had to pay back double the money they borrowed; failure to pay the money back—unless they had been shipwrecked—meant a period of slavery until the debt was satisfied. Very high profits could be achieved trading in spices and silk with the "Indies"; such profits justified the risks. In parallel with such private trading, government-sponsored ventures also took to the oceans; they became the dominant form of international trade shortly before and all through the period of colonialism. Thus Spain exploited its discoveries in South America by shipping gold and silver from America to Europe—thus setting off a great inflationary period. Global enterprise, thus, in the modern sense, began to develop during the Age of Discovery. It was instrumental in stimulating colonialism. Single merchants or groups of explorers went forth and came back with treasures. Government-sponsored consortia, the early global businesses, followed in the adventurers' wake.

The two earliest global companies, both government chartered, were the British East India Company begun in 1600 and the Dutch East India Company, established in 1602. Both have now passed into history. The British company dissolved in 1874, but in its nearly 300-year history it had launched and for a long period had practically run the British Empire. The Dutch company was dissolved in 1798 after nearly 200 years of operations in Asia, India, Sri Lanka, and Africa. But the Hudson Bay Company, another British-founded monopoly to exploit the North American fur trade, was established in 1670 and is still going—so much so that Canadians explain that the company's initials stand for "Here Before Christ." HBC has long since ceased to be a global monopoly and is known today in Canada as a department store.

Early global companies were usually state-chartered trading companies. The Danes, the French, and the Swedes all had East India companies. Japan established companies known as the sogo shosha (for "general trading company") in the 19th century. Japan had tried and failed to preserve its isolation. When it opened itself to the world, it channeled trade through these ventures. Great trading companies were and continue to be important in transportation as well; operating shipping supports their activities. A contemporary American example is the privately held Cargill Corporation which trades internationally in agricultural, food, pharmaceutical, and financial products.

Commodity-based international corporations emerged in the 19th century with oil. The first global oil company was Standard Oil, founded by John D. Rockefeller. That honor was held by others since, including Exxon Corporation and Royal Dutch/Shell Group until, in the mid-2000s, Saudi Arabia's Aramco became Number 1. Major companies in turn emerged in chemicals and in artificial fibers, in automobiles, in aircraft manufacturing, and then in virtually every industry in the second part of the 20th century.

Multinationals

The term "multinationals" came into currency during the same time to designate corporations that operated in at least two different countries—but the actual use of the label applies to corporations that have a global presence. The term is used in a neutral sense simply to indicate very large size and participation in global markets. A more negative connotation of the term is that such corporations are effectively beyond the full reach of national laws because they have a presence in many locations, can move money and resources around at will, can sometimes escape taxation, and thus represent a power beyond public control.

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