Global Business Organisation - Literature review Example

Number: Globalisation Globalisation is a term that has become ubiquitous over the recent years. It has become a common lingo on the news almost every day, the newspapers and every other economic forum. There are as many definitions of globalisation as there are scholars of the concept and it may seem quite elusive at times. However, the concept of globalisation can be generally described as global interconnections that includes a number of interlinked and complex technological, cultural, environmental and political processes (Arndt, 1998, p.9). The core starting point of globalisation is not known yet with certainty but many scientists tend to think that it first emerged in the sixteenth century when the circumnavigation of the “Magellan” occurred. Other arguments however, coin the concept of globalisation as being closely connected to recent developments in the world economy. The whole industrial sector was faced by a major economic crisis in the 1970s that led to a sharp in the profits hence forcing the capitalist companies to expand the nature of production and trade to an international level (Caprio, 2013 p.66). Following this occurrence, in the 1980s and 1990s most capitalist corporations of rich countries sought to increase their production scales and global market share by moving and investing capital from country to country. These led to the emergence of giant multi-national corporations (MNCs) which thus enjoyed the control of the world market from the more developed countries but conducting their business in countries all over the world. They have grown to dominate the world economy. Through their vast resources and wealth, MNCs have successfully challenged the state and the ground rules of trade on an international together with the local policies in their areas of operation. This actions led to dramatic changes and new developments in policies which were created to meet the needs of the free flow of capital, profits and technology across national borders (Milward, 2003, p.98). With such actions, the international economy has witnessed major overhaul and substantial restructuring to remove the restrictions on such free flow. International trade and economic organisations are advocating and providing oversight to this process of restructuring to ensure that the politics and policies of states are duly modified to meet the requirements of this organisations. As seen, globalisation is an effect of capitalism. Huge corporations with vast resources want to expand their operations into the whole world in a bid to gain more market share and hence worth profit (Ghauri, 2008, p.36). The brainchild behind the whole concept was envisioning a scenario that made possible the purchase of anything from any part of the world. This concept was viable due to the rapid growth in information technology that made instant worldwide communication via telephone and the internet possible. One of the greatest advantages of globalisation is the interaction and cultural exchange that has occurred as a result. Over time, it has turned out to be so much easier to work, or study abroad. Developments and improvements in areas such as delicacies and new cooking styles have been observed coupled up with the emergence of new restaurants. Travelling to remote areas has been made easier and considerably cheaper. Education has also faced a major boost with platforms such as online learning where for example, scientists can hold lessons in several universities just from the comfort of their homes. On the flipside, globalisation is capitalistic and hence has its negative side as well. Most notably, the price that is to be paid for the MNCs to gain more influence and generate profit is very high. This is exemplified by the extent of exploitation of the environment and more so of poor countries (Milward, 2003, p. 104). Globalisation is a very wide concept and cannot be restricted only to an economic or business perspective. It suffices further that globalisation can be described as the process of international integration that arises from the exchange of world opinions, ideas, products, and various aspects of culture (Ghauri, 2008, p. 11). Developments in transport and communication networks, are factors that are considered major in the globalisation concept as they generate more interdependence of cultural and economic activities. As the concept of globalisation may tend to seem elusive and a bit vague, the International Monetary fund identified four keys aspects that constitute globalisation to ease with the understanding. The identified aspects were: trade and transactions, capital and investment movements, migration and the movement of people and the dissemination of information or knowledge (Leary & Warner, 2005, p.58). Aspects of Globalisation On a larger and much more general scale, the concept of globalisation can be subdivided into five categories for the ease of analysis. The categories of globalisation include: Global business organisation, Economic globalisation, sociocultural globalisation, Global natural environment and the Global workforce. Global Business Organisation Following the radical changes and improvements in transport and communication networks, international business has been observed to grow rapidly after the 20th century. International business constitutes all forms of commercial transactions that occur between two or more nations, countries or regions across their boundaries. Usually, the private sector corporations participate in these undertaking with the main intention of increasing their profit margins. The business transactions on an international scale usually involve capital, human resources and natural resources that are factors of international production of goods and services (Rosenberg, 2000, p.56). The international business arrangements and relationships that arose are what led to the emergence of large MNCs such as McDonald’s General Motors, Ford Motor Company, Toyota, Sony, LG, Shell, BP and the likes which mainly operate in multiple regional markets. In an in depth analysis of Global business organisations as an aspect of globalisation, the components of global business organisations will be observed to be: International trade, Tax havens, International tourism, International sports and Illicit international trade. International