The Drivers of Globalisation - Term Paper Example

?International Management Table of Contents Introduction 3 The Drivers of Globalisation 4 Global Market Forces 5 Global Cost Drivers 5 Technological Forces 6 Political Forces 6 Potential Impact of Globalisation in the LDCs 7 Impact of Globalisation on the Small and Medium-Sized Enterprises (SMEs) in the LDCs 11 The Capabilities of Handling Opportunities and Challenges by the SMEs in LDCs 12 Critical Evaluation With Respect to Theories and Practices 13 Conclusion 14 References 16 Bibliography 20 Introduction Globalisation acts as an influential motivational factor in the present contemporary economic scenario of the global countries. The emergence of globalisation has rapidly transformed the political influences of governments towards the augmentation of industrialisation. According to the present rapidly growing scenario of the global business world, it has been frequently observed that the Least Developed Countries (LDCs) have also been contributing a substantial growth towards the global economy. The political scenarios of the LDCs can be observed to integrate effective decisions with regard to strengthening the economic stability through establishing different policies which tend to encourage industrialisation within the nations. Moreover, the immense support of the developed countries can also be taken into consideration for the augmenting economic position of the LDCs1. Emphasising upon the present impact of globalisation, the primary objective of this report is to focus on the significance of code of conducts to be adopted by the MNCs when entering into the LDCs. Moreover, the discussion of this report will also focus on demonstrating the present impact of globalisation and its major drivers. In addition, the report will also emphasise on the impact of globalisation which in turn also brings about trade liberalisation on competitiveness of the firms in LDCs and its impact on the SMEs within the respective business markets. From this perspective of the impact of globalisation on the SMEs in LDCs, the paper will further reveal the major opportunities and challenges that are formed due to the emerging situation of globalisation and trade liberalisation. The Drivers of Globalisation Figure: Four Major Driving Factors of Globalisation Source: (Kayode, 2012) Globalisation is primarily driven by its four major and initial drivers such as global market Forces, cost forces, political or macro-economic forces as well as technological forces2. Global Market Forces In relation to the present economic scenarios of the global countries, it can be observed that the LDCs have been experiencing an emerging growth in terms of augmenting their financial and liberalised position. Moreover, the remarkable potential of the global markets significantly tends to build an intensifying competitive scenario amid the Small and Medium-Sized (SME) marketers. In this context, it can be said that the emerging development of the business strategies, operational and management related processes have continuously been performing essential roles for the SMEs which further enable them to expand their business units in different global nations3. In addition, it can also be observed or evaluated that a substantial growth on demand is occurring which necessitates this group of marketers to develop their own networks in the global business environment. Global Cost Drivers Global cost forces can also be regarded as one of the major drivers of globalisation which can be observed in the present business environment. The organisations in the present business world tend to involve effective business strategies concerning products or services along with ensuring strict conformance in terms of quality to meet customers’ desires which enable the SMEs of the LDCs to augment the competition within their respective markets2. Moreover, it can recognised that reliable delivery of the products or services to the customers along with recognising the needs and the expectations of the potential customers have facilitated to reprioritise the cost factors of the SMEs which enable them to effectively drive their business operations. Technological Forces According to the scenario of emerging development of the modern business environment, the technological forces can be regarded as one of the major and effective drivers of globalisation. The rapid advancement of technology plays a vital role in the process of globalisation. In relation to the SMEs, the organisations tend to focus on executing their business activities through the involvement of advanced technological aspects which enable them to efficiently perform their range of business activities. In addition, the communication as well as transportation facilities have also enabled the SMEs to independently perform a superior role in the present business environment4. Therefore, numerous developments of the business processes involving communities as well as strengthening business efficiencies are a few of the major developing segments of the SMEs which can frequently be observed within the business process of the SMEs in the LDCs. Political Forces The political environment of the LDCs has also been identified to enhance the efficiencies of the SMEs through incorporating different beneficial policies and guiding principles of concerning organisations’ business performances. In relation to the present rapid development of the SMEs, it can be observed that the political alliance of the government concerning trade liberalisation, development of import and export activities along with providing liberal autonomy to the marketers have profoundly enabled to develop the business positions of the SMEs. In this similar context, the example of BRICS nations (Brazil, Russia, India, China and South Africa) can be taken into concern in terms of identifying the growth of the