Advantages and Disadvantages that Bring about Globalization - Essay Example

Advantages and Disadvantages that Bring about Globalisation Globalisation has long been a way of life as many countries around the world have and still are carrying out business activities with each other across great distances (Narula and Dunning 2000). It may have been slow a while back, taking even months to complete a given transaction, but Narula and Dunning (2000) assert that it existed. In modern times, a new era of globalisation has emerged where almost every transaction is instant. In addition, activities such as interaction, collaboration, communication and product transfer have also been made easy thanks to the new wave of technological advances (Suttle 2012). Globalisation in the 21st century is believed to have the ability to transform the political, economic and social environment of all member countries in the coming years. Thus, the paper tries to bring out the activities, both advantageous and disadvantageous, that result in general globalisation i.e. globalisation to both small and large businesses as well as citizens. Globalisation This is the act of bringing together different people with different political, social and economic backgrounds and forming of one global community (Ghoshal and Bartlett, 2000). Behind the success of the process lies the economics of international trade, free market frameworks and investment. As earlier mentioned, globalisation encompasses integrating people from different settings, thus it bridges the gap between developing and developed nations as well as creates new cultural exchanges, business models, considerations and experiences within the participating nations (Ghoshal and Bartlett, 2000). Causes of Globalisation The globalisation process began during World War II when Britain and USA leaders helped to establish the International Monetary Fund (IMF) and the World Bank (WB) so as to encourage a capitalist world that is liberal and eliminate the Socialism and Marxism world (Nayyar 2000). Nayyar further affirms that the borrower of the loan from these organisations automatically qualified to follow the preset conditions i.e. reduce import barriers, eliminate financial backing for local-based industries, devalue their currency, put emphasis on export production as opposed to production for local consumption and reduce wages and expenditure on social wellbeing. These conditions resulted in a number of open economies developing a mechanism for integrating with other economies which led to the formation of the World Trade Organisation. Small Businesses Small businesses, small and medium enterprises or simply SME’s as referred to in the European Union (EU) and by other leading organisations like the World Bank, World Trade Organisation and the United Nations; are basically companies or firms with a certain limit of human resources (Nayyar, 2000). Many innovative and competitive economies across the globe have been associated with SME’s since they also occupy a larger portion of the market segment as compared to large business organisations. SME’s have been identified to have the capability to reduce poverty, trade overseas (exportation) and promote economic development in a society. Advantages and Disadvantages of SME’s and Globalisation Advantages Small businesses have different criteria of differentiation from large businesses in every country (Nayyar, 2000). All business activities have advantages and below follows an analysis of how advantages of SME’s result in globalisation (Hasham 2009). i. Small business enterprise managers usually have close relationships with customers. A customer is the pillar to any successful business and thus needs to be treated as per their demands. Managers may keep close contacts with customers for different business reasons. Globalisation is heavily dependent on communication and information technology, thus the keeping track of a customer’s needs and requirements via phone, email etc. culminate into globalisation when this links extend to customers in other regions. ii. Small businesses are usually ideal for people with fewer resources but vast experience in the field. With the help of technology and better communication channels, these business aspirants can find resources and/or funds from international organisations thus establishing a trade link. iii. Many countries across the globe have opened borders to legal immigrants. Many of these immigrants are usually in search of employment. SME’s account for employment of huge numbers of people in many economies. These groups of people may be literate, semi-literate or sometimes illiterate and coming from different backgrounds. Globalisation as seen earlier brings together people from different backgrounds for a common reason, and in this case, business reasons. iv. SME’s have internal competition (among other SME’s) and external competition (from large businesses). When competition is high, SME’s are known to be able to come up with innovative ideas to help cement their position in the market. Some of these ideas may involve production for export rather than consumption thus leading to globalisation. Disadvantage According to Hasham (2009), SME’s have no notable disadvantages; nevertheless, it can be proposed that a successful SME must be accompanied by government interference. As previously noted by Nayyar (2000), the formation of the IMF and WB was aimed at liberating the world’s economic market. Therefore, interference from government agencies may trigger some local and international concerns regarding free market principles and liberalisation of trade (Hasham 2009). During this period of interference, SME’s may decide to seek international help from relevant bodies thus enhancing globalisation. Advantages and Disadvantages of Large Businesses and Globalisation Many large companies started as small companies and later grew big with time. A large company is associated with a number of advantages and disadvantages but only a few of them play a vital role in globalisation. Below follows a description of how they affect globalisation of the large company (Suttle, 2012). Advantages i. Information Technology infrastructure is readily available in many large companies. Globalisation as earlier seen is highly dependent on communication channels and information technology thus, it eases the efforts of the company to reach the outside market. ii. Higher compensation clauses. Large organisations can afford to pay employees huge salaries and improved packages for their benefits. This usually attracts attention from different applicants across the globe who wants to enjoy these services and they bring along diversity in the organisation. As a result, large companies may have staff from different nations working under the same roof or in different places across the world. This is globalisation. iii. Strong Recognition of the brand. Large companies are usually well connected over a large region and thus their products sell by the name of the company. This advantage can be used by the organisation to spread its branches around the world successfully, and as a result bringing about globalisation. iv. Large human resource. For a large company to remain in operation, it has to be supported by a large pool of employees or human resources which allows them to combine their efforts and resources to achieve given goals. Large companies employ people from different backgrounds and countries coming in with different ideas, and together, they form one working group that works towards achieving organisational objectives. The integration of these employees and their different backgrounds forms a basis for globalisation. Disadvantage The main disadvantage of large organisations is low returns due to the reduced room of growth they have (Suttle 2012). Since these companies are already developed and established themselves in the market, they can use this opportunity to establish contacts with external sources i.e. investors from other countries. This helps develop the organisation worldwide as it establishes itself in other participating party’s nations, thus globalising the organisation’s activities. The Citizen Globalisation does not only come to business organisations but also to individual citizens. Communications technology is the major driving force of globalisation in citizens (Ghoshal and Bartlett, 2000). This is through the continued availability of the internet, cell phone technology, broadband, telecommunications, portable wireless devices and other technologies for communication. With these, Narula and Dunning (2000) believe that people can communicate, interact and collaborate instantly regardless of their geographical location. Globalisation represents integration of developed and developing nations and with the introduction of communications technology; this integration process will increase for these technologies have diverse impacts on social, cultural, economic and political views of the people. Conclusion Globalisation has been there, it is there and it will always be there, and to shape the future of globalisation nations will have to find a balance between the benefits and pitfalls of globalisation. Globalisation presents more benefits than detriments, and, as a result, many nations will have to make notable sacrifices for globalisation to prevail. References Ghoshal, S. & Bartlett, C. (2000) Going global: lessons from late movers, Harvard Business Review. Hasham (2009) Advantages and disadvantages of small businesses, viewed 7 Nov, 2012 at . Narula, R. & Dunning J. (2000) Industrial development, globalisation and multinational enterprises: new realities for developing countries, Oxford Development Studies, vol. 28, no. 2. Nayyar, D. (2000) Globalisation and development strategies, high level round table on trade and development: directions for the 21st century, UNCTAD X. Suttle, R. (2012) The advantages of a large business, Demand Media, viewed 7 Nov, 2012 . Read More