The Main Forces Causing Globalisation to Increase - Case Study Example

The Main Forces Causing Globalisation to Increase and the Challenges That Globalisation Presents To Multinational Businesses Our world since its origination has been a ‘hotbed’ of activity. That is, the mental and physical activities of humans have transformed our globe from an archaic one to an advanced one. Many movements in the course of world history have initiated or boosted this advancement. It was only after industrialization that advancement or growth spread to majority of the world population, which in a way changed lives of many people. And as time flowed, new movements or changes started to have effect on the lives of people and international relations, aiding as well as affecting it. Among the many movements, globalisation had and is also having a major impact on the people worldwide. Globalisation literally means the transformation of local phenomena into a global one. Globalisation is a practice of interacting and mixing or assimilation among people, companies and governments of different countries whose significant feature is international industrial and financial business structure. Globalisation may be thought of as the widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary social life, from the cultural to the criminal, the financial to the spiritually. More formally, globalisation can be categorized as a process that embodies a transformation in the spatial organization of social relations and transactions (Wiley, Nandi & Shahidullah, 1998, p. 21). Hyperglobalism conceive globalisation as a new age of economic integration that is characterized by open trade, global financial flows as well as multinational corporations. Hyperglobalism is driven by capitalism, communications and transportation technology, integration into one world market and it is increasingly eroding state power and legitimacy. Probably the largest body of opinion - and one that spans the entire politico-ideological spectrum - consists of what might be called the hyper-globalists, who argue that we live in a borderless world in which the 'national' is no longer relevant (Dickens, 2008, p. 6). The so said social relations and transactions are assessed in terms of their extensitivity, intensitivity, velocity and impact and the rate at which they generate transcontinental or interregional flow and networks of activity, interaction and exercise of power. This process of globalisation is triggered by international trade and investment. The purpose of this study is to analyze the nature and extent of globalisation. We shall further explore some challenges particularly ethical concerns that must be considered by managers when deciding to take their operations global. Fig. 1: (Dickens, 2008) Forces causing globalisation The policies and technological advancement have opened up many domestic and international economies unlike during the Second World War. The adoption of free market economic systems by many governments has amplified their industrious potential within years and created numerous of opportunities for both international trade and investment. There negotiated reduction of barriers to trade by governments and the establishment of international agreements that promotes trade in goods, services and investment have also initiated the globalisation process. Corporations have benefited from overseas markets by constructing new foreign factories and through establishment of marketing and marketing arrangements with foreign associates. Among the many economic based movements, globalisation is the one which had and is still having major impact on the economic development of many countries and its people worldwide. “The word globalisation marks a set of transitions in the global political economy since the 1970's, in which multinational forms of capitalist organization began to be replaced by transnational” (Appadurai, cited in Meyer and Geschiere 1999, p.307). Economic part of globalisation is the key because with the whole world becoming a kind of global village, barriers between the countries are broken with integration happening mainly in the economic aspects. In this scenario, foreign organizations, using the globalisation plank, have entered and will also enter various sectors of the businesses leading to the establishment of many industries and thereby having an impact on multiculturalism. But, the fact is, the entry of countries into various territories and thus making impact on the culture was an age old phenomenon, which took place place under the guise of imperialism. That is, after Vasco da Gama found the sea route to India, circumventing the Cape of Good Hope, major European countries from the initial years of 1500’s moved in large numbers to develop trade relations. (Gopinath, 2008, p16). This trade turned into imperialist leanings due to the weakness of the Asian as well as African countries and in course of time lead to the formation of multiculturalism in a basic and minimal scale. This negative act of imperialism continued throughout the 20th century and only after the advent of globalisation, this entry into foreign territories acquired positive meanings. Now, in the post industrialization era, organizations or firms cannot remain “static”. They has to keep on moving breaking ‘boundaries’ both geographically as well as economically, to actualize the opportunities and emerge successful. That is, with every firms wanting to expand their geographical reach and make an imprint in various markets apart from their home market, there will be enough opportunities for it, to initiate an entry into a foreign market. Their movement abroad is hastened by depression in the home market, which may result in part from their own diminishing incentive to invest due to their ever more extensive market power and collusive agreements. (Pitelis and Sugden, 2000, p.16) Free trade has been promoted by