Business Globalization - Essay Example

?Running Head: Business Globalisation Business Globalisation [Institute’s Business Globalisation Introduction Globalisation hasemerged one of the biggest realities of today and has influenced every aspect of the lives of billions of people around the world. This paper is an attempt to explore various dimensions of Globalisation for business, which includes the reasons for its growth, trading blocs, balance of world trade, economies of scale, cultural and social change through Globalisation and the other dark side of Globalisation as well. Trading Blocs A trading bloc refers to the agreement between certain countries to reduce trade restrictions, tariffs and other trade barriers for each other while imposing strict trade barriers with other nonmember nations. Without any doubts, trade blocs like ‘European Economic Community’ (ECC) and ‘North American Free Trade Agreement’ (NAFTA) exist because they provide great advantages to the member nations (Prempeh, Mensah & Adjibolosoo, pp. 98-99, 2004). First, large markets created through trading blocs allow production to take place in bulk, which in turn means that firms can take advantage of economies of scale. Second, companies within the trading blocs come closer to each other, which lead to greater competition (Wiarda, pp. 93-98, 2007). Quite understandably, greater competition leads to higher level of efficiency. Third, when tariffs decrease due to trade blocs, the cost of imports goes down and consumers can purchase products with lower prices. Fourth, an individual country may not enjoy that political and economic authority over the globe but a group of countries certainly can have their voice heard (Rossi, pp. 304-305, 2007). In fact, this remains the biggest possible advantage of trade blocs that they allow the members to become interdependent on each other thus making them less vulnerable to the external shocks. Fifth, trade blocs reduce the transactions costs for all the members thus allowing the trade the trade to happen with lesser monetary and time costs (Ervin & Smith, pp. 185-186, 2008). Changes in the Balance of Trade in during 20th century Without any doubts, the world is a completely changed place as compared to what it was a century ago. The world has undergone a complete transformation in the 20th century and the same is true for world trade. The balance of trade refers to the total value of exports minus the value of imports of a country during the given year. The balance of world trade in the past century has changed largely. During the early days of the 20th century, most of the countries at that time used to avoid trade deficits and considered it as bad for the economy. The process of Globalisation was slow and most economies comparatively were closed economies. However, as of the data of CIA for the year 2010, out of the 191 countries on their list, only 61 countries or 32 percent of the countries had a trade surplus and the rest of the them were showing trade deficits. Quite understandably, this refers to the fact that the balance of the world trade in totality is in negative giving a trade deficit. The biggest trade deficit was for the economic superpower United States of America with 561 billion US dollars (Steger, pp. 74-78, 2010). Furthermore, even economic powers like United Kingdom, India, France, Brazil, Canada, and Australia had deficits of more than 35 billion US dollars (Steger, pp. 74-78, 2010). However, upcoming Asian giants China, Japan, and Germany remain at the top of list with trade surpluses of 272, 166, and 162 billion US dollars (Steger, pp. 74-78, 2010). Economies of Scale With Globalisation and increasing international trade, economies of scale have emerged as an extremely important factor in expansion and production of various industries. Economies of scale refer to ‘the phenomenon where the cost per unit decreases with increasing production’ (Rossi, pp. 304-305, 2007). It allows the firm to lower its costs and gain greater market share or the firm may decide to maintain the same level of price and increases its profit margins to reap more profits. Consider the example of computer industry where with the expansion of computer giants like Dell, HP, and IBM, they have been able to decrease their prices (Rossi, pp. 304-305, 2007). The fast food industry has benefited from economies of scale by organizing and training their employees in such a way that they can now handle orders with greater efficiency and responsibility. With the growth of the cell phone industry, it has been able to take the advantage of economies of scale by investing more of their retained income in research and development and technological advancements. This has allowed them to introduce new and innovative products more quickly thus increasing the market demand (O'Loughlin, Staeheli & Greenberg, pp. 214-218, 2004). Globalisation and Organizations finding cheaper resources Today, the mantra of the business is to lower costs and increase the profits. This single thought is driving almost all decisions in most of the companies. In fact, most companies today are using their ability to find cheaper resources as their competitive advantage. There are various reasons for the same. First and quite understandably, due to Globalisation, lifting of trade barriers and expansion of markets, firms in every place in the world are now facing more competition than ever in the history (Mishkin, pp. 149-152, 2008). According to the guru of strategic management, Michael Porter, there are now two ways to beat your competition, either to differentiate yourself from others or offer lower prices. Due to all the technology, imitation has become easy; therefore, it all comes to lower cost, which can be achieved by using cheaper resources. Second, businesses in most of the developing countries realize that resources such as land, labor, inputs, and others are expensive in their country; however, the same remains much cheaper in other countries such as China, Bangladesh, Pakistan, India, Vietnam and others. Therefore, many of the manufacturing and even service companies have outsourced their operations to those countries to gain competitive advantage over their competitors (Wiarda, pp. 93-98, 2007). Deploying culture for Social and Economic Change Companies should follow the example of Merck, which invested millions of dollars, without the support of US government and the United Nations and provided free medicine to the people of Africa and Latin America, which were affected by a deadly disease called river blindness (Robertson, pp. 265-268, 1994). Dell also is investing thousands of