MN7181 - People and Organisations: Principles and Practice in Global Contexts - 8

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What is Globalization?

“Globalization is the free movement of goods, services, and people across the world in a seamless and integrated manner”.

Looking at the definition from a different perspective, globalization can also mean that countries liberalize their import protocols and welcome foreign investments into sectors that are mainstays of its economy.

Looking at it from another perspective, globalization could also meant that countries liberalize their visa rules and procedures so as to permit the free floe of people from country to country. Moreover, globalization results in freeing up the unproductive sectors to investment and the productive sectors to export related activities resulting in a win-win situation for the economies of the world.

Introduction to Globalization

Globalization has made the world one big global village. Goods that were available in one part of the world now can be found across the globe. Because of globalization the economies of the world are being increasingly integrated, example mobile phones and internet have brought people closer.

Globalization through global communications, global markets and global production have promoted and facilitated by a fourth area of global activity in relation to money. E.g, the American dollar, the Japanese yen, Euro and other major national currencies circulate globally. They are being used anywhere on the earth and moving electronically and via air transport anywhere in effectively no time. Most bankcards can extract cash in local currency from thousands of ATMs’ across the world. Also credit cards like Visa, MasterCard and American Express can be used for payments in almost every country in the globe (Scholte A, 2000)

People can move from one country to another, trade restrictions are reducing, domestic markets are opening up for foreign investments, telecommunications are better established and the countries that are leading the innovations are passing on their technologies to other countries in need (Kulkami A, 2009)

Positive & Negative effects of Globalization

Positive Effects

Global Market

The impact of globalization on business management is seen by the sudden increase of number of transaction across the borders. In protecting yields and maintaining competitiveness, businesses are continuing to develop a wide range of their footprint as it lowers costs and enjoys economies of scale (Shah A, 2009).

Multinational corporations is a result of globalization. They occupy a central role within the process of globalization as evidenced through global foreign direct investment inflows. Their concentrations within Europe in Western economies has led to size constraints, therefore there is a need for a new geographical areas to operate whereby they will face a lot of competition in the market. Through this they will enlarge their market and enjoy economies of scale as globalization facilities time space compression, economies compete at all levels including that of attracting investors (Smith A and Omar M, 2005).

Foreign Trade
World trade organizations emerged as a powerful international organization capable effectively influencing individual governements to follow international trade rules, copy rights and policies on subsidies, taxes and tariffs. Nations cannot break rules without facing economic consequences (Piaseck R and Wolnicki M, 2004).

Foreign Investment
Managers might favour international diversififcation because it reduces firm specific risk or adds to their prestige. These goals might be of little interest to shareholders. THis divergence of interests between shareholders and managers, might reduce the valu of multinationals relative to domestic firms (Saudagaran M, 2002)

 Negative Effects

Job Insecurity
Globalization has led to exploitation of labor. Safety standards are ignored to produce cheap goods. "In practice, however, the recent experience in Latin America has been that many such open-handed multinationals moved their operations to, for example, China or South EastAsia because of cost and market considerations" (Piaseck R and Wolnicki M, 2004).

Unemployment
Globalization is a blame to world's employment situation though it brought some jobs opportunities. Despite the fact that it brought job opportunities to the global but it is still a blame to the current situation. "It's true that global economic integration and increased travel have resulted in increased competitiveness at the national and enterprise levels, forcing producers to find ways to cut costs, improve efficiency, and raise productivity" (Kigundu N. 2002)

Outsourcing Work
Foreign workforce offers cheaper labor for many service-related positions, but the control of quality of service, shipping expenses and time delays can have hidden costs. A company considering outsourcing a service needs to look at all related expenses and possible problems form having it done overseas. Shipping products overseas, delays in information or financial reporting can reduce any financial savings.
Service jobs, such as information technology, manufacturing, education, accounting and software development are being lost in developing countries, such as the United States and Europe, to lower paying emerging countries, such as India, and China. Outsourcing work that was an internal function may help minimize company expenses. However, the quality of the work can suffer and potentially create more expenses because of the language barriers.

References:

https://www.managementstudyguide.com/what-is-globalization.htm

UKEssays. November 2013. Positive and negative effects of Globalization. [online]. Available from: https://www.ukessays.com/essays/economics/positive-and-negative-effects-of-globalisation-for-business-economics-essay.php?vref=1 [Accessed 30 September 2018].

https://www.marketing91.com/what-is-globalization/

https://bizfluent.com/info-8589864-negative-effects-globalization-companies.html

Image 1: https://hubpages.com/politics/Globalization-in-the-Philippines