Globalization and Diversity - Essay Example

Table of Contents Table of Contents 2 Introduction 3 Historical Background 4 Different Waves of Globalisation 4 Main Motivations andDrivers for Globalisation 6 Effects of Globalisation on Businesses 9 Diversity Explained 12 Workplace Diversity 12 Benefits 12 Challenges 13 UN Global Compact and Global Businesses 14 Challenges of Globalisation and Diversity 16 Conclusion and Recommendations 18 Abstract “Globalisation makes it clear that social responsibility is required not only of governments, but of companies and individuals. All sources must interact in order to reach the MDGs.” Anna Lindh (http://www.brainyquote.com/quotes/keywords/globalisation.html#ixzz1MsmcnLmx) The shape of the world is shifting; globalisation is altering the international economy. Of course it hasn’t yet become universal. Many activities are local in nature; many people, even today, live and work outside the international economic structure. But the direction of change is clear.The world is becoming increasingly global and interdependent. It aims at economic growth and higher returns and in return aids towards poverty reduction. Businesses and companies have spread all around the globe. People from different regions, each following a different religion, culture; speaking a variety of languages come together for the purpose of trade of goods and services. Organizations such as UN encourage honest and fair dealing with its Global Compact.The businesses still face many challenges and have numerous hurdles that they have to overcome to achieve and earn higher profits. Introduction The ability to conduct business internationally is an absolute necessity if you hope to remain competitive in today’s marketplace. “Globalization,” has served to stabilize business and financial markets in such a dramatic fashion that many industrialists have yet to reach an understanding of the depth and breadth of the impact it has had on lowering political, financial, and economic volatility. Business globalisation refers to a business expanding its sales and their assets over the national boundaries, involving a surge in capital, labour, goods and services. Coca cola is a perfect example, as they have profitably expanded their business in the global consumer market. Coca cola has used various tactics to achieve this. To reduce their production costs, they have established transnational corporations. They have also focused on product branding and positioning, and revised their prices according to the competition. In the past two decades, globalisation has greatly increased. It has had a significant impact on the management of businesses. Globalisation, as defined by the OECD is “The geographic dispersion of industrial and service activities, for example research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets” Globalisation is a process of making the world economy more interdependent. The growth of trade in goods and services, the increase in the flow of capital across national boundaries and the increase in multinational economic activity means that most of the world’s economies are increasingly dependent on each other for their macroeconomic health. Historical Background Different Waves of Globalisation The phenomenon of “Globalization” is not new. In fact, it has been creeping up on us since the dawn of time; it just hasn’t been so visibly impactful until recent years. Nick Stern, Chief Economist of the World Bank has identified three major stages of globalization: Wave One: began around 1870 and ended during the interwar period of 1920s and 1930s, with the descent into global protectionism. During this time there was a rapid growth in international trade driven by economic policies that sought to liberalise the flow of goods and people, and by emerging technology, which reduced the costs of transportation. With this started the pattern of developing countries specializing in primary goods and exported them to the developed countries. Wave Two: After 1945, the second wave was built on a rise in world trade and the reconstruction of the world economy. This rapid expansion was supported by the establishment of new international economic institutions. In 1944, the International Monetary Fund (IMF) and the World Bank were created in order to promote stability in the monetary system, to provide a sound basis for multilateral trade and to help in restoring economic activity. Their aim being to promote economic co-operation between nations. Wave Three: The current wave of globalization is demonstrated by a quick rise in the ratio of trade to GDP for many countries and also by a continuous increase in the flow of capital between countries and the trade of goods and services. http://tutor2u.net/economics/revision-notes/a2-macro-globalisation-introduction.html Main Motivations and Drivers for Globalisation As the well respected commentator Hamish McRae has argued, “Business is the main driver of globalization!” The process of globalisation is motivated largely by the desire of multinational corporations to increase profits and also by the motivation of individual national governments to tap into the wider macroeconomic and social benefits that come from greater trade in goods, services and the free flow of financial capital.  The following are among the main drivers that fuelled the pace of globalisation. Technological change especially in communications technology. Example: UK taking their business and data to India due to cheaper skilled labour. There has been a massive reduction in the cost of transmitting and communication information- this is a huge factor responsible for the growth of trade using internet technology. Faster and cheaper transportation including containerization. The reduction in the costs of shipping different goods and services around the globe helps to bring the prices of the manufacturer down, making it easier for him to compete with the local market. The advances in transport technology have greatly lowered the costs. The increased speed and reliability of transporting goods and people thus extended the geographical reaches of the businesses and making new and growing markets accessible on a cost-effective basis. Deregulation of global financial markets the abolition of numerous rules and regulations, for instance, rules concerning foreign ownership (removed from UK in the 1800s). Privatisation also took place, as a result businesses were now open to purchase and/or take-over. This