Challenges of Globalization for Contemporary Companies - Literature review Example

Globalization Name Class Unit Introduction As the world has changed from industrialization to globalization, organization management has changed a lot. The market has been able to dictate on the way organizations act and how they manage their workers under globalization. Globalization has been able to evolve due to trade across international boundaries and technology. The effects of globalization have made it a concept that needs to be understood by the organizations as they operate in today global market (Mussa, 2003). Organizations have been faced by challenges and opportunities as a result of globalization. The purpose of this essay is to look at the concept of globalization and the challenges of globalization on today’s organizations. The essay will start by defining the concept of globalization. Furthermore, the essay will discuss challenges today’s organizations are faced with as a result of increasing globalization using examples. All this will be achieved through use of peer reviewed journals and textbooks. Globalization has been fueled through increase in foreign investment and international alliances for trade. The process of globalization have been aimed at nations being able to work together to build their strength and joining efforts for mutual benefit. Granell, (2000, p. 89) referred to globalization as ‘It means integrating differences, putting together our strengths, building from the differences and being able to join efforts for a win-win process’. According to Granell, (2000, p. 89) ‘Globalization is a worldwide pressure for change’. Gradual improvement in technology in areas such as communication and transport has made globalization possible. The force that has made globalization to be realized is the benefits that people have been gaining from the process through trade, investment, access to resources and acquiring new ideas. Today, globalization is associated with better living standards. There are improved technology, quality medical care and increase in global per capita income. According to Anuar, Supian & Anuwar (1996), globalization is the continuous integration of countries into the global economy. Globalization is still ongoing at an accelerating trend. Despite the positive outcomes associated with globalization, it is still have its negative aspects. Organisations have been able to enjoy the benefits of globalization and also exposed to the challenges that are associated with it. International trade has been a major benefit for globalization (Granell, 2000). Today’s managers are faced with several challenges due to globalization. Failure to manage the challenges faced by organization managers can lead to loss of market and reduced return on investment among other negative impacts (Herrmann, 2012). The challenges brought about by globalization to the managers include managing in diverse cultures, maintaining social responsibility and ethical standards globally and technological changes. Thus, despite various definitions to globalization, they all imply that globalization is integration of countries which have been supported by technological change and free trade. As the organization starts global operations, management are supposed to know different cultures and how they operate. The success of global operation is based on understanding culture and its influence on business. Herrmann (2012) asserts that ‘Cultural awareness as well as the understanding of the challenge will most likely lead to an opener communication between the subsidiaries’. For most global companies, managers come from different cultures. A manager can be transferred from USA to China to operate the business there. Hofstede came up with the five cultural dimensions to help in decision making in different cultural environments (Hofstede, 1984). Different countries vary on the five dimensions from Hofstede’s study. The five elements are power distance, uncertainty avoidance, individualism versus collectivism, masculinity verses feminism and long term versus short term orientation. Power distance refers to the way power is distributed in the society and the way the society accepts the distribution. Uncertainty avoidance refers to the way in which each society accepts ambiguousness. This refers to the way individuals adopt set boundaries or structures. The way the individual acts based on their interests or group interests is what individualism and collectivism refers to. All the five aspects are different in each country (Hofstede, 1984). Herrmann (2012) asserts that ‘employees may be resisting a company’s corporate culture if it is counter to the beliefs of their own national one’. For managers who are in a global arena, they are faced with different cultural scenarios. For example, a manager from America, which has a low power difference may face difficulty in adapting to China where there is a high power difference. Managers who have no skills in multicultural management find it difficult to work in new cultures. They find it hard to lead a team in a foreign country without making mistakes (Mussa, 2003). Companies always find problems while adjusting to a new cultural environment. The company management is always faced with a dilemma when choosing to operate in a new country. This is due to fact that they have to choose an entry approach that will lead to less cultural issues. Strategies used in managing across cultures are training managers on cultural awareness, forming strategic alliances with local firms, supporting cultural diversity and initial assessment on foreign culture (Granell, 2000). Maintaining corporate social responsibility and ethics in a global environment is a major challenge that faces global managers. The challenge is supported by the fact that different countries have different national rules and regulations and culture. In some countries, there are weak legal frameworks leaving loopholes which might lead to the management making mistakes. Some of the organizations have been under legal tussles due to abuse of corporate and ethical standards. For example, some organizations have been accused of child labor (Gupta, 2013). Organizations