Globalization: The Impacts of Globalized Business Transactions - Research Paper Example

Globalization: The Impacts of Globalized Business Transactions Introduction Globalization, without a doubt, is one of the most fascinating concepts of the 21st century. Polarized from its very definition to the explicit effects on the trans-border exchanges across the globe, the concept, seemingly, knows not unanimity. It is a concept defined along the internationalization of borders, integrating global markets for easier transfer of goods, services and capital, yet intelligent minds with access to similar information still draw different conclusions on the realities in the open. With a powerful internet regime aiding a voluminous international exchange through an omnipresent availability of data, the world has graduated from the primary obstacles of geography and social boundaries to a higher level thinking of strategies capable of penetrating even the potentially valuable networks born out of the same process. Indeed an inkblot test generating endless debate on either of the divide, the impact of globalization on global business is not only an opportunistic phenomenon opening doors for the proactive and the visionary, but also an evil aspect of modernity that buries the hitherto fundamental norms and behaviors across nations (Levitt, 1983, p. 92). The Positives Effects of Globalized Business The implications of increasingly globalized market transactions are voluminous. In essence, the rather enlarged scope has blurred the distinction between the domestic and the international while seeking to reward players [the small and big moneyed] with larger visions, which is, for sure, every business’ desire (Hax, 75-77). Though challenging, enterprises that learn to adapt fairly quick enough into more complex and uncertain environments seem more likely to realize even better results in terms of greater revenues due to the expansive nature of the international market. From an economic perspective, “Globalization” is an essentially inevitable and almost unchallengeable exchange process that is gradually destroying and/or building on the traditional business procedures, with value additives that have significantly impacted the world’s economies, with manifold effects. With trade liberalization as the primary engine opening up international markets for the exchange of goods and services in a “borderless” system, the growing interdependency among the world’s economies via the multinational nature of sourcing, trading, manufacturing, and investment activities has magnified the frequency of cross-border transactions and financing, heightening the intensity of competition; a competition that is large scale and enlightening in character (Hout, 1982). There is no gain saying that the new generation of national governments is developing a series of ambitious economic policies and economic reforms aimed at integrating themselves within the global economy. More than any other time in history, the advances in communication technologies, the ever expanding economic growth and wealth across the globe are weakening the boundary walls erected even by the pioneer advocates, thus making the formation of economic trading blocs a viable bargaining chip for the preservation of common interests (Hax, 1989, p. 92). With the development of new technologies, countries have formed irreversible linkages shifting the focus away from the nation state towards industry oriented specialization. Sagagi (2007) is categorical in his analysis stating that “though willingly, countries at different stages of development are grudgingly liberalizing their economies to allow for direct foreign investments and reap from the obvious benefits such as the transfer of technical know-how”. Indeed as Ajayi (2003) reports, global trade flows increased 16 fold over the last 50 years, thus bridging the income between the poor and the rich nations. Observably, globalization is but a new commercial reality standardizing markets with increased trade transactions and income levels in magnitudes previously unimagined. A concept with innumerable facets, globalization of markets has enabled efficient, free flow of business activities by remodeling the old manufacturing systems towards economically sustainable production modalities. Through outsourcing of business activities, firms are more capable today of shifting to places best equipped to produce the intended products at the lowest possible costs; a trend evident particularly in the service sectors. Engardio, Bernstein, & Kripalani (2003) writes that companies such as Microsoft, IBM, Intel, and Philips among other manufacturing and service firms engage in massive outsourcing activities, especially those involving specialists, in dealing with cases of customer relations in various parts of the world. Of course such business activities also result in job shifts from one country to the next, forcing changes in company structures to accommodate the expanding nature of firms going international. In extreme scenarios, the phenomenon is also driving alliances in sectors dealing in products of similar qualities (Cavusgil, 1993, p.86). Alliances among automakers such as GM-Ford- DaimlerChrysler, Ford-Mazda, and GM-Honda, the airlines alliances such as the star alliance, and BP-Mobil, NUPI-Chevron Texaco alliance in the petroleum industry are but