Definition of regionalisation

Though multinational enterprises (MNEs) and other firms have been encouraged to adopt global strategies for a number of years, in practice, most firms do not operate globally, in the sense of conducting business in each major region of the world - the EU, North America and Asia.

Instead they effectively adopt regional or local strategies – a process known as regionalisation.

To explain this process, firms start off competing in their own country, many stop there.  Others go onto export and then set up foreign operations. Most firms start off with nearby countries, for Canadian firms the U.S. is a natural place to go.

The next stage of growth is typically to expand within the region the home country is part of due to trade agreements and physical/cultural proximity.  After becoming a regional player some firms do adopt global strategies, research suggests that for even global firms their home region still remains the most important.

For example, the world's 500 largest firms, measured by revenues and/or assets, have averaged 77% of their sales and 81% of their assets in their home region over the last 10 years.

Only a handful of these firms - over 20 per cent - have significant operations in each of the three broad regions.  Despite globalisation rhetoric, business is actually largely regional.

Though Walmart is the world’s largest firm, by revenues, its North American operations represent the lion’s share of its activities.  Europe is an interesting case for Walmart; the company does have some substantial operations in the U.K. through its acquisition of Asda, however it pulled out of Germany in 2006 leaving it essentially in only one European country.  It also operates in China, Japan and India but this is the extent of its operations in Asia.  Certainly, Walmart is a world leader in terms of size, but it operates in less than 20 countries.  [1]