The Advantages and Challenges of Globalization - Case Study Example

Unit Code: Title of the Unit: Assignment Title: ADVANTAGES AND CHALLENGES OF GLOBALIZATION FOR EUROPEAN BUSINESS ORGANIZATIONS IN THE 21ST CENTURY The 21st century has embraced the most beneficial yet controversial issue that mankind would have ever wished: globalization. The advantages and challenges of globalization are widely known, making it one of the most debatable topics currently. This paper will examine the advantages as well as challenges of globalization in the context of the European Business Organizations in the 21st century. Many researchers have examined the advantages and issues facing globalization all-over the world, however, there is a very limited choice of literature that strictly looks at the context of European business environment, or the aspects that make a distinction between business organizations in Europe and in the European market from other regions (Ranger, 2007). This paper seeks to particularly focus on the European business context because the aforementioned limited research on this area and, more importantly, the fact that European business organizations have demonstrated to the rest of the world how economic, political and social factors can fundamentally affect business strategies and the environment. The gradual transformation that the Central and Eastern Europe has undergone and later on the growth of the European Union from 15 states to 25 are key examples to this. Besides, the European Union was recently ranked as the biggest goods trader in the world, according to the analysis by Eurostat (Eurostat, 2010). This is demonstrated in the Appendix. Advantages Trade and development The advancement in trade processes is arguably the most significant benefit that globalization has had to the European business organizations. At the moment, the European Union is the biggest trader in the world, and accounts for up to 20 percent of the world imports and exports. (UNCTAD, 2010) The liberalization of trade has enabled the most efficient European Union firms to have a fair competition with its competitors in other countries. Because of the departure of trade barriers in the EU, the EU had prospered in its business processes and is now more committed to global liberalization. As countries in the European Union removed tariffs on trade among them, they also brought together tariffs on goods imported from other regions. The result is that other firms pay the same tariff whether their products enter the European Union through the ports of Hamburg or Genoa. The effect of this is, for example, products from Japan which pay import duty on arrival in Belgium can be shipped to Germany or such a country and sold in the same way as Belgium products, without being charged any further duty. (Amy, 2004) The trade policy of the EU is closely associated with its growth policy, whereby it has granted cut-rate or duty-free access to its market for the majority of the imports from budding countries under its comprehensive system of preferences. This has made it even extend to the 49 poorest countries in the world, all of whose exports, except arms, enter the EU market duty free. (Johnson & Turner, 2006) Importantly, the EU has created a new trade and development strategy using its 78 partners from the Africa-Pacific-Caribbean (ACP) group; the strategy’s objective is to integrate the partners into the world economy. Further, the EU also has a trade accord with South Africa that will ensure free trade, and it is in the process of settling for a free trade agreement with the members of the Gulf Cooperation Council (GCC) , namely Kuwait, Oman, Bahrain, Saudi Arabia, Qatar and the United Arab Emirates. It is however worth noting that the EU does not have specific trade agreements with major partners in the developed regions such as Japan or the United States. (Shirley, 2004) Market Integration European business organizations are experiencing the benefits of integrating the European market, whose initiatives are focused upon ending the fragmentation that European businesses go through. (McAlister, 2005) Further, market integration is intended to enable European business organizations to exploit the economies of scale and the economic scope so as to help the European market improve its competitiveness in the international scope. The foundation for European integration is the Single European Market (SEM), a programme that, since its development has brought numerous opportunities to European business organizations. (Wolf, 2004) The fragmentation of the European market before the adoption of the single market programme was rocked with numerous barriers that directly imposed numerous costs upon businesses and inhibited factor movements as well as trade. The barriers are categorized into: physical barriers, technical; barriers and fiscal barriers. Physical barriers include customs barriers, border stoppages as well as other time delaying and cost increasing measures that affected business processes between states. Technical barriers include the lack of common standards across the European Union which means coming up with different versions of the same product for every market as well as technical regulations and public procurement practices. Fiscal barriers include differing levels of VAT as well as excise duties among the relevant states. (World Trade Organisation, 2010) The current strategy for the SEM has addressed the aforementioned barriers and is now focused upon the following four constituents: improving the quality of life of its citizens; enhancing the efficiency of markets; improving the business environment; and helping maintain the competitive position of the European economy in the modern global economy. Nationhood Formation Globalization has developed conditions whereby nationhood continues to be a valued and effective sociopolitical formation as well as providing mechanisms that develop the capacity for imagining, constructing and maintaining