the creation of globalization. Though many may not be aware, a customer’s service claim to any of the above mentioned companies emanating from Nigeria, for instance, could be getting a response from the main office headquarters in New York, United States. Similarly, an insurance agent may be processing the customer’s claims of damages in Dublin, Ireland. The invention of the internet, in particular, has enabled not only swift responses to such claims, but customers are now more capable of receiving detailed information at a comparatively cheaper, affordable, and sustainable costs. To be sure, the introduction of the “global economy” has conferred organizations around the world with a global status that was a mirage only a couple of decades ago. It is, therefore, not unusual for organizations headquartered in far lands to oversee subsidiary operations located in other countries; utilize technologies developed in other countries; and sell products in a number of countries across the globe. Essentially, globalization has expanded market for goods and services, boosting industrial and economic growth of the world‘s economy (Pearce & Robinson, 2003). By and large, the removal of trade barriers and the subsequent opening up of the formerly shielded markets against competition has spurred quality production of goods and services. Implicitly, an essential pace for extraordinary creativity and continuous innovation putting entrepreneurs on their toes with constant “learning” is on course. A couple of decades ago, only a handful of multinational companies with immense financial muscles could effectively penetrate the emerging international markets with ease. It is undeniable that the inflow of foreign capital has not only opened up funding opportunities leading to a proliferation of numerous types of international business transactions, but it has also transformed the traditional export-import and foreign direct investment engagements into more complex, but beneficial exchanges beyond goods and services. As businesses from every corner of the world seek to navigate the new competition thicket brought about by the phenomenon at hand, the collaborative networks formed in the processes of exchange transform themselves into linkages aiding the transfer of managerial and technical skills or expertise across borders (Akpor-Robaro, 2012). Courtesy of globalization, the modern rapid transfer of technology between markets and players is fast breaking the traditional monopolistic sources of advantages leading to inefficient production methodologies. It is quite evident that a perfect remuneration hitherto regarded as indefinite for patent holding companies such as the Bill Gates’ Microsoft has long been broken into by even smaller enterprises. Indeed with globalization reaching even the previously remote areas of the world, more old companies like the Microsoft are finding their patents mere papers long overtaken by events; and instead opting to open them for mass usage globally as they seek to make their services superior for more customer base. Although reported scantily in globalization literature, the concept discussed herein has positively augmented entrepreneurship personality change, through the intercultural associations and interactions (Akpor-Robaro, 2012). The Intercultural contacts within the international market afford individual entrepreneurs rare opportunities of learning and adopting varied entrepreneurial cultures which are essential in driving global business success while fast discarding the non-profit boosting cultures. The Negative Effects of Globalized Business While it is evident from the foregoing that economic globalization has been somewhat beneficial, the negative effects of the process are creating unnecessary havoc in far lands, with inerasable conflicts that are in dire need of urgent remedies. The promises of the late 1980s and early 1990s clamor for liberalization policies has only turned into a gimmick that is enriching the powerful while weakening even the down trodden. According to Osland (2003, p. 141), the liberation policies that literally resulted in the opening of borders have more than exposed the vulnerable nations to the stronger global market forces, ultimately making the race to the bottom even much feasible in the 21st century. More than any other time in history, economic globalization via the multinationals has suppressed the labor standards of the developing world to dangerous levels. Because governments view themselves as competitors in a world where capitalism matter the most, the multinationals corporations’ (MNCs’) power have been strengthened by the credible exit threats, leaving the former with less bargaining power in championing the interests of its citizens even in the obvious, extreme cases of massive labor exploitation (Huber and Stephens, 2001, p. 224). A survey of 11 countries by the US Labor Department reveals that five actually went to the extent of luring the multinational enterprises into their territories by not only offering them a tax-free status for a certain number of years, but also exempting them from adhering to the hitherto existing labor codes enforced elsewhere [in the five countries] (Charnovitz, 1992, p.343). With the labor unions kept at bay by the threat of mobile capital, even the International Labor Organization [ILO] is making no tangible efforts