Impact of Globalization on the Processes - Essay Example

Table of Contents 1.0. Introduction 02 2.1. Current Global Scenario 02 2.2. Current Scenario in the Middle East and UAE 03 2.3. Challenges and Problems 03 2.4. Solutions to the Problems 04 3.0. Globalization and MNC’s 05 3.1. PepsiCo 05 3.2. FedEx 06 4.0. Conclusion 07 5.0. References 08 1.0. Introduction Globalization is considered as the worldwide movement towards the economic, financial, trade and communication integration. It is an opening of local and nationalistic perspectives with the free transfer of capital, goods and services across the national borders. It has different meaning for different levels of developments for the countries and the developing countries consider it as the means of integration with the world economy. It integrates the entire global market into one big market. The companies consider it in two ways, firstly, several manufacturing locations across the globe offering products in various diversified industries and secondly, the ability to compete the foreign competitors in the domestic market. In this project we study the current scenario that globalization has led to in terms of both UAE and the whole world. We come across the challenges and problems that different MNC’s are facing in the current world due to globalization and also the possible solutions to the same. Further we discuss the same situation for two world leading companies PepsiCo and FedEx with detailed analysis and suitable solutions to the problems due to labour and cross culture. 2.1. Current Global Scenario Globalization has led to liberalization of trade causing a higher level of exposure to external competition. It has been the new buzz that has dominated the world since the nineties of the last century and has been the source of new opportunities for the developing countries. The world today has turned into a global village and business has taken a global character. Different organisations have ventured beyond the national boundaries and grabbed the business opportunities (Anthony, 2002). Globalization has benefitted almost every country of the world and has raised the welfare of the people and the economic growth of the poor countries and helps reduce world poverty. It has significantly raised the development speed of the countries ensuring the economic, social and environmental sustainability. It has changed the business procedure worldwide in terms of psychology, technology, methodology, mindset work culture, etc. and provided new opportunities and challenges with better profits and prospects. It has enhanced the access to developed country markets and technology has promised improved productivity and higher standard of living. There are some negative aspects that globalization has given rise to and some of them are growing inequalities nationally and globally, volatility in financial markets and environmental deteriorations (Wade, 2003). The low income or the under developed countries are facing serious wealth inequalities due to the policies and practices of the high income and develop countries. 2.2. Current Scenario in the Middle East and UAE UAE has undoubtedly enjoyed global economic success on a very big scale. Many global companies like Microsoft, Exxon-Mobile and Boeing have taken advantage of the tax regulations and the strategic geographic location of the country and have set up their regional offices in UAE. The tourism and hotel industry have experienced a boom with globalization. The infrastructure of the country has also been developed due to globalization. The Middle East is not an attractive location in terms of population and territory but the abundance of natural resources and gas has made these countries active participants of globalization. UAE was only considered to be a desert country but with the discovery of oil the economic picture of the country changed. With globalization, UAE concentrated on other sectors, rather than just oil, to enhance profits. The country has also applied the advancing technology and also cooperated with modern trends and applied the new knowledge that is being applied by the big countries of the world. Globalization has helped in the market expansion of the country and has an active import and export market with almost some big developed and developing nations being the partners in this business with exports comprising of crude petroleum and import of chemicals for the local enterprises. 2.3. Challenges and Problems Globalization has always looked to reinforce the interdependence between different countries and regions. But even though there are some major challenges that the process is facing world over and there are four major challenges addressed by governments, civil society and other policy actors. These four challenges are: The benefits of globalization should reach all countries and should not be confined to the few big guns and this shall not happen automatically. Dealing with the fear of globalization leading to instability in the developing world is the next concern. The increasing global competition shall lead inexorably to race to the bottom in wages, labour rights, employment practices and the environment in the industrial world. Globalization and the related problems are not to be used as excuses to avoid searching for new ways which are in the interest of the people and the country (Spiezia, 2004). Globalization has not been a smooth process and has faced challenges or perceived to cause challenges spurring political backlash and protests. It has also been considered a major reason for the exacerbation of the gap between the rich and the poor both among and within countries. UAE has also faced many problems due to globalisation and the biggest of those is that although it has a huge size economy and creating jobs for people outside the country it has been unsuccessful in providing suitable jobs for its citizens. The country posses a bright political history of providing job to the local people in their homeland which has been ruined after globalization. It has also affected the practices in business and styles of management. It has interrupted the culture and mentality of the UAE people. In the race to attract foreign investors and tourists the country has been compelled to compromise with its deep-rooted Islamic traditions. 2.4. Solutions to the Problems The challenges created by globalization can be met through combined efforts of both the public and the private sectors. The public sector, through participations in development of open economy process and adapting the economic and social circumstances and private establishment of industrial area and free trade zone, are helping fight the problems arising out of the process. Private sector can also help through improved performance and productivity (Jeffrey, 2002). The government is also required to work with social and business organisations to attain different goals. The government is required to fix up a minimum percentage of the total employees and workers as per their size for different organisations and enterprises to ensure job opportunities for the local people. Globalization cannot be considered as the solution for everything as there are very few opportunities which it provides and countries which have grabbed it are flourishing than the ones who missed out on it. Policies of the government are to be so devised that the instability position can be fought. The solution to globalization is not more globalization and pursuing healthy interdependence between the nations with mutually beneficial trade rather than the current unhealthy co-dependence way of business. 