nations. The main example in this context identifies the recent advances in communications technology, a strategic element that is fundamental in nation building. Scholars have however established that this element is not only fundamental in nation building, but in developing organizations as well. Globalization, since it has been propelled and accompanied by the advancement in technology that ranges from the Internet, cell phones, satellites, fax machines, as well as the sophistication of existing technologies such as television, presents new and increasing opportunities for emerging business organizations. (Bhagwati, 2004) Challenges Following the collapse of the Soviet Union, numerous world leaders and policy makers jubilantly proclaimed the arrival of a New World Order. A number of academics, for example Lucian Pye, the renowned political scientist, proclaimed that a global culture of modernization had brought in the sundown of authoritarianism, and declared that the great transformation ushered in by globalization had proved correct modernization experts of the 1950s who had envisaged that economic growth, the acceleration and spread of science and technology as well as the growth in communications would result to democratic transitions all over the world. (Moore & David, 2009) In other words, technological and communications advancement, socioeconomic advancement and democratization looked as if they had triumphed over parochial attachments and ties, for example nationalism and ethnicity. According to some academics, this was “the end of history”, and as explained by Francis Fukuyama “ the endpoint of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government” (Croucher, 2004). These passionate visions did not anticipate the turmoil that soon followed, for example the genocide in Rwanda, the aboriginal uprising in Mexico, just before the close of the 20th century. The turn of the 21st century, with issues such as the Islamic fundamentalism that ignited the horrific September 11 as well as the upsurge of identity-based conflicts were a major contradiction to the celebratory analyses of globalization and brought to the fore the numerous challenges that globalization faced. The following is an investigation of the major challenges that have faced globalization for particularly European business organizations in the 21st century. The Rise of Private Violence The devastating events of September 11 emphasized the significance of events that happen in the South to the Northern countries, something that had been ignored by European and American decision makers since the end of the Cold War. Alfred Paler and Marika Lerch (2005) in the book: Challenges of globalization: new trends in international politics and society write that issues that affect Southern territories, such as state failure, cultural disintegration, economic hopelessness, authoritarianism and social deprivation are not only significant to the territories involved, but to the entire world. The rise in private violence, which is driven by warlords in Afghanistan and such territories in commonly referred to as marginalized regions in the world has raised significant concerns that this could leave critical marks in Europe and America as was done in New York on September 11. This is a significance challenge that affects particularly business organizations in the European environment. (Alfred & Marika, 2005)The impact brought about by organized crime, for example, attests to this. Globalized has transformed what was initially transnational organized crime to international crime. Because of the development in communication technologies, for example, organized crime is now restructured in small, more effective units that use networking and additional processes such as flat hierarchies and small working pools so as to adapt more efficiently than traditional large cartels. Organized crime has been defined as the economic activity of groups which have a permanent division of labor and whose aim is to maximize profits and exploit the regulation of various economic activities as well as the violation of state-guaranteed rights such as freedom, safety and property rights. While organized crime affects processes of European businesses in all the activities that the perpetrators are involved in, the following activities have significantly affected the European business environment: illicit technology transfer. The spread of Western liberal democracy and global capitalism have been established to provide answers to the many questions that were asked following the events of September 11 as well as the 7 July 2005 London bombings that killed 56 people and injured 700 others, particularly the question: ‘Why do they hate us?’ Worth noting is that the events of September 11 sum up a paradox that is commonly observed in today’s global world- a paradox that has been christened ‘Jiha vs McWorld’. Jihad, in this context, refers to “a retribalization of large swaths of humankind by war and bloodshed…in which culture is pitted against culture, people against people, tribe against tribe,” at the same time as McWorld refers to the extreme outcome of globalization, the surge of “forces that demand integration and uniformity…pressing nations into one global network that is commercially homogenous”. This is therefore a significant challenge to globalization, whereby as globalization presses on bringing the world together a variety of forms of political and sociocultural differentiation focus on counteracting this effort and tearing the world apart. The Western Culture The Western Culture offers another significant challenge to globalization that has greatly impacted the European business environment. Worth noting is that the western culture in the 21st century has played a major role in influencing a variety of aspects concerning global politics, international relations, market trends and pop culture. The United States of America, for example, is increasingly influencing the communication