SMEs5. With this consideration, it can be stated that these countries have been experiencing a promising development in terms of their economic position due to the increasing positive influences because of globalisation within the various industrial fields. Potential Impact of Globalisation in the LDCs Globalisation is the catchword of the modern global economy which has been merely observed since the last few decades of the twentieth century. The countries in the past relied more on the liberalised position in the market economy. The emergence of globalisation has radically changed the overall economic position of the global countries including both developed and developing countries. This radical change of the global economy has taken place because of the integration of the domestic products and services, capital as well as labour markets into different foreign markets6. Moreover, the notion of globalisation has also facilitated in terms of diminishing trade barriers amid the global countries which further has enabled the countries to perform trade operations among the diverge number of countries. The development was also stimulated due to the effective support of information and technology within the business processes. The technological trend within globalisation has facilitated to rapidly transform the global organisations to reduce costs concerning trade as well as operations, which further has enabled the countries to achieve more internationalisation in terms of producing goods or providing any services to the other countries7;8. In the similar context, it can be critically evaluated a simultaneous development has also been observed in the LDCs. The rapid transformation of the resources as well as continuous trade operations with the developed countries have significantly played a major role for the LDCs in terms of acquiring continuous growth of their economic position. According to the observation of various researches, it has been observed that the current view of globalisation has tremendously been found to be quite effective especially for the LDCs to achieve cumulative economic development. Therefore, the potential impact of globalisation especially for the LDCs has been revealed in the following discussion. An increasing pace of globalisation has considerably been observed in a majority of LDCs in terms of improving trade operations and increasing import and export transactions of different resources, products and labourers as well as other economic factors with the developed countries. According to the present day context, it can frequently be observed that the LDCs are highly focused on strengthening their export capabilities as well as trade operations along with ensuring liberal market economies within the global business environment. Moreover, a majority of LDCs in the present business environment have extensively participated in the structural adjustment reform programmes which enable the countries to gain considerable extent of market shares in the global economy. Therefore, it can be identified that these countries have been experiencing continuous growth on the overall national income9. In relation to the initial phase of globalisation which had been observed during early 20th Century, the LDCs faced severe challenging environment in term of their capability of producing goods and delivering those products to the developed countries. This had taken place due to the inadequate level of basic infrastructure as well as a lack of human capital within the LDCs. The fundamental infrastructure comprises road and rail network, generation and distribution of power, water as well as ports and communication technologies10. However, the present scenario of the LDCs has been severely transformed through practicing trade among different countries, making proper utilisation of their resources along with ensuring the availability of adequate human capital which provide immense support to the global economy. Moreover, the transportation, power generation as well as water distribution facilities have also simultaneously been developing due to the increasing pace of globalisation11. Moreover, the expansion of global organisations in different geographical areas can also be regarded as a major supporting factor for the LDCs to acquire significant development with regard to the macro-economic conditions of the countries. In addition, the rapid pace of globalisation also enables the LDCs to achieve substantial benefits regarding economic insurgency through generating employment and developing infrastructure. In addition, the notion of globalisation is also encompasses the development of the transportation and telecommunication which further enables the LDCs to achieve economic growth. Impact of Globalisation on the Small and Medium-Sized Enterprises (SMEs) in the LDCs The Small and Medium-Sized Enterprises (SMEs) are apparently promoted by the increasing pace of the globalisation which has been observed especially in the LDCs. The continuous development of business operations, process development as well as increasing capacity of the SMEs are the major advantageous factors which have been observed due to globalisation. The emerging development of the globalisation drivers such as growing market forces, technological advancements as well as well-built governmental policies and guidelines have been influentially providing immense support for the SMEs in the LDCs to perform their range of business operations12. A major driver of globalisation i.e. market force is empowering the SMEs to develop their business strategies through encompassing managerial, financial as well as technological factors in terms of performing their business activities13. The LDCs are also observed to be currently the major targeting areas for the developed countries in terms of relocating their subsidiary divisions. According to the present