Global Business Environment - Term Paper Example

Global Business Environment Introduction Globalisation is a very complex phenomenon. It is a synthetic expression of a large variety of social, economic, and technological factors. Its notion of impact and measurement is not universal, but vary according to specific interests. In other context, globalisation can be understood as the process whereby social systems and local economies are experiencing a rapid rise in their reciprocal interdependence and sphere of action (Marina, Lewis & Hugo, 2009). However, the globalisation process is both a result of the increasing business activities of multinational corporations and a result of their increasing stronger international affirmation. Although global organisation operations are intense in the developed nations, the developing nations have also been impacted in one way. Amid the globalisation and diversification of production, the benefit of business activities that are carried out abroad has increased rapidly than even domestic markets (David, Joakim & Richard, 2008).Therefore, the essay evaluates the advantages and disadvantages of globalization for business. Advantages of Globalisation for Business Today wave of globalisation that began immediately after World War II has moved businesses and entire world economy to a state of interdependence, and it enabled it through making possible expansion of investment and trade across the national borders. Multinational companies that are always referred as borderless organisations have played a key role in accelerating the pace of world economic interdependence and integration by expanding their businesses (Wallerstein, 2009). Globalisation has led to the dismantling of national barriers and the breakdown of barriers to the flow of goods, capital, services, ideas and people, and the explosion in the volume, complexity and variety of those flows. In addition, it has led to increasing uniformity and standardisation among businesses, the growing homogenisation of infrastructure, policy, and ideas to conform to the global platforms(Wallerstein, 2009). For most of the business organisation, globalisation means an opportunity of taking advantage of scale, and exploiting synergistic benefits, as well as benefiting from the geographical merits and the market power advantages. However, according to the scale economy theory, the average cost per unit goes down as the amount of goods and services that are provided increases. Growth and expansion abroad of the business are the key strengths to getting the benefits of scale, hence achieving important cost reduction for the cost of a production unit, sales system costs, and the supply costs incurred. In this manner, there is an intensification of the stages of exploiting the outcomes of the development and research activity while innovations are being promoted at the same time(Bernard, Redding & Schott, 2007). In addition, the businesses also have new possibilities of reducing prices, by means that companies continue to maintain its competitiveness. However, the reduction of the costs can be critically analysed by use of experience curve. The experience curve reveals decreasing unit costs along with rising of output (Bernard, Redding & Schott, 2007). The economy range involves minimising the unit cost due to selling of a variety of products, and the advantages are recorded along the logistic chain. In case of a range of products extension, business avoid a negative phenomenon of the lower standards of quality. Use of the merits of range can appear in the case of new markets that have been conquered or in such case; production is diversified, when the global corporation takes advantage of the company experience in other global markets. However, these synergistic effects might happen because of the relationships with suppliers, customers, or the foreign technology partners. Globalisation provided opportunities to businesses, and at the same time poses threats as it shall be discussed. Opportunities resulted from potential scale economies, accessing bigger markets, and exposure to the technology and best practice management. However, according to heterogeneous models of the firm, advantages are likely to be available to most productive, while the least productive most likely to be vulnerable to disadvantages (David, Joakim& Richard, 2008). The multi-dimensional impact and nature of globalisation is perceived as a system of outputs and inputs. However, the inputs are the international agreements that are reached in order to bring down the international trade barriers and to ensure the free movement of capital and other factors of production across borders. The major outputs of the globalisation transformation stages include economic integration, factor mobility, bicultural identities, and interdependence, the spreading of the consumption culture, and cultural confusion (World Trade Report, 2008). Globalisation has provided advantages to the business organisation that include their network and the international production system. Business organisations are seeking to maximise fully the opportunities that are offered by the existence of given factors of production that can be exploited advantageously in different nations. However, due to the potential, they have a high level of flexibility, which enables easy change of strategies or modification. In general, globalisation provides a transnational organisation the opportunity of focusing towards most profitable business activities, with a best development trend in future (Parker, 2005). Another advantage of globalisation in business is competition between organisations that resulted in an advanced technological revolution. The development of technology and technique laid strong foundations for a new form of protection, both fair and competitive, taking into account the environmental protection, the safety, and health of consumers. The large corporations have also had to establish worldwide standards for protection of the environment in order to avoid obstacles imposed by the regulatory requirements in other nations (Bernard, Redding & Schott, 2007). Disadvantages of Globalisation for Business Globalisation has led to conditions that threaten to propel a pandemic all over the world. It has brought a challenge for the businesses, and they should understand how to prepare for a likelihood of increased pandemics. However, there is no clear precedent as to how the pandemics might affect modern globalised society, but it is possible to identify broad areas that business can be affected. First, the direct impact on the human resources as the business staff are quarantined at their residents or become ill or they can be stranded by the transport systems collapse that would be incapacitated because of lack of personnel. Secondly, the impact of the above on services and suppliers as their staff are also affected. Thirdly, the impact on markets and customers as confidence in particular areas collapses and the means to transport and distribute products and services can be reduced by the restrictions (Marina, Lewis, & Hugo, 2009). As national borders are open up to wider and even more profitable exchange, customers and business employees are exposed to a variety of parasites and pathogens. The impact of the pandemic on the human resources