Benefits and pitfalls of globalization for business - Essay Example

Anthony Mcgrew defined globalization as a “process of deterritorialization – as social, political and economic activities are increasingly stretched across the globe…” (n.d., “Ch.1: Globalization and global politics”). This comprehensive view gives a glimpse of the trend towards borderless economic societies of the future from the current nation-states based on political considerations. Given the vast differences among the different countries and their peoples in respect of socio-political and economic conditions, this trend gives rise to both promises and pitfalls for the global businesses.

Globalization benefits can be expected from cross-fertilization of ideas, access to best available talent/resources, creativity and technological growth arising out of global competition, creation of networks of alliances, etc. while pitfalls include uncertainty of political conditions and economic policies, impact on local industry and employment, fear of dominance etc. (Ali, 2006, pp.78-81, 141-143). Cross-fertilization of ideas occurs when firms come across different ways of solving a problem or completing tasks, which are more cost effective or in identifying newer opportunities and demands.

For example, housing shortage in poor countries can give rise to generation of fresh demand and exploitation of newer/locally available materials and methods of construction. Coming to talent, it is noted that many global firms employ foreign nationals at all levels of organizations recognizing merit. Again, global firms like Procter & Gamble compete at global level through heavy investment in R&D and this in turn creates new technologies and products. Networking is another beneficial aspect of globalization by which global firms and local suppliers join hands to create value for customers.

Global firms face uncertainty when political changes occur which may impact international agreements apart from operations. Stability of government policies on investments, employment, profit repatriation etc. is essential for a business to thrive. Competitive politics give rise to issues like job losses, exploitation, dominance, interference etc. Further, events in one country or a region will quickly impact business prospects of global firms in many other countries. For example, the recent downturn in the US economy is impacting firms across Europe and Asia.

Given the above analysis, governments, businesses and organizations like WTO are working towards co-operation among nations by promoting democratic governments that respect international laws and strive for the economic prosperity of their citizens. This means that global businesses take on the responsibility of actively promoting local industry, skills and employment to create a win-win situation. Q.2: Address to shareholders Dear Shareholders, In the competitive world of business, we have to constantly strategize our operations and our decision to invest in Franistan eight years ago was based on sound economic and business principles.

That the decision was right is seen in the nearly 19% reduction in cost of manufacture of our products and the more than corresponding increase in the net profits over the last five years. As per our corporate policy, your