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Posted on September 3rd, 2012, by

Thomas Friedman is the famous journalist and columnist of The New York Times, expert on Middle East processes, the Pulitzer Prize winner, the author of a book on globalization “The Lexus and the Olive Tree”¯ (1998) and of the notion of “golden arches’ world”¯ (by which Friedman has shown that countries where the network launched by McDonald’s is present, will never fight with each other).

“The World is Flat”¯ as a characteristic of the 21st century is not an accidental metaphor. This formulation was taken by Friedman from the expression of Indian information technology magnate and outsourcing king Nandan Nilekani, uttered in a conversation with Friedman and running that the playground has become smoother.

In his book “The World Is Flat”¯, Friedman presents the concept of a flat world, according to which the modern world has entered the third stage of globalization, which is fundamentally different from previous ones. According to Friedman, the uniqueness of the current situation is that with the development of modern technologies not only states and transnational corporations, but also separate individuals and small groups of people have been involved into the process of globalization.

The subsequent course of thought will be understood not only to those who read Baudrillard and Soros. The global field of activity is getting aligned. The digital era is determined by the digital way of thinking, it is not leading to it. The new coordinate system promises unlimited opportunities, providing everyone with an instant connection with everything. But at the same time, it turns out that the “open society”¯ gives the freedom and unties hands of those forces that cannot wait to wipe the very society off the face of the earth.

The era of electronic communication technology, satellite communication systems and fiber-optic networks has come. According to Friedman, the second half of the 20th century witnessed the birth of a truly global economy, where states and transnational corporations are no longer the key players in the game, though in practice they determine its rules and monitor game’s implementation.

As Thomas Friedman notes in his book “The World is Flat”¯, many people have mistakenly equaled the boom in Internet-based business with globalization, and when the bubble burst, the prices on services of telecommunication operators and data transfer services dramatically decreased, which in its turn led to the development of information technology, involving low-cost application of knowledge of Indian Bangalore, Chinese Dalian in the form of establishing call centers, systems outsourcing, opensoursing, Internet banking, electronic offshoring in India and China, i.e. web-3.0 technologies, based on the semantic Internet.

Identifying business strategies drawn by the flattening world

Friedman believes that the true uniqueness of the modern world, which can be also used for raising the effectiveness of economics and business, is that individuals and small groups of people for the first time in human history have the opportunity to collaborate and compete in the global marketplace as full-fledged producers and consumers of goods and services. These partners and competitors can enter the economic competition in all countries and all continents, creating new corporations or modifying the work of existing ones.

Internet and other communication technologies have made possible such cooperation in carrying out various activities claimed by modern civilization, which are implemented almost instantaneously across the planet. Thus, the whole planet can become a single industrial and business field, where standardized operating rules are acting. This is the basic meaning of the concept of the “flat world”¯, leveled by information technologies.

At the same time Friedman does not claim that the “flat world” will develop peacefully and lead to the disappearance of the former economic barriers. Now this process has affected half of the humanity in various degrees. But the second half of the humanity is so far standing on the sidelines, and its accession cannot be considered a historical inevitability. The majority of people in many countries still have not benefited from the “flattening”¯ of the world, and many of them even have a reason to believe that it works against their interests.

However, Friedman describes a number of major obstacles to the development of the “flat world”¯. First, it is the catastrophic poverty and diseases, affecting a significant part of the world’s population, which does not have a chance to improve its situation. Friedman sees the second obstacle in the presence of huge human masses living at the junction with the “flat world”¯ and feel its impact, but cannot take advantage of its benefits (e.g. the inhabitants of rural regions of India and China). The third difficulty is that the globalization of the economy has increased social stratification and the number of the unemployed in many Third World countries, creating mass disadvantage and inferiority complexes. However, these obstacles and difficulties could be applied for establishing business relations with the problematic layers of society and regions, which are considered to be a latent potential of the economics and an addition loophole for the further development of markets, being used as target points.

Flattening of the modern world is, according to Friedman, under the influence of a range of economic, political and social factors. Friedman identifies ten main causes of this process, which actually influence the further development of the business world and influence decision making process in identifying business strategies.

The first factor is the destruction of the Berlin Wall, which became a symbol of the irreversibility of the collapse of the socialist system and the victory of market economy on a global scale. This event is primarily associated with the democratization of Eastern Europe, but its consequences are far more serious and ambitious. The Wall’s collapse has stimulated capitalist reorientation of India, has strengthened the positions of advocates of economic liberalization in China and Latin America and weakened authoritarian and dictatorial regimes around the world. “Flattening of the Earth”¯ could not occur without the elimination of political and social obstacles that hinder this process; since that time, effective business strategies include global development of markets, usage of offshore zone schemes, etc.