decreasing or abolition of tariffs, creating free trade zones with minimal imposition of tariffs, reduction in transport costs through containerization for ocean shipping, reducing or abolition of capital control measures as well as balancing subsidies for local businesses. Restriction of free trade is done by harmonizing the laws that regulate intellectual property across most states and supranational acknowledgment of intellectual property and patent rights. Communication technology and the worldwide marketing of western cultural has triggered cultural globalisation. Developments as well as advances in information technology have been another most important driver of globalisation by spectacularly transforming the economic life. Information technology gives individual economic actors like the consumers, producers, investors and businesses an important tool for identifying and pursuing the underlying economic opportunities. This has been possible through the use of faster and more up to date analyses of global economic trends, easy transfer of assets and partnership with distant partners. Challenges to multinational businesses The proponents of globalisation agree that globalisation allows poor countries and their citizens to grow economically and as a result improve their lives, whilst the opponents of globalisation argue that the establishment of unregulated free markets has instead benefited the multinational companies in the western world at the expense of the local companies, local culture and the ordinary people. There has been increased resistance towards globalisation and this has taken form at both popular and governmental level while at the same time people try to control the flow of capital, labour, goods and ideas that make up the present sign of globalisation. Globalisation presents opportunities for economic growth and thus employment and increasing incomes but it raises the concerns about the negative aspect of the labour market risks in the form of unemployment, downward wage pressures and a race to the bottom in the working conditions. Firm hiring and firing rules tend to affect women and young workers. Most of the world’s biggest employers are now global and most companies are signing global agreements which are often called framework agreements and they cover issues ranging from trade union rights and collective bargaining rights to information and consultation, equal opportunities, safety and health, minimum wage standards and the banning of child labour and forced labour. At the global level, there is a crucial difference between a unilateral company code of conduct and a union management agreement. Companies have been relocating or outsourcing to other countries where there are lower wages and often much lower standards. Service jobs are not necessarily sweat jobs and high staff turnover and poor career advancement are found anywhere in the world. The service jobs are relatively high skilled. When managers want to take their operation global, they should consider effective support for workers and their communities, they should observe fundamental workers’ rights and hold prior consultations and negotiations with workers representatives before they introduce change in their operations. Globalisation has helped extend the market and the responsibility for goods produced under extreme forms of exploitation such as child labour or forced labour. Challenges in recruitment for the Multinational Businesses In a multinational company, the workforce recruited will show a lot of diversity. That is, as MNC’s are organizations which are established on foreign shores, it would have ‘collage’ of workers. (Scullion & Collings 2006). As mentioned above Organization is a ‘structure’ where ‘collage’ of workers will do their allocated work. This team of workers like the five different fingers in one’s hand; will be different from one another having different characters, attitudes, education, background and importantly ethnicity, thereby bringing in the diversity element. So, in case of MNCs, recruitment of these diverse workers under the concepts of Human Resource management (HRM) will be the common feature. That is, MNC will be composed of workers from three national or country categories, when they are recruited to fulfil the various needs of the MNC. The employees from the parent country where the firm is usually headquartered or based (or came from) are called Parent Country nationals (PCNs). The employees from the host country where a subsidiary or MNC may be located are called host country nationals (HCNs). Finally, there will be third or other countries which may be the source of labor, finance, research and development, and the employees from these countries are called third country nationals (TCNs) (Scullion & Collings 2006). These all three groups of workers or at least the first two groups of workers will normally be recruited by MNCs, to fulfil certain needs and also as a form of necessity. MNC are some times forced or duty bound to recruit employees from the host country. That is, MNCs mainly set up their subsidiaries or units in other countries, to tap the resources of the host country and thereby earn benefits from it, and so it is normal or necessary for those MNC to give a share of their benefits, back to the people of the host country. The benefits for the HCNs will be mainly given by the MNC, through maximum recruitment of them. That is, HCNs according to their skill, knowledge, experience, attitude, etc will be recruited by the MNC and HRMs for various positions, thereby fulfilling the necessity. Apart from fulfilling the unwritten rule of giving employment to the locals, this recruitment procedure will also benefit the MNC in other ways by providing them surplus and some times cheap labor. (Scullion & Collings 2006). So, MNC by recruiting HCNs can strike two blows with a single stone. But, some times, MNCs stationed in foreign countries