business environment, it can frequently be observed that the leading manufacturing organisations tend to establish their production units in most number of LDCs to achieve adequate resources including raw materials and human capital among others. In this regard, the accessibility of adequate resources in the LDCs can be regarded as a major factor for the countries to attain substantial growth in this present globalised business environment14. Therefore, the SMEs in the LDCs are likely to face competitive position due to the emergence of globalisation within the respective countries. The Capabilities of Handling Opportunities and Challenges by the SMEs in LDCs According to the various observations, it has been found that the SMEs in the LDCs are frequently facing different challenges owing to the rapid transformation relating to globalisation and trade liberalisation. Significantly, the SMEs are likely to experience challenges to cope with the development of the global business environment in order to build long-term sustainability in the global business environment. Globalisation is the major trend which tends to shape the economic position of both the global and regional environments especially for the SMEs as has been observed mostly in the Asia-Pacific countries15. Therefore, it can be defined that there are two major events which are severely enabling to build effective business environment for the SMEs of LDCs to assess different challenges of globalisation. Firstly, the establishment of World Trade Organisation (WTO) as the administrative body of the global trading system and secondly the finalisation of multilateral trade negotiations in different LDCs across the world16. Critical Evaluation With Respect to Theories and Practices The notion of globalisation is continuously having an effect on the LDCs across the world. In relation to the aforesaid discussion, it has been found that globalisation simultaneously has been playing a major role in improving the economic condition of both the developed countries and LDCs as well. However, in various scenarios this notion has become a major debatable topic concerning its effects on the LDCs. In this regard, the discussion will proceed through reflecting upon various theories of globalisation which tend to define the actual affect of globalisation especially on the LDCs. According to the observation of Barbieri & Reuveny (2005), the LDCs tend to face different challenges including social insurgency and other similar constraints due to the affect of globalisation. The LDCs are observed to be quite less open to the world economy which likely to engender various unrest situations. The authors have also mentioned that the insurgencies in the LDCs take place because of the declining of economic openness within the LDCs17. Contextually, Robbins & Ferris (2003) have also mentioned that the LDCs are also affected by the exclusion trap of globalisation due to their less political and economic capabilities. In general, the LDCs have immature or undersized institutions and significantly include less capability of policy discussion at the global level18. Therefore, it can be critically evaluated that the fierce competition of the global countries concerning their political and economic stability significantly affects the LDCs to cope with the pace of globalisation. On the other hand, from the statement of Milanovic (2002), certain significant views concerning the affect of globalisation on the LDCs can be recognised. According to Milanovic, it has been observed that the LDCs are principally affected in two major ways through globalisation. The primary benefit of globalisation to the LDCs is that the notion has enabled them to increase their export activities through selling goods to a number of developed countries. In this regard, the LDCs are the key recipients of the foreign investment. In the same way, the increasing amount of export also facilitates the LDCs to achieve more financial support from the foreign investors19. Therefore, it can be stated from the aforesaid evaluation that globalisation tends to affect the development of the LDCs. Conclusion According to the above made discussion, it has been viewed that the emergence of globalisation is continually performing a crucial role for all the countries including developed, developing or underdeveloped nations. However, the notion of globalisation has also been criticised with regard to improving economic stability of the LDCs. With this concern, it can be stated that the present economic conditions of the LDCs are considerably becoming steadier than the financial position beforehand or in the initial phase of globalisation. The major drivers of globalisation such as market forces, technological advancements along with global cost forces are rapidly performing a major role for the LDCs to achieve substantial economic growth. Moreover, the governments’ considerations and initiatives concerning the development of business practices in the LDCs have also played a significant role to deal with the rapid pace of globalisation. In addition, the increasing challenges and opportunities of the SMEs in the LDCs have further been recognised to be a major factor for the countries to develop their financial position. Therefore, it can be stated that the emerging pace of globalisation is considerably playing a crucial part for the LDCs to strengthen their economic position along with providing a substantial support in the global economy. References Bauernfeind, M., Drivers of Globalization: Integration of Theories and Models, GRIN Verlag, 2006, p.3 Barbieri, K. & Reuveny, R., ‘Economic Globalization and Civil War’, Journal of Politics, Vol. 67, Iss. 4, 2005, p. 1228-1248. Bhagwati, J., In Defense of Globalization: With a New Afterword, Oxford University Press, 2007, p. 149. 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