dollars in training children from poor and lower class families to learn computer skills, from which they would remain isolated under normal circumstances (Rossi, pp. 304-305, 2007). In this way, these companies have benefited many people and have initiated a process of social and economic change. The point here is that companies should use their resources in such a way that they could provide some benefit to the economically and socially least advantaged in the society (Ervin & Smith, pp. 185-186, 2008). One of the most important ways in which businesses can deploy culture for social and economic change could be through the increased use of corporate social responsibility. This refers to the fact that businesses should try to achieve a balance between their goal of profit maximization and the needs and well-being of the entire society (Collier, Dollar & World Bank, pp. 41-48, 2002). Another way of the same, which is also discussed in length under the later heading, is the process of acknowledging cultural diversity and opening the gates of the company for all people regardless of their gender, race, color, cast, creed, sexual orientation, and other demographics (Steger, pp. 74-78, 2010). Cultural diversity at workplace Quite understandably, the world has become a global village and it is shrinking everyday. Gone are the days when segregation was possible and allowed. Today, diversity and pluralism have emerged as undeniable realities and the same is true for workplace as well. A business can promote cultural diversity through various ways. First, in order to embrace diversity it will have train its employees for the same. Embracing and promoting diversity is not an overnight job but it takes time, effort, and energy (Mishkin, pp. 149-152, 2008). Therefore, the company will have to start a rigorous training for the same purpose. Second, the company will also have to include the same in their vision and mission statement to tell the stakeholders that the business is determined for the same (Rossi, pp. 304-305, 2007). Third, the organizational culture processes, and systems will have to flexible and such which could acknowledge the cultural diversity. They may include flexi time, holidays, leaves, and others. Fourth, consider the example of Colgate, which has associations and affiliations with more than 35 minority organizations for African Americans, Asian Americans, Hispanic Americans, Gays, Lesbians, Women, and others. Fifth, the company will have to acknowledge cultural diversity by introducing separate products or services for different target markets (Steger, pp. 74-78, 2010). Importance of Globalisation for employees of Dell Globalisation and its impact on a company are of great significance for its employees. Consider the example of Dell, which is quickly globalizing. Its employees will be concerned for various reasons. First and the most important would the due to the fact that Globalisation will allow the company to encounter with different cultures and in order to deal with them, it would be important for the company to have ample information about their cultures (Gannon, pp. 25-28, 2007). For example, in Japanese and Chinese cultures great significance is laid upon the age of the employee which means that an older employee will have to respected even if they are a lower level of hierarchy or even if they are at the wrong side (Prempeh, Mensah & Adjibolosoo, pp. 98-99, 2004). Furthermore, in Middle Eastern cultures, there is a completely different concept of time. In Western cultures, time is viewed as an asset or an important resource, which one lost, is impossible to retain back. Therefore, waiting for someone is equal to disrespect and insult (Collier, Dollar & World Bank, pp. 41-48, 2002). However, the same does not hold true for Middle Eastern cultures because they do not place importance on time but on relationships. If a guest has kept one waiting, it probably means that he wants to meet after being completely free from other commitments, which is a good sign (Ervin & Smith, pp. 185-186, 2008). Globalisation, Poverty, and Hardships Where Globalisation has transformed the world and improved the lifestyle of millions of people, it has been blamed for increasing poverty and hardships for millions in the world. Critics claim that Globalisation has only benefited the western world and despite all their claims, many countries in Africa and Asia still have a considerable number of their people living below the poverty line (Prempeh, Mensah & Adjibolosoo, pp. 98-99, 2004). It has forced any underdeveloped and developing countries to lift trade barriers and allow those small firms to compete with international business giants, which has ultimately resulted in the loss of jobs and closure of business by many local entrepreneurs and workers (Scholte, 230-240, 2000). Therefore, Globalisation has facilitated competition on an unfair ground where many small and local workers have lost their jobs. Furthermore, by allowing foreigners to exploit the resources of poor countries, it has increased the gap between rich and poor (Waters, pp. 10-12, 2001). For example, in 2000, the richest 1 percent adults of the world owned 40 percent of the world’s assets and the richest 10 percent adults were incharge of 85 percent of world assets. However, bottom 50 percent of the entire population in the world has only 1 percent of the world assets at their disposal (O'Loughlin, Staeheli & Greenberg, pp. 214-218, 2004). References Collier, Paul, Dollar, David, & World Bank. 2002. Globalisation, growth, and poverty: building an inclusive world economy. World Bank Publications. Ervin, Justin, & Smith, Zachary Alden. 2008. Globalisation: a reference handbook. ABC-CLIO. Gannon, Martin J. 2007. Paradoxes of Culture and Globalisation. SAGE Publications. Globalisation and the human factor: critical insights. Ashgate Publishing, Ltd. Mishkin, Frederic S. 2008. The Next Great Globalisation. Pearson Education India. O'Loughlin, John Vianney, Staeheli, Lynn A., & Greenberg, Edward S. 2004. Globalisation and its outcomes. Guilford Press. Prempeh, E. Osei Kwadwo., Mensah, Joseph, Adjibolosoo, Senyo B-S. K. 2004. Robertson, Roland. 1994. Globalisation: social theory and global culture. Sage. Rossi, Ino. 2007. Frontiers of globalisation research: theoretical and methodological approaches. Springer. Scholte, Jan Aart. 2000. Globalisation: a critical introduction. Palgrave Macmillan. Steger, Manfred. 2010. Globalisation. Sterling Publishing Company, Inc. Waters, Malcolm. 2001. Globalisation. Routledge. Wiarda, Howard J. 2007. Globalisation: universal trends, regional implications. UPNE. Read More