will discriminate the HCNs on the basis of religion, race, caste, sex, etc. In host countries, there will be different religions or cultures or castes, etc, and if the MNCs without understanding their uniqueness and importance, ignore workers from these backgrounds, it will lead to the failure of the recruitment process, as the whole organization will come under fire. “Common values and standards allow people at the front lines to make consistent decisions, even under pressure.” (Rosabeth, 2008, p.44). So, the HRM policies of MNCs should be optimized to include HCNs in their functioning, so that discrimination charges are nullified and also appropriate employees are recruited. Challenges for the multinational businesses while operating in the foreign countries From time immemorial, these countries particularly the Asian countries only carried out agriculture for their livelihood. However, just before and particularly after the onset of globalisation, these countries and their governments started to focus on industrial development. Thus, globalisation turned out to be a godsend opportunity to these countries. That is, these countries opened up their markets and invited the foreign companies with a slew of schemes and benefits. The foreign companies for the part maximally invested in these Third World countries to optimally tap the cheap labour and the resources, thereby garnering good returns. As a sizeable portion of this good returns went to the local employees, their economic standing and their standard of life improved a lot. With this positive change of events, globalisation and the resultant industrial optimization was appreciated and welcomed by majority of the people in the Third World countries, with only a minority of the population opposing it. The minority does not have valid arguments and oppose globalisation only as an excuse of their inability. That is, although their grouse against globalisation is real, the reasons put forward by them does not hold good and exposes their shortfalls. As part of globalisation, business organizations have entered many countries economically helping them as well as destroying them. Rapid growth and poverty reduction in many Third World countries like China (China is now only in the top echelons), India, and other African countries that were poor 20 years ago, has been a positive aspect of globalisation. However, globalisation has also generated significant international opposition over concerns that it has increased inequality among the local population and also causing environmental degradation (worldbank.org). That is, with the foreign firms enticing maximum local customers with quality products or services and through their effective marketing strategies, the home grown businesses are deprived of their long standing customer base. Although, they indigenous businesses can improve and standardise their quality, it was not happening. When customers have similar expectations of quality and performance, or when products have universal specifications, standardization is the best option, as it reduces costs, allows better planning, and projects an image of uniformity (Cavusgil et al, 2008, p. 519). As the home grown business does not elevate themselves up to the levels of the foreign companies in terms of quality as well as other factors, they are ignored by the local customer base. Thus, loss of customers and market share, happens mainly due to the inability of the local businesses, however they wrongly fear that large multinationals would drive them into extinction and cripple domestic entrepreneurship. (Bhagwati 2004, p. 181). Because of this fear and self-made losses, people dependent on home grown businesses appear to suffer, with economic inequality being the main problem. The economic inequality between the people benefiting from the globalisation and people suffering from globalisation and the resultant differences in the lifestyle creates a lot of tension and even clashes. Demonstrations against globalisation are also mainly carried out by these local people who oppose globalisation and the businesses which operate as part of it. Conclusion To conclude, globalisation is a challenge not only for the economic, social and political forces of society and the world. It is also a challenge to the Multinational companies. Globalisation is an omnipresent and continuous phenomenon impacting the lives of many people. As it impacts people in various countries, it has an impact or effect on the way multinational businesses function. With globalisation making both positive and negative impacts, multinational businesses with sound business strategies should have surmount the challenges. The impact of globalisation will continue in the future as well, and it is up to the multinational businesses and people to make sure there are mainly benefits. References Bhagwati, JN 2004, In Defense of globalisation, Oxford University Press US, New York. Cavusgil, S. T., et al 2008, International Business: Strategy, Management, and the New Realities, Prentice Hall, London. Dicken, P., 2007, Global Shift: Mapping the Changing Contours of the World Economy, 6th Edition, Sage, London. Gopinath, C, 2008, Globalisation: A Multidimensional System, Sage Publications, London Meyer, B and Geschiere, P, 1999, Globalisation and Identity: Dead certainty: Ethnic Violence in the Era of Globalisation by Arjun Appadurai, 305-324, Wiley- Blackwell, New York. Pitelis, C., and Sugden, R 2002, The Nature of the Transnational Firm, 2nd Edition, Routledge, London. Rosabeth, KM 2008, Transforming Giants, Harvard Business Review, vol. 86, no. 44. Scullion, H & Collings, DG., 2006, Global Staffing, Routledge, New York Wiley, J, Nandi, P.K and Shahidullah, S.M. (1998). Globalisation and the Evolving World Society, Brill, Boston. worldbank.org, Globalisation, Retrieved November 16, 2009, from http://www1.worldbank.org/economicpolicy/globalisation/ Read More