Business in a Global Context - Essay Example

BUSINESS IN A GLOBAL CONTEXT By Location Business in a Global Context In the world of business, globalisationis not a new phenomenon. In terms of business and business environment, globalisation can be defined as the increase in international financial and economic integration. The term globalisation is, therefore, used in most occasions in reference to the removal of any hindrances to international business activities such as production, financing, distribution, and sales of goods and services. The ultimate goal of globalisation is to see to it that the world starts operating as a single market. Globalisation does not only refer to the movement of goods and services across borders but also the movement of finance, technology, and investments across borders. Globalisation can, therefore, be said to be something that affects all the aspects of human life and not only the economic aspect as some people would imagine. This paper aims at discussing the various ways in which globalisation affects modern business organisations. There are a number of ways in which globalisation affects business. Some of them are positive while others are negative. One of the ways in which globalisation affect business organisations is by giving them extended markets. If one imagines a business without globalisation, it is easy to realize that without globalisation business organisations are only able to sell their goods and services in the domestic markets. However, with globalisation business organisations are able to enjoy even international markets (Okpara 2008, p. 101). A good example will be the state of trade between the western countries and communist countries before communism finally failed. The trade barriers put in place by the western countries ensured that goods and services produced by communist countries were not sold in their markets. However, the end of communism and the dropping of trade barriers led to more goods and services from the formerly communist states flowing to the western countries. This increased the profit potential of business organisations from the formerly communist states. Due to globalisation, some business organisations have also been able to access cheaper resources. The resources that business organisations can be able to get internationally include: labour, raw materials, and equipment’s. For raw material, a good example will be the East African grown coffee, which is always processed in Europe. This means that with globalisation business organisations do not have to have raw materials locally. For labour, the fact that some business organisations in the United States of America started seeking cheap labour from China after china opened up its market shows that globalisation can lead to the availability of affordable labour. The good thing about using less expensive resources is that business organisations can be able to lower their cost of production. With lower production costs business organisations are able to offer their goods and services at more affordable prices, making their goods and services more competitive in the market (Hitt, Ireland & Hoskisson 2007, p. 135). Globalisation can also lead to international development. International development is believed to be a result of both expanded markets and cheaper resources. For instance, foreign companies have made investment in less developed countries provided that the market and resources are available in these countries. If a foreign company invests in a developing country with raw materials lying idly unexploited, they will also be able to get cheap labour from these countries. Developing countries are known to be good sources of cheap labour. The good thing is that an international organisation that decides to make such an investment will also be able to enjoy the local markets (Parker 2005, p. 198). In such scenarios the investors can count themselves lucky to get raw materials, labour, and market in a foreign country. The countries where such investors are made can also benefit from such investment. The investments will bring economic benefits in terms of revenues and job opportunities. Globalisation can also be said to a factor that encourages high productivity. This is because business organisations are aware that they can attend to the global market and not only the local markets. On the other hand it also enhances the availability of goods and services to consumers all over the world. A person in South America would not have to worry about how they will get their hands on products that are not produced locally (Andrews 2011, p. 163). Through globalisation, consumers can access goods and services regardless of the part of the world that the particular products are being produced. In this context, it can be said that globalisation reduce the possibilities of consumers being over exploited by the local producers. This is globalisation enhance the availability of more affordable options which do not necessarily have to be produced locally. Globalisation can also be said to be a factor that encourages specialization of business organisations due to the availability of global markets. Globalisation means that business organisations have the ability of adopting new technologies that have been developed elsewhere. A business organisation will not have to restrict themselves technologies that are available locally. The new technologies can be used in improving their production process which will eventually reflect in the quality of goods and services. The good thing about the adaptation of new technologies is that is a win-win situation for both consumers and producers and consumers. For producers new technologies help in making the production process less stressing and also makes the process less costly (Ekins & Voituriez 2009, p. 167). As for consumers they are able to get goods and services of high quality and at more affordable prices. In such a scenario, businesses will always be able to use the technologies that best suits their cultures, goals and objectives. They will also have the privilege of choosing the technologies that match the market section that they target with their good or services. With globalisation business organisations are given more expanding opportunities. Before globalisation had much effect on business environment, it would be hard for a business organisation to expand in situations where they had already exhausted the local markets. Through globalisation business organisations can be able to invest in foreign markets, thus increasing their production base which will eventually lead to an increase in the income that they get from their activities (Harrison 2013, p. 211). This implies that globalisation presents business organisations with an opportunity to have unrestricted growth and expansion. Globalisation also encourages the