addressing the foregoing, perhaps due to the threats of funding withdrawal. George Soros (2002) puts it clearly that globalization has elevated the provision of private goods above the more important public issues of peace, the protection of fundamental human rights, poverty eradication and more importantly, the right to a healthy working environment. Among the exploitative practices of the multinationals commonly cited by anti-globalist are child-labor, unwanted collective bargaining, hazardous working conditions and extended unpaid working hours (Lawrence, et al., 1996). Klein (2000) goes further to pinpoint the export processing zone factories that hire, fire and rehire workers at will thus avoiding worker-benefit commitments that would otherwise cut down their huge profits. Even at their current state of affairs, globalization is increasingly making it difficult for the poor nations to identify just what exactly constitute their national economies. Indeed, governments have been reduced to mere ceremonial actors right in their backyards, as aggressive production systems and capital markets under the stewardship of the transnational organizations take the center stage in commanding their economic developments. Through the IMF and the World Bank, the neo-liberal policies have forced the raw commodity prices that the LDCs so much depend on down to the sustenance levels. Without a doubt, the policies have drastically reduced the social safety nets of the poor countries, thus making their economies less and less competitive in the globalized economy (Falk, 1999). The imbalanced relations has so far strengthened the rich by increasing their wealth and power [influence] as the poor’s cake gets even much smaller [the widening inequality gap] (Stiglitz, 2002, p.9). It is rather pathetic that the richest 20 percent of the world’s population are firmly in control of [receives] 86 percent of world’s GDP combined, pockets 82 percent of export trade as well as 68 percent of foreign direct investment the world over, yet the world’s poorest 20 percent only receives one percent (UNDP, 1999). The same report further revealed that a paltry 358 individuals the world over own as much wealth as that owned by 2.5 billion people; an indication that an overwhelming share of the modern international business belongs to these favored population. The net result has been far from the much anticipated convergence of incomes worldwide, with the Asian Tigers managing to slip through a narrow window to prosperity by cashing on job shifts from the pioneer advocates of liberations policies, while poorer nations of Africa and Latin America retarding even further behind. In fact, while the rich nations are getting a medicine of their own creation via the relocation of the very multinational corporations to countries considered cheap in terms of operation costs in the 21st century, poor nations suffered the loses three decades way back as the infant industries became extinct (Lee, 1996). Quite on the contrary, the creation of winners by job shifts in developing countries makes no sense as the wages receive at the rear end are only enough for bare survival; in essence, globalization is constructing choices on how people make their living (Daly, 1996). Conclusion and Recommendations The preceding exploratory analysis on the impacts of economic globalization has clearly demonstrated that behind the seemingly positive rewards of the concept discussed herein lie massive fundamental flaws that threatened to push even the pioneer advocates to the periphery. A highly uneven process that has fallen behind its weight with a feasible threat of sinking the prospects of billions the world over, globalization is but a paradoxical force with an inbuilt moral decadence effects pitting the West’s value systems against everybody else. Indeed, while advocates praise the phenomenon as a good thing in the modern world, it is an almost obvious fact that with the poor infrastructural conditions in most of the developing nations, local entrepreneurs stand little competitive advantages over the oiled machined multilateral corporations. The ever burgeoning literature on the controversial effects of globalization underscores the status of a moral dilemma, thus making it [globalization] rightfully a deceptive, fraudulent and value corrupted concept. As the adage goes, “solutions of any problems are but in the roots.” The problems of globalization are international in character. It follows, therefore, that the solutions must also be international in character. Though still very inefficient in a number of ways, the United Nations has done fairly well in arbitrating issues of world conflicts since the Second World War. As evident in the mass protests against the WTO over its stewardship in an era of widening inequalities, the world is headed for even greater conflicts over unfair distribution of resources. The unwanted markets as well as the current international trading deficiencies can be promptly resolved if the organization were to have a little more power to crack the whip; a power vacuum that only require all nations to act to avoid an impending disaster. References Ajayi, S. I. (2003). Globalization and Equity in Sub-Saharan African: The Myth and the Reality. Retrieved from www.gdnet.org Akpor-Robaro, M. R. (2012). 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