University of Vaasa - Vaasan yliopisto

What is a Global Business Organization (GBO)?
A trans-national corporation (TNC) or multi-national corporation (MNC) is not
necessarily a GBO. UNCTAD has published annual World Investment Reports since
1991, many of which review TNC activities and impacts (UNCTAD 1992, 1993,
1994, 1995, 1997, 2002, 2005, 2007, 2008). UNCTAD’s TNC data is frequently
referenced in the literature, notably the SCOPE program (van Tulder et al, 2001).
UNCTAD uses three indicators of internationalization: foreign sales as a percentage
of total sales; foreign assets as a percentage of total assets; and foreign employment
as a percentage of total employment. Each of these ratios requires that a TNC has a
“home” or “domestic” market. However a GBO has no such “home” or domicile:
rather its operations are spread globally.
Experience in a domestic marketplace is significant for a TNC or MNC, as they can
use the business practices, standards, ethics and policies of their “home” country as
benchmarks or reference points as it expands into new countries or regions. However
in a GBO that is created through (a series of) mergers or acquisitions may find that
the “home” country experiences of its predecessor companies are inappropriate or
inadequate and need to be replaced by a global program: examples of this include
ArcelorMittal which was created from two distinctly different MNCs (with two
different “home” cultures) in the steel industry (ArcelorMittal, 2007) or the
contemporary BP (BP, 2009) which was created through the acquisition of three US
oil & gas companies by a British oil & gas company. Similarly, an organization that
starts its life as a global (rather than domestic) business also needs a global approach
to sustainability management and cannot use any home, or regionally specific
standards or behaviours as reference points. An example of this is Schlumberger
(Schlumberger, 2009) the oilfield services company that merged a number of familyowned
activities, located in different countries into a single holding company
registered in the Netherland Antilles’ in 1956 and established (and still maintains)
headquarters in both Houston and Paris.
There are a small number of existing GBO definitions in the literature. Redding
(2006) uses a definition based on distribution of revenue. This GBO definition is
reasonably precise: accounting standards for calculation and reporting of revenue are
well established, and data is normally audited. However revenue is not the only
indicator of globalized activity or organizational culture. For example, de la Torre et.
al. (2001) take a very different approach: GBOs are defined as those that treat the
world as a single market. This definition suggests that a GBO has a global business
chain although de la Torre (2001) limits this to the customer portion of the chain,
which is an important feature. However it is important to note that GBOs are not
necessarily large, as size may be correlated with, but is not equal to a global presence.
But de la Torre (2001) offers no quantitative criteria that can provide a test of
globalization, and the definition is not therefore adequate for empirical research or
comparative work. The MIT Sloan School of Management (2005) defines a GBO as
an organization with international sales (i.e. business), but which does not
necessarily coordinate work globally: it is small but offers its products or services
worldwide. This implies that the GBO is less ‘global’ than a multinational
corporation (MNC), and contradicts other available definitions.
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