trade is a process that involves the exchange of the factors of production across international boundaries. In most countries, international trade accounts for a lion share of their Gross Domestic Product. The growth and development in international trade is of core importance in the concept of globalisation. Trade advantage in international trade arises when a country spends less per unit in producing a commodity as compared to the trading partners. On the same platform of reasoning, it should hence import products for which it has production disadvantage. As a result of the cut-throat competition arising from international trade, corporations have argued that the comparative advantages due to international trade have become necessary for business survival. The emergence and growth of international trade has also led to establishments of trade agreements, economic blocks and special trade zones in countries to facilitate smooth trading (Scheide, 2003, p.63). The establishment of trade areas that are not subject to tax by governments is a modern and essential feature to handle international trade. Such zones improve the quality of trade by reducing the overall cost of trading and hence a reduction in the price of the commodities being traded across the international borders. Tax havens, which are also part of the global business organisations have also become a common feature of globalisation. These are countries or regions where tax levies are at an all-time low or there are no taxes whatsoever for business activities. They are commonly used by businesses for tax evasion or avoidance. Individuals and corporations as a result find the need to establish shell companies or even relocate to areas with favourable tax treatments which thus creates a competitive environment between governments (Shanaham, 2003, p.87). Tax shelters have a negative effect as such avenues lead to the accumulation and non-usage of cash that would otherwise be constructively invested. International tourism is also a fundamental feature that has grown rapidly with globalisation. A tourist is an individual traveling to and staying in places out of their ordinary area of residence for a period not more than twelve months for the purposes of business or pleasure. The advancements in transport and communication networks which are a core part of globalisation can also be attributed to the influx in the number of people who are travelling over the years (Rosenberg, 2000, p.54). Further, international sports events has grown to become a big business as a result of globalisation. The sporting events have proved to be of great influence to the political, economic and other aspects of culture in countries in the world over. While there have been criticisms from economists against holding major sporting games such as the Olympic games due to the cost implications associated with them, the host country is likely to benefit more from the tourism numbers and the trading opportunities that arise as a result. Globalisation has over the years created and increase competitiveness in international sports (Leary & Warner, 2005, p. 67). Though a very controversial aspect of the economy, globalisation has also led to increase in illicit international trade as this also operate transnationally. Black markets and organised transnational crime have been on the rise with globalisation (Streeten, 2001, p.79). Illegal international business transactions such as drug trafficking and human smuggling and trafficking have also been increasingly menacing and are a multi-million dollar business around the world. Economic Globalisation Economic globalisation can be described as the increase in the economic interdependence between national economies in the world over resulting from the fast increase in movement of goods, technology and capital across the international borders (Smith, 2006, p.91). It is the process that further fosters the cultural transcendence between nations thus resulting in the development of a one stop global market place. Dependent on ones choice of view, economic globalisation can either be positive or negative. Economic globalisation encompasses the globalisation of the major factors of production such the production process itself, the markets and the technology involved. The main components involved when addressing economic globalisation would be: the global financial systems, Austerity, capital flight and the element of measuring globalisation (Wes, 1996, p.102). The global financial system was first observed during the first modern incidence of economic globalisation that was marked by the setting up of intergovernmental organisations, multilateral treaties and central banks whose core objectives were to increase the level of transparency and control which would in turn increase the efficiency and effectiveness of the global markets (Scheide, 2003, p.233). The integration of the international economy increased over the 20th century due to the liberalisation of capital accounts and financial sectors that were deregulated. The higher exposure to volatile capital flows in the economy led to numerous financial crises in Asia, Europe and Latin America that also had adverse effects on other countries. Austerity policies are sometimes put in place by governments to lower deficits in budgets during tough economic conditions. These would include actions such as reduces spending or increasing taxes. These policies are used by governments to show potential liquidity to their lenders and credit rating institutions by matching fiscal income to the expenditure (Shanaham, 2003, p.125). Due the broad and non-specific definition of austerity, its precise economic effects are still unclear and therefore prior to its implementation, governments should have proper consideration of the underlying economic fundamentals. Capital flight, which is also part of economic globalisation is a phenomenon that occurs when there is a rapid flow of money or assets out of a country due to an increase in the costs of that country such as taxes, tariffs, labour costs or other unfavourable financial conditions in the country. Often, this leads to a quick disappearance of wealth in the country which is usually accompanied by a plummeting exchange rate of the affected country (ZCTU, 1998, p.24). Capital flight would have a negative impact on the international trade