Advantages and Disadvantages of Globalisation on Business - Essay Example

Advantages and Disadvantages of Globalisation on Business Introduction Research indicate that globalisation has influenced businesses to a large extent through the manner in which they conduct their operations and business. This has been attributed to the advancement of technology, transport, education, communication and regulations of trade that make business fair to all parties. Fair terms of trade are also attracting more investors all over the world towards investment destinations. For this reason, many multi-corporation are establishing outlets, production sites and connecting to suppliers and customers in different parts of the world. Globalisation is reducing the world into a one big single village, although it faces a number of challenges and poses threats to the business environment. Globalisation can be defined as a process where regional economies, culture, and societies have been integrated by trade and a worldwide-spanning network of communication. Globalisation exists in different dimensions. These dimensions include rapid technological advancement, foreign investment, capital flow, migration as well as international trade (Hill & Cronk 2010). Globalisation in simple context is considered as efforts to making the global society as a single village. This process is characterised by the production of goods in one region of the world and later distributed to the rest of the world. For instance, vehicles are manufactured in countries like Germany, United States, and Japan among others but are used in the rest of the world including Africa. Globalisation has integrated world economies for instance internet connections, and mobile phone have made people closer. This makes the world be a smaller village. Work can be distributed to any part of the world as far as internet connection is existing (Smith, 2005). In the business context globalisation serves to remove variation that exist and is geared to achieve universal platform. Globalisation influence issues and concerns of a business environment. Issues and concerns are the ones that are considered to affect business either positively or adversely (Jens-Uwe.W and Meera W, 2009). Economic globalisation further integrates national economies to form an international economy through aforementioned dimensions of globalisation. Jens-Uwe and Meera (2009) point outs that technological advancement and policy have played a crucial role in enabling global investment, immigration and international trade. For instance, the current globalisation in the United Kingdom is traced to be cooperative policies such as trading blocs. Globalisation is a tool that helps in eradication of state-enforced legislation on services and goods across the borders. Globalisation through global markets, global communication, and global production have promoted and facilitated by fourth area of global activity in relation to money. US dollar, Japanese yen, Euro and other major currencies circulate all over the world. These currencies are used all over the world and are moved electronically and also through air transport (Scholte 2005). People also free to move from one region of the to the other, trade barriers are reducing, local markets are opening up for foreign investment telecommunication are better established and the countries that are leading innovation in other countries In need (Nagwanshi and Kulkami, 2009). Advantages of Globalisation in Business Globalisation has a significant advantage to businesses depending on the scope of their operations. The impacts of globalisation vary depending on the geographical location of the business and the specific industry. Globalisation has led to increased employment and economic growth. The results of trade liberalisation due to globalisation is that there will be efficient and effective resource allocation to the productive sectors of the economy. There will be creation and expansion of employment opportunities in the exporting industries. In addition to that, citizens of these countries that engage in this liberalised trade arrangements experience improved living standards due to increased income as well as economic growth. This is attributed to increased productivity and efficiency that leads to increased local output (Palan, Murphy, & Chavagneux, 2010). Also, this liberalised trade facilitates entry into the global market. This leads to increased revenue for businesses. Elimination of trade barriers also means that other countries will easily accept the exports of a particular country in the global market, which has led to increased exports from the trading countries. For instance, due to globalisation, the UK has had the benefit of inexorable economic growth for more than a decade by ever-rising levels of employment and improved standards of living. A 2.5% annual growth was the longest and sustained growth noted which was attributed to global trade. Additionally, investment rates and levels of trade have risen as a result of global competition (Jens-Uwe and Meera, 2009). Another outstanding advantage attributed to globalisation to business is competition. Globalisation leads to deregulation and, as a result, promotes competition. Deregulation encourages opening up of new foreign markets and innovation and creation of new commodities and markets that impose positive challenges to the industry leaders. It is evident that selling from a global perspective results in significant advantages associated with the economies of scale. Participation in international trade is viewed as an effective strategy to exploit the benefits attributed to unrealised advantages of economies of scale (Palan, Murphy, & Chavagneux, 2010). Basically, international trade depends a lot on specialisation, where each country that specialises in the production of a specific commodity attains the comparative advantage. With the potential benefits that can be associated with large-scale operations, there are many advantages accrued to specialisation and participation in international trade even in instances whereby there are no variations in production efficiency of the commodities that the countries produce (Giddens, 2002). For instance, suppose that a nation enjoys the economies of scale when producing a specific product. However, this nation is producing the product at a low output level resulting in a high average cost of unit production. As a result, this country does not have a comparative advantage when exporting the commodity due to the high costs of unit production. Suppose another country specialises in the production of another commodity, and that economies of scale exist in both the commodities produced by both the countries, firms in the industries can