allowed businesses in one country to buy those in another. For example, many UK utilities are owned by French and US businesses. Removal of capital exchange controls the opening up of the capital markets facilitates direct foreign investments. It also encourages freer flow of money across the borders. Free trade numerous barriers to trade have either been removed or relaxed because of regional groupings such as the European Union (EU), where as some have been removed by the WTO making trade cheaper and more attractive. Changes in consumer tastes and willingness to try foreign goods resulting from the arrival of the global satellite the awareness among the consumers has increased. Advancement of the global consumer market; world demand and taste have greatly merged to global demand for numerous products. The second most recognized word in the English language is “Coke”. Americanization is often seen as a backlash against globalisation. As the products become for and more identifiable, comparatively cheaper and of higher quality it gives a boost to the global consumer. Effects of Globalisation on Businesses The effects of globalization vary from country to country, region to region and of course from business to business. Communications infrastructure is of high importance to modern business, but all countries do not have access to it. There is also the “non-traded” sector i.e. goods and services that cannot be imported or exported. For example, domestic services are provided where the house is; a clean house cannot be exported. Competition Foreign businesses buy into the domestic market. Deregulation opens up the markets to competition- it encourages innovation and creation of new markets hence challenging the traditional market leaders. Meeting consumer expectations and tastes The high awareness and exposure of the consumers, their high incomes results in them having greater and higher expectations hence forcing the businesses to meet their standard. Economies of scale Selling in the global market allows enormous economies of scale, though not all businesses benefit from it. Choice of location Businesses can now operate from cheaper and more efficient. UK has been seen as an attractive location specifically for financial services. Many businesses have located in UK, boosting their economy and also providing increased competition for the domestic businesses. The increased movement of businesses and jobs has forced the governments to compete with each other to provide attractive and low costing locations. Example Ireland offers “Tax Holidays” to relocating businesses. Multinational and multicultural management This is one of the biggest challenges faced by businesses and their managers. A multinational business environment is complex and has more variables, thus difficult to manage. A multicultural employment policy results in employees of various nationalities, languages, cultures and religions, in various offices across the globe. Globalization of markets The importance of national borders grows less. Markets are stretching across the border and the MNCs are well placed to take full advantage of this. Globalisation is directly proportional to the economic growth of a country, as it eventually contributes positively in reducing any country’s poverty level. (http://ishrathusain.iba.edu.pk/speeches/globalization/Impact_of_globalization_Mahboobul_Haq.pdf) A- International & Regional Institutions, Policies, Governance B - Domestic Policies, Institutions & Governance Diversity Explained When used in business terminology, “Diversity” refers to a company that has hired a diverse workforce. In the employees they have men, women, and people of different racial and ethnic backgrounds. In the global market such a company can understand the market conditions and demographics in a much better way. They can then use this information and equip themselves to thrive. A company that has a diverse workforce is more likely to improve its productivity and their employees are more satisfied, than a company with a limited workforce. The federal and state laws in the US, prohibits the companies to discriminate on the basis of race or ethnicity when hiring or assigning employees. Workplace Diversity Diversity in the workplace results in many benefits as well as challenges. Benefits Communication is a key element for the successful running of a diverse company. Along with diversity come substantial benefits. Such as: Better decision making Improvement in problem solving Greater innovation and inspiration for creativity Recognition of the employees talents This leads to: Improved product development Successful marketing Employees having a sense of belonging Greater commitment and loyalty of the workers Challenges Management faces numerous problems in managing a diverse workforce. Many organizational theorists have raised their concerns over the motivation and management of a diverse workforce. Diverse organizational work environment should be considered as low context cultures. Many challenges are to be faced by the management. Such as: Miscommunication within the organization Interpretation of messages can vary from person to person since no two people have the same experience of events Cultural bias including prejudice and discrimination Assimilation UN Global Compact and Global Businesses The UN Global Compact focuses on human rights, labour, and the environment and anti-corruption laws. They have universal consensus and have been derived from: The Universal Declaration of Human Rights The International Labour Organizations Declaration on Fundamental Principles and Rights at Work The Rio Declaration on Environment and Development The United Nations Convention Against Corruption Companies are asked to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment and anti-corruption. Human Rights Businesses should support, respect and protect the internationally proclaimed human rights; and making sure that they are not complicit in human rights abuses.   Labour Businesses should uphold the freedom of association; they should focus on the elimination of all forms of forced and compulsory labour; abolition of child labour; and eliminate discrimination in respect of employment and occupation.     Environment They should maintain a precautionary approach towards environmental challenges; take on initiatives to promote environmental responsibility; and promote the progress and circulation of environmentally friendly technologies.    