free movement of capital. Capital forms the backbone for every economy. The advantage here is that globalisation, thanks to technology enables business organisation to move capital from one part of the world to another. What makes it even more interesting is the fact that technology makes it even faster and more secure. This means that businesses are able to move capital into any part of the world easily and without having to take much risk. Business organisations can also take advantage of globalisation and invest in countries with less tax restrictions with the aim of maximizing their income. It has been discovered that some countries have been taking advantage of countries that are considered to be tax havens by over investing in them. Such countries include Hong Kong and Switzerland. Through such involvements such business organisations have been able to make sure that they get the best from being involved in international markets. The end result in such commercial involvement is that such business organisations are always able to avoid paying taxes in the countries where they are based. This usually has negative effects to the revenue and the economies of the countries where such business organisations are based. Despite the fact that business organisations can benefit from the existence of globalisation, there are a number of ways in which the existence of globalisation might lead to some challenges in business organisations. One of these effects occurs in the local business organisation when stronger foreign organisations invade the local markets. Such involvements imply that the smaller local business organisations will be in no position to compete with the stronger international ones. In terms of resources, capital, and technology the local small business organisations usually have a hard time coping with the bigger organisations (Gaston& Khalid 2010, p. 153). As a result of this difference the smaller and bigger companies makes it impossible for the smaller ones to compete the foreign investors in any way. As a result the performances of the small and middle size business organisations are affected negatively by globalisation. Some of the small business organisations end up having to close down because they lack the ability to adapt to the high competition levels. Globalisation can also lead to environmental degradation, especially in developing countries. When developed countries seek raw materials from the developing countries sometimes they get the raw materials at the expense of the environmental well being of the developing countries. Most developing countries usually lack legislations that can protect their environment from exploitation through such activities. As the result of the lack of legislations, the foreign companies always take advantage of the situation and continue with the exploitation for their own advantage (Lofdahl 2002, p. 201). The sad thing is that in such situations it is the local organisations that have to work under the poor environmental conditions. Local business organisations which depend on the same raw materials are also sometimes less advantaged as the bigger foreign business organisations are always given more consideration. As a result of globalisation, countries tend to depend on each other. This kind of interdependence can lead to regional or global economic instabilities. For instance, if the economy of one country fluctuates all the countries that are economically connected to the country will also feel the effect of the fluctuation of their economy. This will specifically influence the business organisations that have been operating within the affected countries. If a business organisation has invested in a country, then a few years down the line, the country experiences economic fluctuation thus the business organisation in question will obviously be counting losses (Aswathappa 2008, p. 233). This is something that might have not have happened were it not for the economic interdependence. Globalisation can also lead to labour drain. As discussed herein, globalisation has leads to the availability of cheaper labour. However, the thing is that only business organisations from developing countries usually benefit from globalisation in this manner. Facts have it that labour is always more costly in developed countries as compared to developing countries (Wagner 2000, p. 187). What makes this kind of labour transfer disadvantageous is that some countries usually end up having labour forces that are insufficient in serving their various industries. This might affect a particular industry or the whole country. When a country’s labour force is drained it means that the local business organisations will not get enough labour force to support volumes. This might negatively affect their income which will eventually reflect on the country’s economy. Another possibility is that it can make labour expensive because of the low availability which leads to higher demand. In such a case business organisations will have to spend more on labour and thus higher production costs. Globalisation has also led to an increase in the rate at which illegalities are taking place in the business environment. For instance, it is evident that cases of piracy have been on the rise. This is because globalisation allows for the production and sales of products internationally. One of the most affected industries is the electronics industry. There are a lot of imitation products that are sold in the markets, especially in the developing countries. As a result, the legitimate producers of such products have to incur losses in big numbers. The effect of piracy and imitation would not have been that strong was it not for the existence of globalisation. It is clearly evident that globalisation has some effects on business organisations. Globalisation does not only affect the global players, but also the localized business organisations. This would imply that there is no business organisation that would say that globalisation does not concern them in any way. It is also clear that globalisation has both positive and negative influences to business organisations. However, judging by the herein discussed facts, it will be right to conclude that globalisation has more positive effects to business organisations than the negative ones. It is also certain that bigger business organisations and those from developed countries are the biggest beneficiaries of globalisation. Figure 1: A mind map globalization and business activities Bibliography Andrews, D 2011,The Global Marketplace: Business Without Borders: Globalisation, Gardners Books. Aswathappa, K 2008,International business,Tata McGraw Hill Education, New Delhi. Bettignies, H. C. D., & Lépineux, F. (2009). Business, globalisation and the common good,Peter Lang, Oxford. 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