processes and trade ways of foreign countries by influencing their culture and, gradually changing their systems so as to make them coincide with the American processes, under the disguise of developing a global system of trade and communication. This is happening through the spread and influence of mass media as well as the international distribution of motion pictures that portray the American culture as the “most appropriate”, as the US dictates what is right and what is wrong, while at the same time weakening what was exclusive about each and every organization by weakening one’s patriotism, identity and support of the eventual organization. There are nations fighting violently with globalization, prominent local industries and traditional products. This includes American coffee shops, for example, those have started infiltrating Italy and have become competitive to Italian franchises. Despite Starbucks infiltrating the Italian market, fortunately, the majority of Italians are traditionalists, particularly in the respect of coffee and restaurants, and the battle for keeping local specialties for maintaining local specialties is far away to be won. (Craft, 2000) Conclusion This paper has examined the major advantages and challenges of globalization facing European business organizations. With regard to trade and development, the EU should work upon ensuring that it develops specific trade agreements with the United States, Japan and other major developed trading partners, since the complexity which may curb trade processes in the near future may be too intricate for the EU’s current agreements in individual sectors with these two countries. The opportunities brought about by the SEM programme and nationhood formation to European business organizations are significant opportunities that the European business organizations need to take into consideration when implementing their policies. As the Republic of Korea, for example, chairs the Group of Twenty in 2010, the SEM program will have the opportunity to improve the business environment for European business organizations (G20, 2010), hence should take this opportunity with all the passion that is required by ensuring that it sufficiently links with all those that will be present. (Bartlett, 2010) The SEM can maximize its opportunities by helping bring together the economies that will be represented by the summit because this significantly stabilizes the global market, therefore improving the business environment for not only the European business organizations but also for other organizations outside the European market. This is fundamentally important because in the future, the European organizations can easily venture into all desired regions to carry out business. Additionally, the SEM programme can look into ways of exploiting the optimism that organizations are having with the implementation of the Single market, as was aforementioned. However, strong political commitment is required so as to successfully implement the Single Market Act, and more importantly, as emphasized by the Business Europe, a social partner of the European Union, so as to recover the European economy, (Business Europe, 2010) there is urgent need for the improved governance of the single market. Once the European economy is improved, without the European business organizations will be greatly benefit as well. On a similar note, the organizations should also fundamentally consider the major factors that relate to challenges of the rise of Private Violence and the Western culture. These challenges have prevented business organizations from realizing their full potential in the European market hence making the relevant organizations to lag behind other global players. Although these challenges affect organizations all nations, European business organizations are in greater risk considering the colossal amount of trading that happens in the European Union. However, these organizations should focus on effectively managing the challenges and obtaining inspiration from the advantages of globalization to ensure that they maintain their competitive lead and that they address the needs of the modern-day consumer. Appendix Bibliography Alfred, P., & Marika, L. (2005). Challenges of globalization: new trends in international politics and society,. London: Transaction Publishers,. Amy, K. (2004). Globalization’, Economic Review,. vol. 17. no. 3, , pp. 16-19. Bartlett, D. (2010). Korea uses G20 to nurture African links. BBC World Service . Retrieved from: Bhagwati, J. (2004). In Defense of Globalization, Oxford University Press, New York. BUsiness Europe. (2010). The single market is the key for Europe's growth and jobs! Retrieved from: Craft, N. (2000). IMF Working Paper. Globalization and Growth in the Twentieth Century. Croucher, S. L. (2004). Globalization and Belonging: The Politics of Identity in a changing World, Rowman & Littlefield, London Eurostat European Union Statistics. Retrieved from Friedman, T. L. (2000). The Lexus and the olive tree: Understanding Globalization. Chicago: Anchor Books. G20 (2010). Welcome from the Republic of Korea. G20 Seoul Summit 2010 . G20: Johnson, D., & Turner, C. (2006). European business. New York: Taylor & Francis. McAlister, E. (2005). Journal for the Scientific Study of Religion, vol. 44 no. 3,. Globalization and the Religious Production of Space , pp. 249-255. Moore, K., & David, L. ( 2009). Origins of Globalization, . New York: Routledge. Ranger, S. (2007) Minister: Globalization a "Two-Way Street" Retrieved: Shirley, J. (2004). Challenges of globalization. International Review of Management, vol. 44, no. 3 , pp. 143-154. . UNCTAD. (2010). Globalization and Development. United Nations Trade and Development Organisation. Retrieved from: Union, T. E. (2010). External Trade. The European Union . Retrieved from: Wolf, M. (2004). Why Globalization works. New Haven: Yale University Press. World Trade Organisation, W. T. (2010). Globalisation. Retrieved from: Read More