make use of combined markets of both nations and offer goods at relatively lower prices compared to a situation whereby their target market is limited at the domestic level. The European Common Market is an example of such (Palan, Murphy, & Chavagneux, 2010). For example, with regard to the aircraft and machines industries, the manufacturers are informed of the reductions in unit cost production due to economies of scale in learning. It is approximated that the average unit production costs reduce by 20% every time the cumulative output increases twice. This is mainly since economies of scale learning within the firms’ employees and efficiency improvement, which can be significantly attributed to globalisation. In specific industries whereby learning is a critical success factor in causing economies of scale, there are significant business advantages in the country that specialises in the production of that commodity. This implies that specialisation in international trade can result in a reduction in the average unit production costs and retail prices compared to operating in a domestic market (Hill & Cronk, 2010). Labour migration is closely associated with globalisation. This is a potential advantage to the United Kingdom’s economy reducing the problems of shortages in labour provisions in the sector, construction and other industries facing the deficiency of workers. Disadvantages of Globalisation in Business On the other side, there are disadvantages linked to globalisation, which focuses on jobs and inequality. It is claimed globalisation contributes significantly to the rising scale of relative poverty in the world. The first limitation noted is losing of job opportunities in the manufacturing industries in different countries. The rising import penetration and shift of manufacturing lower cost manufacturing have resulted in a decline in output and many thousands of jobs lost in the countries with a less comparative advantage. This is due to lack of occupational mobility of labour, which can further intensify the regional economic divide (Aslam et al., 2012). Globalisation has also worsened the balance of payment of some countries. In the United Kingdom, for instance, trade balance since 1997 has been reducing. The process was featured by trade surplus for service balance and commodities balance reduced; 57 billion sterling pound was the gap between the two balances as it was estimated in 2004. These generated low economic performance featured by the low standard of living. The service sector was threatened by globalisation, a case towards hiring labour at low cost from countries such as India. These amounts to a loss of employment and puts more pressure on UK business to cut down cost (salaries) for them to compete efficiently in the world market (Walker, 2008). Globalisation is considered as the major cause of erosion of one’s national identity. Global forces negatively influence the social cohesion of communities all over the world. Globalisation influences social cohesion in two ways; these includes increased mobility of people and progress in global communication networks. For example, emigration of many UK workers to other parts of the world leaves UK with few workers to hire and hence diminishes its identity. On the hand, the arrival of immigrants will bring societal disruptions in the sense that each will struggle to form an association and UK will forced to homogenise global culture (Hill, 2011). In addition, globalisation has segregated society into two classes. The two classes includes those who are considered as the haves and have-nots. In the United Kingdom, for instance, the divide between the haves and the have-nots is widening due to globalisation. This is shown by the wages of the have-nots have barely increased over the last few years while the haves have had an increase in both revenues and accumulated wealth that is estimated to be 20% to 40% (Hill, 2011). Globalisation eliminates the authority of trade unions to safeguard pay and job that may result in drastic structural changes in employment in various industries (Hill, 2011). Countries have suffered from global crimes as a result of globalisation (Giddens, 2002). These global crimes include human trafficking and smuggling of goods and services due to the overstretched criminal network. The arrival of immigrants poses a huge threat to the government in guarding her borders. Narcotic drugs are smuggled into different countries by immigrants, and other pornographic commodities gain access into the said countries as a result of smuggling. Conclusion In conclusion, the merits and demerits of globalisation require the cost-benefit analysis approach, which currently indicates that globalisation effect has hit many countries of the world. The cost-benefit approach gives a detailed explanation of merits and demerits of globalisation. For example, currently UK faces no immunity since it cannot differentiate itself from the impact of intercontinental foreign trade characterised by capital inflow and trans-national corporate activity. Therefore, it has to overcome confronts of competitive global economy otherwise her economic performance is on the verge of collapsing. More so it is too early to conclude that UK benefits more from globalisation since waves of globalisation give on changing. Globalisation has affected UK greatly starting from scopes such as the economy, political and social, and this implies that UK should have to adopt the negativity of globalisation and promote it is benefits. References Aslam, H. D., Azhar, M. S., Yasmeen, K., Farhan, H. M., Badar, M., & Habib, A. T., 2012. EFFECTS OF GLOBALISATION ON DEVELOPING COUNTRIES. Journal of American Science, 8(8). Giddens, A., 2002. Runaway world: How globalisation is reshaping our lives. Profile books. Hill, C., & Cronk, T., 2010. Global Business. New York, NY: McGraw Hill/Irwin. Hill, C., 2011. Global Business Today. New York, NY: McGraw Hill/Irwin. Hosseini, H., 2005. An Economic Theory of FDI: A Behavioural Economics and Historical Approach, The Journal of Socio-Economics, 34, pp.530-31. Jens-Uwe,W & Meera W., 2009. A Dictionary of Globalisation. London, LA: Taylor & Francis. Nagwanshi, D. K., & Kulkarni, S. C., 2009. Light weight Solitary Beam Design to meet Low speed vehicle damageability and RCAR impact requirements (No. 2009-26-0007). SAE Technical Paper. Palan, R., Murphy, R., & Chavagneux, C., 2010. Tax Havens: How Globalisation Really Works. London, LA: Cornell University Press, 2010. Scholte, J. A., 2005. Globalisation: A critical introduction. Palgrave Macmillan. Smith, N., 2005. The end game of globalisation. Routledge. Walker, C., 2008. Depression And Globalisation: The Politics Of Mental Health In The 21st Century. Springer. Read More