The second factor is the production of Netscape Navigator in August 9, 1995, which was the first navigation system for Internet, suitable for mass usage. Later other effective browsers appeared, and by the end of 1990’s Internet has become a truly global information network that has virtually unlimited growth potential. Currently, company’s site and internet-availability is one of the most significant factors of its general economic success.

Integration of computer applications and creation of XML language is considered to be the third factor that should be taken into consideration. The use of this software ensures that sending and receiving computer can easily interpret the content of any messages without errors. As a result, computers connected to the World Wide Web provide co-operation of efforts of hundreds of millions of users.

This, in turn, stimulates the creation of a great number of new applications, which simply had no practical value before, but are now an effective potential for setting a high IT level of business. IT department development is ranked first in many global companies’ strategic planning and engineering.

The fourth factor is the birth of the movement for the creation of software with open code sources, published in Internet, so that everybody can not only use free software, but also modify and improve it in accordance with his own needs. As a result, there is a constantly renewed set of new programs, the range of authors of which is practically unlimited. In recent years, activists of the movement for open sources began to create not only computer programs, but also publicly accessible electronic databases, having great popularity. Being highly popular such resources are able to attract an enormous amount of customers and potential clients, as well as highly qualified professionals, which could be used for advertisement and headhunting activities.

The next strategically important factor is the unification of millions of people from different countries for the creation of intellectual products. The scope of this movement is growing rapidly, and it has become one of the most powerful factors of the world’s “flattening”¯. It has contributed much to one of the effective strategies lying in involving highly skilled and price-accessible programmers living in Third World countries and successfully delivering their products to the global information market.

Another business strategy, which could be drawn from the sixth economical factor defined by Friedman, is shifting of industries to China and other countries, characterized by the excess of labor force. This process accelerates the industrialization of developing countries and allows them to play an increasingly active role on the world economic scene. It also largely neutralizes the still existing trade barriers and, thereby, helps to create a single global economic space. It is essential that the most dynamic companies expand their geographical presence, not only for the sake of reducing costs and increasing profits, but also in order to develop new markets. In the conditions of the leveling world corporations can survive only by changing constantly and inventing new opportunities to offer consumers products and services that their competitors do not offer at all or provide them for a large fee.

The seventh factor is the emergence of giant trading companies, directly connecting producers and consumers (like Wal-Mart). The major practical meaning of this factor for business strategies’ construction is that such firms don’t need the services of wholesalers and other intermediaries, as they order and buy products themselves, deliver them to their destination and realize themselves through their own network. This facilitates and cheapens the transfer of goods on a global scale, and greatly contributes to the leveling of the world.

The eighth factor is the emergence of firms that specialize in quick delivery of small quantities of virtually all goods between any two points of the globe. These companies (e.g. UPS, DHL, etc.), first and foremost, address the needs of small and medium business, which requires a variety of transportation services to succeed in the global market. This allows the emergence of corporations, specializing in Internet commerce, such as Amazon and eBay; besides any company (independently of its orientation) can arrange its own Internet-shop, The volume of such trade, especially of private transactions between individuals, is growing so quickly that it has made a significant contribution to the economy.

The ninth factor is presented by Internet search engines, enabling to obtain quickly any inquiries through Internet together with the tenth factor, including the mass spread of wireless communications equipment and other high-technology innovations, accelerating the traffic of information flow. This equipment allows to work in online regime anytime, anywhere and, thus, provides Internet users and global companies with complete mobility, in this way increasing business productivity and speed of business transactions.

Conclusion

Thus, chances for success are not determined by citizenship and place of residence, but by education, abilities, perseverance, ingenuity, and access to global communication system. This situation radically changes the activity conditions of previously encountered companies, which have to either constantly readjust their strategies to the new competitive environment, or retreat and leave their business.

The World is Flat is the fundamental book for people, experiencing the third wave of globalization, where X-rays of the Americans are processed in China, and tax returns of the British – in India. Friedman draws a three-dimensional picture of the world and provides a clear explanation of how the economy of the 21st century is arranged and what benefits and threats are produced by the flat world for ordinary citizens, companies and entire countries. The author shares Friedman’s opinion, that indeed, the flat world’s platform, while it has the potential to homogenize, also has an even greater potential to nourish diversity to a degree that the world has never seen before.

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