Affected Globalization on Small Businesses - Essay Example

How Globalization Affect Small Businesses? Introduction Globalization can be described as a process through which organizations or businesses are influenced by foreign businesses, ideas or organizations and they make changes to start operating in an international standard. A small business is a business that is privately owned and has a small number of employees. Globally, globalization ahs affected the operation of many small businesses as they have made the m to change their operations and venture into markets (Go?gl, Hans-Joachim & Clemens 67). This paper examines how globalization affects small businesses. Background of Globalization Globalization can be defined as a process of moving goods, people and ideas due to the increased trading and economic activities which is greatly affected by economic integration of different countries. Globalization is a tool that is used by many countries to control economic power. It was used to influence policies, expand trade and gain economic advantage over other countries and organizations. Globalization is traced back to the First World War where super countries applied it to harness their communication and have access link to transport to different parts of the world with an economic motive. The first instance of globalization was directed by the super power to have access over India. Trade was a major link that the super power countries could access their political and economical goals; therefore they used various theories which later resulted to globalization. Countries considering themselves as superpowers were very much engrossed during the world war, but they introduced various policies within their boundaries to protect their interest while they pursue other interest which did not directly affect their country. An example is that some countries sanctioned the importation of manufactured products. This encouraged the Great Britain to expand its market by taking advantage of the situation where countries sanctioned the importation of their manufactured products by liberalizing its trade to increase its economic production while the war was being fought. After the war, many countries introduced trade tariffs which were aimed at restoring domestic industries and economic production and this highly affected other parts of the world resulting to the process of globalization (Shuman 150). Globalization In the Past and Today Globalization in the pasts was known as the anti-globalism period because of the wars which were surrounding its era. The first face is traced during the Napoleonic wars to the First World War. It was characterized by international trade, financial flow and migrations of different races to areas where they considered havens. The trade during this era was high compared to the output that was being produced in the world by different countries. Global integration was promoted during this era because of the lowering of trade tariffs and transport cost. Transport cost was significantly reduced because of the railroad and roads being constructed on different parts of the continent. In the past, globalization was also characterized by different policies like the sanctioning of Corn Laws in Britain. Countries put in place a trade liberalization trend which was highly geared towards improving economic activities in the region. The current globalization is characterized by policies from developed and developing economies which support the process of globalization itself. The industrial sector has greatly improved because of the presence of skilled labor obtained from educated workforce. New technologies have also promoted globalization in the current eras they linked transport and communication as individuals living in this century are able to access vital information and communication. ICT trends within the continent have promoted and made globalization easier as it has led to the cost of accessing information and communication globally. Moreover, globalization during this contemporary society prides itself of a globalised workforce which makes it possible for numerous production processes to be performed remotely. In addition, intra-firm or cross border collaboration has been increased leading to the production of new and different products without difficulties (Lerner, Joshua & Antoinette 77). Pros and Cons of How Globalization Affect Small Businesses The economic success of a country is determined by the type of activities taking place within the region. Small businesses are crucial in determining the economic position of a country as they form major source of revenue for the government. However, Globalization has diverse effects on small businesses globally. Pros of Globalization over Small Businesses Globalization has promoted small businesses to compete in an international scale. This is because small businesses are equipped to fight and compete in markets where only big businesses are known to succeed. Most big businesses are associated to trade in international markets, but by the advent of globalization, small businesses are able to expand into big business or introduce unique products that big businesses can not produce, thus allowing them to compete in international markets (Thomas). Small business also benefits from the process of globalizations as it has opened opportunities for a wider global audience. Before the process of globalization, small business could not expand their target market as they were limited with techniques and resources. This led them to conduct their businesses within their geographical scope, hence limiting their potential to expand to other regions (Murphy 56). Globalization linked domestic market to international market enabling small businesses to sell their products both internally ad externally. Moreover, integrating international and domestic markets led to the expansion of small business as they increased their profit margins. Most small businesses did not have overseas contacts and business partners, but the globalization process allowed this as it broadened the communication process between continents and in the process removing communication barriers hindering small businesses from communicating and acquiring contacts overseas. Overseas markets served as better grounds where smalls business could search for opportunities like raw materials, marketing strategies and industry knowledge on the type of products to produce for a specific target market. In addition, overseas contacts helped small businesses to acquire new technologies which were cost efficient and reliable in producing different kinds of products(Cooper). Cons of Globalization over Small Businesses Smalls businesses are negatively affected by globalization as it has negatively reduced their profit margins. It has opened doors for many small businesses to go international as they are able to acquire new products and produce other products which are being produced by big businesses. This implies that for small businesses to succeed, they have to lower or make their product prices affordable to majority of their targeted population. This limits their profit margins as they encounter competition from both small and large businesses alike. Globalization has also promoted the use of internet and with it comes along e-business which is done through the internet. Outsourcing has rendered many small businesses irrelevant because most sellers who are considered as small scale business men are using the internet to market their products in both domestic and international market. Small businesses are finding it difficult to compete with e-business because of the target audience who are mostly targeted by e-business via the internet. Their opportunities of reaching their target audience are limited compared to the e-business that easily access their target audiences via the internet. Therefore, the demand of products produced by small businesses is shifted to e-business (Vernon, Heidi & Lawrence 125). Globalization also affects small businesses negatively a it has largely promoted the creation of jobs. This affects the small businesses which majorly rely on unemployed individuals to conduct various small trading activities. When small businesses lack human resource to conduct the different activities of trading, then the sector is negatively affected as activities can not be accurately conducted (Dess, 89). Conclusion In conclusion, globalization is a continuous process as result of the technological changes and trends being introduced into the market. Globalization has advanced over time and the present globalization is different form the past globalization due to the changes that has happened within the environment and to technology. Globalization has been of great significance to small businesses as it had rendered with other alternatives to focus into international market by helping in removing barriers which were there in the past like communication and distance. Works Cited Go?gl, Hans-Joachim, and Clemens Schedler. Big Strategies for Small Business: Exceptional Projects in Europe. Basingstoke: Palgrave Macmillan, 2009. Print. Dess, Gregory G. Strategic Management: Text and Cases. New York: McGraw-Hill/Irwin, 2012. Print. Vernon, Heidi, and Lawrence H. Wortzel. Strategic Management in the Global Economy. New York: John Wiley, 1997. Print. Cooper, Cary L. Leadership and Management in the 21st Century: Business Challenges of the Future. Oxford: Oxford University Press, 2005. Print. Murphy, Paul B. Corporate Compliance Institute, 2005. New York, NY: Practising Law Institute, 2005. Print. Thomas, Adelle Dawn. An Integrated View Multiple Stressors and Small Tourism Enterprises in the Bahamas. Thesis (Ph. D.)--Rutgers University, 2012, 2012. . Lerner, Joshua, and Antoinette Schoar. International Differences in Entrepreneurship. Chicago: University of Chicago Press, 2010. Print. Shuman, Michael. The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition. San Francisco: Berrett-Koehler, 2006. Internet resource. Read More