THE PROS AND CONS OF GLOBALISATION TO BUSINESSES Essay Example

  • Category:
    Management
  • Document type:
    Essay
  • Level:
    Undergraduate
  • Page:
    3
  • Words:
    1754

Student:

In the 21st century, the world has become more interconnected through efficient communication and movement of people, goods and services across different regions and continents. Enhanced communication and movement of people, services and goods is essentially the most significant impact of globalization on human civilization thus far[ CITATION Ste112 l 1033 ]. However, business managers are presented with new and unique opportunities and challenges that require innovative and informed decisions to achieve growth, competitiveness and sustainability of their enterprises[ CITATION Sve01 l 1033 ]. Indeed, globalization has negative and positive implication for businesses and their management that ought to be considered during any strategy formulation or implementation process. For example, regional integration efforts in different parts of the world have opened up previously inaccessible markets for business leading to increased competition and productivity[ CITATION Bon14 l 1033 ]. This paper will detail an insightful analysis of several advantages and disadvantages of globalization, particularly to businesses and their management.

Globalization has opened up and expanded markets for both small and big businesses. Due to improved communication and movement of people and products, businesses can reach a wider market without minimal geographical limitation[ CITATION Ber10 l 1033 ]. For example, top managers at headquarters of multinational such as Coca-Cola Company, Apple Inc, Microsoft and Nike can remotely monitor production in Asia or Africa and sales in different parts of the world efficiently. Small businesses can also interact with potential and existing customers in different parts of the world to sell and expand their businesses. This has been made possible by high-speed internet connectivity, mobile telephony and improvement of sea, land and air travel[ CITATION Ron07 l 1033 ]. Trade between businesses has also been improved by the Bretton woods monetary system that uses the dollar as the primary pegging currency in the world. Businesses can, therefore, trade efficiently with a globally accepted monetary system[ CITATION Wag05 l 1033 ]. Governments have also been on the forefront in accelerating globalization by forming trading blocks and removing trade barriers between countries. Such efforts have led to expanded markets for business in most regions of the world[ CITATION Ber10 l 1033 ]. Business managers have to position their enterprises appropriately to take advantage of expanded markets and the unique opportunities offered by globalisation.

Globalisation has improved flow of technological knowhow from advanced economies to emerging and developing economies[ CITATION Bon14 l 1033 ]. Chinese, Indian and Brazilian companies have particularly benefited from flow of technology from mainly western countries. For example, companies such as IBM, Apple, Microsoft, Motorola, Nike, Adidas and several more have in the past few decades established manufacturing concerns in Asian countries to access cheap labour and new markets. Domestic industries in Asian and Latin American countries have acquired massive technological knowhow that has led to emergence of fully sufficient companies such as Tata, Mahindra and Lenovo that can compete at a global level. Indeed, globalisation has played a pivotal role in the growth of Chinese, Japanese and Brazilian economies[ CITATION Hit12 l 1033 ]. Business managers must always seek to gain new information, technology and market insights in order to compete and innovate according to global needs and opportunities.

Globalisation has made it easy for businesses to access cheap labour and other production inputs. Multinational companies operating at a global level can offshore their production efforts to countries that offer incentives such as low taxes, cheap electricity and labour[ CITATION Eli01 l 1033 ]. Low production costs make it possible for companies to compete effectively in globally competitive environment. It is also sensible to locate manufacturing activities closer to sources of cheap raw materials in order to limit wastage and costs within the value chain. The growth of internet and efficient broadband communication has enabled accessibility to cheap services such as customer care outsourcing, software development, digital marketing and others. Such services are accessed cheaply than they would have costed in domestic markets where they are required[ CITATION Ste112 l 1033 ]. It is important, therefore, that business managers are aware of cost-cutting opportunities that globalisation delivers for businesses in the modern world.

Despite the notable benefits brought about by globalisation, there are several negative implications of globalisation on business all over the world[ CITATION Ste112 l 1033 ].

In some parts of the world, globalisation has been blamed for exploitative practices such as child labour. In Bangladesh and Vietnam, several multinational apparel companies have come under sharp criticism for allowing underage people to work in their facilities. Child labour is in most cases cheap and accompanied by other social problems such as demands for sex from supervisors. This makes child labour a very serious social problem emanating from exploitative business practices. There have also been reports of multinational companies paying way too low wages to employees in third world countries in order to keep production costs low. Lowly paid workers also labour in slave-like conditions where they offer longer hours with heavy workloads. Such exploitative practices are a negative implication of rapid globalisation that affects mainly third world countries with poor regulatory frameworks[ CITATION Haq15 l 1033 ]. It is important that globally respected brands do not engage in such practices in order to protect their reputation in the market.

Due to globalisation, world economies are more connected and interdependent of each other now more that any other time in history. During the 2008 global financial crisis and the Euro-zone debt crisis, most global economies in regions as far as Asia, Africa and Latin America experienced slow growth and disruption of business cycles. This shows that businesses are exposed to external economic vulnerabilities that may affect their strategic plans. Currency fluctuations also have a significant impact particularly on business that involved directly in importation or exportation of goods or services. For example, the Chinese government has been accused on several occasions by the U.S. government of devaluing its currency to favour its exporting industries[ CITATION Ros15 l 1033 ]. The Australian motor vehicle production industry has been performing poorly over the recent past, partly due to a strong national currency that favours car importers (Toner 2013). There is a need, therefore, for business managers to develop and review strategic plans in accordance with prevailing and predictable future economic changes at a global level.

As markets expand for business due to globalisation, some vulnerable domestic industries are exposed to intense, harmful competition that often leads to their collapse. There has been intense lobbying by farmers and business leaders in countries such as Australia, France and South Africa to have measures such as tariffs and quotas in place to protect vulnerable industries[ CITATION Bon14 l 1033 ]. In Australia, the government has been blamed in the past for allowing cheap clothes and cars from Asian markets that have better technology and high economies of scale that offer them an advantage over Australian businesses (Toner, 2013). Indeed, the World Trade Organisation has been blamed for advancing the agenda of industrialised nations at the expense of third world countries in a rapidly globalising world (Inman, 2013). It is vital that business managers understand the full impact of opened up markets and competition at a global level.

There has been increased proliferation of crimes of financial nature involving global cartels. Cyber crime is a major risk factor for businesses such as Amazon, Ebay and Alibaba that rely on the internet to access customers and collect payment for goods. Several insurance companies and banks have also lost vital client data due to cyber crime. In addition, popular global brands such as Gucci, Adidas, Sony and Samsung have experienced loss of business due to counterfeiting of their brands by unscrupulous businesses. Such fraudulent cases lead to huge financial losses that are not easy to prevent due to different legal regimes and law enforcement capacity across different parts of the world[ CITATION Wil15 l 1033 ]. Business managers should plan appropriately for global risks that may affect their profitability.

From the evidence present so far, it is clear that globalisation has resulted in several benefits for businesses in the modern global context. Business can access larger markets with minimal trade and physical limitations. There is increased flow of technology and information across different industries and countries in the world. It is also possible to access cheap labour, better technology and less costly low materials for cost effective production. However, businesses are also faced with several disadvantages due to globalisation. For example, some multinationals have been accused of engaging in exploitative practices such as child labour and operating slave-like production facilities. Global economies are also more interconnected and vulnerable to shocks that may affect businesses. Globalisation has also opened up competition that may affect vulnerable industries particularly in developing worlds. Finally, globalisation exposes business to various risks such as data theft, financial frauds and brand counterfeiting. Clearly, business managers should be familiar with both positive and negative impacts of globalisation in order to develop appropriate strategic plans for their companies.

References

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