Anti-Corruption Businesses should get together and work against corruption in all its forms, including extortion and bribery. Challenges of Globalisation and Diversity The basic challenge that is faced by economic globalisation is to make the global system deliver economic growth more consistently and equitably, as the best way to reduce global inequality and poverty. Globalisation is faced with both region- and subject-specific challenges. The performance of the industrial countries determines Global growth. Their attitudes towards globalisation shall act as a key to the future of the global economy. Thus the governments need to step up and support the right policies; help people deal with the consequences of economic change; and come through on the promises of trade, aid, and also of strengthening the international economic system. In Asia, South Korea had led the way, China and India are also headed on the path to sustainable growth, and it is expected to continue to spread. Fierce competition for markets and talent, scrutiny and in some cases public doubt, the expectations of investors and the market pressures for sustained competitive performance. All these issues will remain challenges, some ever intensified by globalisation. In addition to these familiar themes there are new challenges driven by the changes that are taking place in the global economy. Absence of a framework of global rules No global framework of rules and regulations exists to match the global nature of business. The companies are required to operate by the laws of the country that they are located in. Organization and management of companies Companies must apply delegation of authority, to establish who is responsible for what and to ensure that everyone understands the framework of standards within which they are to do their job. Cultural diversity This is related to cultures and values. Historically business is monocultured. But now it is impossible to do business in this way. Locals have to employed in senior staff roles so that they may bridge the cultural divide. Corporate responsibility for the externalities associated with business activity This issues is certainly not a new one, but has been intensified by globalisation.   Conclusion and Recommendations In the 21st century, globalisation is changing the international framework conditions and, consequently, the fundamental conditions as well. Globalisation presents a number of new challenges, for example: The fight against international terrorism Relations between the West and the Muslim World Problems in the area of energy and the environment Conflicts and the suppression of human rights The prospects for continued global growth The fight against poverty, especially in Africa More non-state actors on the international scene The world is moving in the direction of a global network and the new challenges are to be addressed accordingly. This requires strong partnerships and presence worldwide. In the age of globalisation, it is the objective of businesses to contribute decisively to furthering their interests on the international scene and to enable them to pursue a policy internationally that will help foster broad and committing international cooperation regarding the challenges presented by globalisation. The businesses must focus sharply on the challenges presented by globalisation For example terrorism, relations between the West and the Muslim World, new challenges with respect to energy and the environment, global competition, poverty reduction). Must establish open and strong partnerships in domestics markets as well as abroad Implying, among other things, enhanced co-operation with civil society, enterprises, organizations and ministries. They must be present in the hot spots of globalization Implying, among other things, proposals for new embassies and the reinforcement of existing missions. Some argue that globalization is driven by technology, and that it represents an unstoppable force. Perhaps – in the long run. We cannot take it for granted that the world will continue down the road of globalization, greater prosperity, and greater democracy. Political, cultural and religious forces play the dominant role in shaping the future of globalization. The world and the economic system we live in are highly imperfect. There is much that needs to be done to make it work better. But as we do that, we should maintain a perspective that reflects what Winston Churchill said of democracy (Democracy is the worst form of government, except for all the others that have been tried): “The pro-market, pro-globalization approach is the worst economic policy, except for all the others that have been tried” In conclusion globalisation creates an opportunity for businesses to expand revenue streams, diversify risk and increase brand equity. Many companies have successfully expanded their business as a response to the drivers of globalisation. There has also been a noticed development in the global strategies of companies as a response to globalisation. References Mauro F.Guillen, (January 2000), “Diversity in Globalisation”, Organizational change in Argentina, South Korea and Spain, pp. 6 Geert Bekaert / Campbell R. Harvey / Christian T. Lundblad / Stephan Siegel, (May 2007), “Stock Market Valuation and Globalization” Morrison, J. (2006), “The International Business Environment”, Basingstoke: Palgrave The Impact of Globalization on How Businesses Are Managed. ©2000-2006 by Book Rags, Inc. All rights reserved. Journal of Applied Behavioral Science, C.L. Walck Developing Receiver-Centered Communication in Diverse Organizations, Judi Brownell Cultural Diversity in the Workplace: The State of the Field, Marlene G. Fine John Manzoni (2005), “Which are the Key Challenges Facing the Global Company of the Future? West Sussex Source: http://www.bp.com/genericarticle.do?categoryId=98&contentId=7009879 Searching for: UN Global Compact Accessed on 18th May, 2011 Available at: http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html Searching for: Accessed on 19th May, 2011 Available at: http://ishrathusain.iba.edu.pk/speeches/globalization/Impact_of_globalization_Mahboobul_Haq.pdf Searching for: Globalisation and Diversity Accessed on 19th May, 2011 Available at: http://www.sss.ias.edu/files/papers/papersix.pdf Searching for: Globalisation Accessed on 20th May, 2011 Available at: http://tutor2u.net/economics/revision-notes/a2-macro-globalisation-introduction.html Read More