of a business would entirely depend on the nature of the pandemic and whether or not it targets people of a working age. Businesses that can provide their human resource with vaccines would be in a relatively strong position, provided that these can be distributed in time compared to businesses that are still growing. Therefore, where possible, businesses have been forced to have contingency plans that allow their employees to stay at home or even to work from localities that are remote(Marina, Lewis, & Hugo, 2009). Bureaucracy is a barrier to world corporations who are carrying out their business overseas. This is through firm regulations and with reference to the foreign capital investment: a significant representation of local managers to its management, capital participation, the need for transferring technology and know-how, and imposing a quota of processing components locally replacing their imports. In addition, corruption has also been a phenomenon with severe negative outcomes on the development of the corporation (David, Joakim& Richard, 2008). Always, there are cases in which representatives of a State Administration request for money for certain services. Removing non-tariff and tariff barriers was a priority of integration of European process in order to promote business. However, the customs duties are still applied in order to protect the local business, and that represent real barriers to expansion of the business activities of the multinational corporations. Also, in the category of the non-tariff barriers the customs import certificates or licenses can limit and delay the development of the business. The phenomenon of industrial piracy is a great phenomenon that is detrimental to the organisations with an expensive development and research activity. In addition, global corporation is also faced with the challenges of ensuring that their products would not be imitated and as well promoted by low-cost competitors (Marina, Lewis, & Hugo, 2009). Adjusting of resources to other foreign market situations is a factor that is associated with the globalisation, and it affects businesses. In some areas, the preferences may not be the same from those that are encountered in the home country of multinational corporation, and therefore to some extent can lead to effects on the image issues and financial plan. In addition, the disadvantages of operating globally include: Operating globally bring a strong competition. In every market, the global corporation are facing both other global competitors who are having the same in size financial and strength as well as the local competitors. The local competitors enjoy the advantages that are provided by the legal of the country concerned, and the loyalty of nationalists consumers as well deep insight into the local psychology respectively: In addition, there are higher expectations from the public in general: therefore, global business organisations have a burden to show an interest in human rights, environmental protection, and country regulations. Every mistake can turn into a well-publicized huge scandal, followed by events, boycotts, and protest marches against them that can cause damage to their corporate image and can result in sales decrease. Also, managing a business of millions of dollars and dozens of branches worldwide can be difficult in terms of the central management, each management error can cost millions of dollars (David, Joakim& Richard, 2008). In addition, the disadvantages from globalisation are businesses closure in import-competing sectors as well as potential losing of jobs. While business collapse represents one response to more increased competition, it is not the only option to organisations. However, instead of ceasing, production firms might switch to a different product or industry; others might remain in the same industry but acquire another business or merge with another (David, Joakim& Richard, 2008). Economic analysts weigh the merits and demerits of globalisation, and speculate about the chances of de-globalisation in case the world economy encounters short- or medium-term stresses like arising in the European nations’ sovereign debt or reduction in China’s exports. Although globalisation has potential benefits to businesses, globalisation can carry some risks. The recent stream of contagion and financial crises after nations liberalized their financial systems and became integrated with the world trade markets may lead to a suggestion that globalisation can generate financial crises and volatility to businesses. Lastly, globalisation can lead to crises where there are no imperfections in international trading markets. The imperfections in markets can generate bubbles, speculative attacks, as well as crashes among other things. In addition, imperfections in finance capital markets can result in crises in nations with sound fundamentals. For instance, if investors believe that the rate of exchange is not sustainable they may speculate against a currency, leading to a self-fulfilling equilibrium of payments crisis despite the market essentials (David, Joakim& Richard, 2008). Conclusion In conclusion, businesses organisations have been the major beneficiaries of the globalisation. Their investment, production, and marketing strategies have been instrumental in restructuring the global economy as they spread their business operation to every part of the world. They take advantage of a favourable political environment and the removal of the traditional barriers to the movement of factors of production including capital (Makhlouf, 2014).It can be deduced that due to globalisation, business activities assisted in raising the living standards, increased choices of the consumer in the world market places, and in boosting of economic growth. Also, globalisation has been a subject of criticism. This is by those who might have been impacted negatively by the liberalisation of investment policies and trade, as well as those who have concerns and reservations about the ever growing in the influence and power of multinational companies. However, beside the advantages it has brought to businesses, globalisation is also perceived to have created problems to business in equal measure (Makhlouf, 2014). References Bernard, A., Redding, S., &Schott, P., (2007). Comparative advantage and heterogeneous firms.Review of Economic Studies, 73, 31–66. David, G., Joakim, G. & Richard, K. (2008).Surviving globalisation.Journal of International Economics, 74, 264–277. Makhlouf, H., (2014). Facets of globalisation.International Journal of Business and Social Science, 5(1), 59-63. Marina, M., Lewis, D., & Hugo, P. (2009). Globalisation challenges for European regions. Report presented to Commission of the European Communities. [online] Available from: http://ec.europa.eu/regional_policy/sources/docoffic/working/regions2020/pdf/regions2020_globalisation.pdf [accessed 29th April, 2015]. Parker, B. (2005). Introduction to globalisation and business relationships and responsibilities. London: SAGE Publications. Wallerstein, I. (2009). Globalisation or the Age of Transition: A Long-Term View of the Trajectory of the World System.International sociology, 15(2), 251-267. World Trade Organisation. (2008). World trade report, 2008: Trade in a globalising world. Geneva, World Trade Organisation. Read More