3.0. Globalization and MNC’s Globalization has backed the big companies of today to develop a market which is immense in size and has provided opportunities to them for earning profits. Many big companies have seen and seized the opportunity of a quality market in the UAE and Middle East, PepsiCo and FedEx being two of them which are further discussed. 3.1. PEPSICO PepsiCo is a world leader in convenient snacks, foods and beverages and employing over 285000 people globally. Globalization helped the company to mobilize its business in this part of the world and with the tendency to accept customer taste and preferences and also including the demographics, social trends and lifestyle of the local people. The company made immense profits from the markets and set itself for a long future ahead. There have been some common reasons that a company faces in terms of business all over the world and UAE was no different for PepsiCo. Cultural difference plays the role of a very important challenge for any company working outside its local boundaries. A shift in the customer’s likings, rules and regulations against the industry, downturn in the economic scenario and also the tax structure of the country directly accounts for the sales and profit of the company. PepsiCo is facing business problems in the UAE of which some are due to work methodology and some due to managerial expertise (Vrontis, Thrassou and Lamprianou, 2009). A major concern for the company was the labour factor which is the most important for any organisation. With the advancing technology and the technology that the MNC’s bring along with them hampers the labour forces as they are replaced by the technical advancements. Also the pressure of international competition and that from the local products it becomes very important to tap cheap labour for controlling the product prices from soaring high. Maintenance of harmony among the employees is a big asks this makes the company to understand the importance of the social values of the employees and their culture. Also the local governments have taken up steps for the participation and allocation of jobs to a particular percentage, for the local people, for any outside company either producing or working in their country. To meet the challenges the company has tried to set up the best harmony with the labour and also to bring harmony amongst them through socialization of labour. It has provided opportunities of collective bargaining to employees and unions by providing them with common grounds to solve issues. With the need for adapting technology to fight the intense global competition PepsiCo looks to relocate the manpower, who have been replaced by technology, to some other project to ensure job safety and also to retain the knowledgeable local manpower from switching jobs and rendering service to their competitors. 3.3. FedEx Corporation FedEx Corporation is an American global company providing courier delivery services all across the world and having its headquarters in Memphis, Tennessee. It is an export and import company providing other services besides express shipping providing service in about 220 countries and territories. Providing unmatched air route authorities, best transport infrastructure and integration of high class technical infrastructure makes the company the largest freight and express organisation of the world. Alike other MNC’s, FedEx also looked to expand its business to UAE and was quiet successful in this direction. With globalization proving opportunities and the huge scope for such a well organised shipping company attracted it to the Middle East. UAE being a country of great cultural heritage which is influenced by the originality of its people made the business of the company to face intense cultural challenges. Being a global market leader and even in the UAE, FedEx still had to face various environmental challenges and cross cultural challenges with respect to workplace environment and marketing among the customers of the country. The cultural challenges were in terms of religion, language, working style, women at workplace, behaviour, appearance, attitude, etc. These factors are very important for the organisational culture as customer satisfaction and loyalty highly depends upon them. With the aim of carrying business in UAE, the company had to employ UAE local nationals and to reduce operational costs. This caused the company to face various challenges of cross culture and operate efficiently. Islam being the official religion encompasses every aspect of life within the country. The concept of hierarchy is embedded in the business culture of UAE making things more difficult for the company. The dressing pattern of the people, official and widely spoken language of the country and strict prohibition for the use of alcohol makes things more difficult. The strategies that the company applied to combat the problem of cross cultural challenges to evolve as the best in the UAE market were as follows: A basic knowledge and understanding of Islam. Knowledge regarding the role of women in the workplace and at home. Knowhow regarding the Arab workplace culture. Understanding of the verbal and non-verbal communication in the Arabic culture. Attire and dressing sense knowledge. Effective translation during communication. Respecting their prominent factors. With the adaptation of such knowledge and proper implication FedEx can overcome cross cultural challenges to some extent. 4.0. Conclusion UAE has been very immensely influenced by globalization and has actively participated in providing an environment that is apt for business and foreign investment. The country has successfully expanded its import and export markets and has also gained with development in the infrastructure of the country. Globalization has led to openness of country which has resulted in negative impact in terms of culture and tradition. The project has focussed on all such factors and given a study of PepsiCo and FedEx in the similar terms. The Government of the country needs to manage the flow of foreign investments to maintain the economic stability. 5.0. References Anthony, G. (2002). Runaway World: How Globalisation is Reshaping Our Lives. London: Profile Books. Jeffrey, W. (2002).“Winners and Losers Over Two Centuries of Globalization,” NBER Working Paper, No 9161. Spiezia, V. (2004), Trade, Foreign Direct Investment and Employment: Some Empirical Evidence, in Lee, E. and M. Vivarelli (eds.), Understanding Globalization, Employment and Poverty Reduction, Palgrave Macmillan, New York, pp. 143-63. Vrontis, D., Thrassou, A. and Lamprianou, I. (2009). International Marketing Adaptation versus Standardization of Multinational Companies. International Marketing Review, vol. 26(4-5) pp. 477-500 Wade, R. (2003). Is Globalization Reducing Poverty and Inequality? (Development Research Center: London). Read More