since the loss in value of the currency of the affected country would hence lead to a loss in the nominal value of the goods and services for export while on the other hand, the import costs would be higher. Generally, capital flight can cause major liquidity crisis in the affected country. Sociocultural Globalisation Under social cultural globalisation, the concept of globalisation takes a paradigm shift from the economic aspects and moves to the integration of cultures which leads to the emergence of new cultures or new ways of doing things among the existent cultures. Cultural globalisation has increased the level of cross-cultural interactivity thus leading to the decrease in the uniqueness of communities that were fairly isolated at some point in time (Leary & Warner, 2005, p.69). The aspects of sociocultural globalisation are Culture, politics, interest, population growth and health. Under culture as an aspect of cultural globalisation, religious movements were among the first elements of culture to globalise. This was due to the forces and actions of migration and other specific groups such as evangelists and traders. With respect to culture, globalisation describes the changes in cultural practises in the world over where a tradition may be lost it may be fused with other traditions. From a politics perspective, globalisation may, in the long run, reduce the importance and relevance of the nation states and other supranational organisations (Smith, 2005 p.78). For example, some scholars claim that the gradual drop in the US’s power over the years is due to globalisation especially due to its high trade deficits. As a result a power shift has been observed with power being transferred to Asian countries such as China. The influence of Non-Governmental Organisations on policies has increased worldwide in addition to the action of global Philanthropic organisations which have come to head humanitarian and development efforts globally (Arndt, 1998, p.57). Some countries such as the North Korea have adopted Isolation policies as a protective response against globalisation. This policies make it very hard for outsiders to enter the country and once they are in the country, there activities are closely monitored by the government. The citizen’s free will to leave the country is also restricted by the isolation policies. The internet, which is both a great facilitator and a bi-product of globalisation provides a link to computer users all around the world. The internet has hit a multi-billion mark in terms of usage in the past decade. The internet has greatly facilitated trading activities by reducing the costs that are associated with normal trading activities through platforms of e-commerce where business-to –business and business-to-consumer transactions occur. In the 20th century where fast globalisation and industrialisation was observed, population growth rates also increased. This resulted I a number of social problems such as urbanisation on a global scale (Ghauri & Powell, 2008, p.124). A greater majority of the population around the world live in industrialised region as compared to the rural and agricultural regions. The increase in population growth also had an impact on global health. For example, international travel which has been improved and made easy by globalisation has helped to spread some of the deadliest diseases observed in world history. Global Natural Environment The global natural environment is composed of all living and non-living this that are of a natural occurrence on the surface of the earth. The natural environment can be compared to the man-made environment which involve the regions whose components existence is attributed to and dependent on humans. Globalisation has increased the extent of negative human effects on the environment. Controversial aspects of the natural environment like climate change, global warming, over-fishing and pollution could be greatly attributed to globalisation on a worldly scale (Arndt, 1998, p.88). Numerous industries are coming up but little regard has been placed to the global natural environment which has seen gradual depreciation over the years. Global Workforce The global workforce refers to an international pool of workers inclusive of individuals working for MNCs that are connected on a global platform via a complex system of production and networking (Munck, 2004, p.32). The global pool of labour greatly increased in numbers in the 20th century during the period of rapid globalisation. The global labour pool is characterised by cut-throat competition due to the globalisation of skills and knowledge (Leary & Warner, 2005, p.111). Certain telecommunication features such allow companies unlimited search for workers without only a local limitation. Even though the employment levels may be seen to have improved in some regions due to the effect of globalisation, the phenomenon has been observed to hurt some groups in other countries. In conclusion, the concept of globalisation can be seen to be wide. Dependent on an individual’s paradigm, it is either a positive or negative process and regardless of whether globalisation works for better or worse, its exact meaning will remain a controversial debate subject among those who support, oppose or simply observe it. References Arndt, H. (1998). Globalisation. Canberra, Australia-Japan Research Centre. Caprio, G. (2013). The Evidence and Impact of Financial Globalization. Ghauri, P. N., & Powell, S. (2008). Globalisation. London, Dorling Kindersley. Milward, B. (2003). Globalisation?: internationalisation and monopoly capitalism : historical processes and capitalist dynamism. Northhampton, MA, Edward Elgar Pub Leary, V. A., & Warner, D. (2005). Social issues, globalization and international institutions: labour rights and the EU, ILO, OECD and WTO. Leiden, Martinus Nijhoff. Munck, R. (2004). Labour and globalisation: results and prospects. Liverpool, Liverpool Univ. Press Rosenberg, J. (2000). The follies of globalisation theory: polemical essays. London, Verso Scheide, J. (2003). Globalisation - the end of national economic policy?: new forms of international business cycle linkages. Berlin, Duncker & Humblot. Shanahan, M. (2003). Globalisation: Australian regional perspectives. Kent Town, Wakefield Press. Smith, N. J.-A. (2005). 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