are easily affected by issues related to the social responsibility and ethics due to pressure provided by the interest groups and public. There have been introduction of international laws which are aimed at monitoring the companies. The international arena consists of many stakeholders whose interests are to be catered for. According to Gupta (2013, p.37), ‘in the international arena, such concerns are compounded by the larger numbers of stakeholders involved, including customers, communities, allies and owners in various countries’. This is in contrast with the domestic arenas where the complexities are not much. For a manager in a global organization, they have to ensure that the numerous stakeholders are catered for (Mussa, 2003). Multinational companies are expected to use their role in corporate social responsibility to ensure that they address the world special and economic needs. According to Gupta (2013, p.37), ‘globalization has multiplied the ethical problems facing organizations’. Management decision should be according to the international social responsibility. Managers are expected to maintain ethical and social responsibility across boarders making it a complex task. There are efforts by the organizations to come into consensus on what should constitute the global ethical and corporate culture. Despite the efforts, the issue is still a challenge to managers in global organizations. Technology is changing at a very fast rate in the global business environment. Herrmann (2012) assert that ‘globalization is happening and it is happening very fast due to the improvement of technology’. Organizations are expected to manage technological change and ensure they are at par with the current trend. Most of the multinational players’ use technologies to enable them maintain a competitive advantage (Anuar, Supian & Anuwar, 1996). An example is Toyota who uses modern manufacturing technology to produce their vehicles. The rise of foreign direct investment due to globalization has made managers to face a challenge of technological change. Organizations with low skilled workers and poor technological infrastructures are finding themselves being eliminated from global competition. The management of the organizations has to ensure that they are at par with the current technology and skills. There have been efforts where the technologies have been integrated into the management, financial and marketing in a firm. This implies that today’s manager have to be equipped with technology skills (Herrmann, 2012). To be able to acquire and accommodate new technologies, the organizations require a manager who is skilled. Technology has been quoted as the main force that is making the managers to be effective and efficient (Herrmann, 2012). Technology has acted as the power for modern global organizations’. Use of technology in today’s organizations has led to a new breed of managers who can manage in a complex situation using technologically generated data and statistics (Anuar, Supian & Anuwar, 1996). The consumers have become more enlightened through technology, which has led to the need for the managers to be more efficient in their practices. Herrmann (2012) claims that ‘internet business seems to have a major effect on competition and market developments as the actual location of a company do not really matter anymore’. There have been rise of e-business which requires the management to be technologically empowered. The board and management meetings have been conducted using the technology platforms. A manager in the US can have a meeting with employees based in Australia through platforms such as Skype. Organizations have also increased their use of internet through web application in conducting their business. This implies that the management must be well versed in technology in the global arena. To keep up with technological changes in global arena, organizations have invested heavily in research and development and staff training (Gupta, 2013). The purpose of this essay was to look at the concept of globalization and to focus on three main challenges facing managers in global organizations. Managers in global organizations are faced with three main challenges which are managing in different cultures, maintaining corporate social responsibility and ethics in the global arena and technological changes. Globalization involves the countries being able to put their efforts together for mutual benefits. Globalization is a global pressure for change that has been fueled by the benefits that have been achieved through trade, investment and access to resources. Through globalization, standards of living have changed for better. Managing in different cultures requires the managers to be equipped with multicultural management skills. The managers are also expected to maintain social corporate responsibility in a complex global arena. The managers have to ensure they understand rules and ethical operations in their countries of operation. Technology is changing at a fast rate in the global environment. Technology has also been one of main driver for globalization. Managers in global organizations are expected to be well versed with technology and keep at pace with its changes. Managers in global organizations are expected to face and cope with these challenges in order to manage effectively. References Anuar, A. M., Supian, A & Anuwar, A 1996, ‘Globalisation Challenges and Competitiveness: The Role of the State and Private Sector in Malaysia’, Managerial Finance, Vol. 22, no.5, pp. 59-69. Granell E. 2000, ‘Culture and globalisation: a Latin American challenge’, Industrial and Commercial Training, Vol.32, no.3, pp. 89-94. Gupta, A. 2013, ‘International Business Environment: Challenges and Changes’, Research Journal of Management Sciences, Vol. 2, no.11, p.34-38. Herrmann, A. 2012, Globalization and its Effect on International Business, Global Awareness Society International 21stAnnual Conference-New York City. Hofstede, G. H 1984, Cultural Dimensions in Management and Planning, Asia Pacific Journal of Management, pp. 81-99. Mussa, M. 2003, ‘Meeting challenges of Globalisation’, Journal of African economies, vol.12, no1, pp. 14-34 Read More