Impact of Globalization - Essay Example

Impact of Globalization on Private and Public Sector Organizations Introduction Over the last few decades, globalisation has been one of the most talked of themes in almost every sector of the economies. Most countries have opened their markets to new international competition regardless of the development status (developed or developing) of these countries. As such, both developed and developing countries can compete on the same level without any barriers. Countries in the European Union can compete amongst themselves as well as with other countries worldwide. It is evident that globalisation not only affects world markets but also impacts on the people socially, economically and politically. In the long-run the results of globalisation are that both government and private agencies would be affected either positively or negatively. Therefore, it is in view of the above that this paper seeks to discuss the impact globalisation has made on the state and private organisations. Globalisation has been defined in many ways by different authors. As reported by De Vries and Michael (2001, p. 394) it is a new capitalism ideology. The notion of a borderless world has come with many developments. Not only has internationalisation led to the expansion of global trade but as Farnham states (Farnham 2005, 69) but it has also facilitated internationalisation of production and finance among other fields. Further, internationalisation has been the primary cause of the massive reforms in the public sector. Privatisation, deregulation and other developments in the public sector, have been the main effects caused by globalisation trends. Long before the advent of the concept of a borderless world, governments used to spend more funds on giving subsidies to the state-owned agencies. Further, it was a hard task to facilitate productivity as these agencies always knew the state would come to their rescue in the event of possible collapse. However, because of globalisation, foreign agencies have ventured into other countries and invested in these countries. Despite the fact that these corporations pose a threat to development of local companies, they to a great extent, lead to effectiveness of the sectors as they reduce chances of monopolies. Also, because of globalisation, most firms were able to launch their products worldwide in a bid to make huge profits. Toyota, for instance, is a motor vehicle manufacturer founded in Japan but in an attempt to increase its revenue it had to spread to countries like the United States and other continents. The same goes for Ford Motor Company that started as an “International New Venture” (Oviatt and McDougall 1994, p. 47). In addition to this, globalisation made it possible for some countries to get what they could not produce cheaply as the cost of producing the same could have been higher than buying from international corporations. In spite of the possible advantages of going global, it is argued that this idea has a dividing factor between countries (Hertz 2001, p. 3). The fact that governments are put in a situation whereby they must choose between a number of different companies from different countries is seen to be insinuating that there would be bad relations with corporations that are not chosen. Furthermore, the role of the government has been changed. The state ought to protect its interests by virtue of its sovereignty, but globalisation forces state to privatise their agencies so as to benefit from the advantages that come with privatisation (Hertz 2001, p.4). Turning to privatisation in a bid to do business affects the government’s role in deciding how to run its agencies and this greatly dictates who may be sponsored to ascend to political power so that they may be easily influenced to sing to the tunes of these international corporations. In developing countries, most governments have a history of leaving most of their agencies unattended and without proper supervision. This necessitated the incorporation of New Public Management reforms to promote and improve services offered by public bodies. As a matter of fact, because of globalisation, these countries have been able to manage efficiently and run their companies with limited resources. Globalisation further facilitated the improvement of public services all over OECD countries in early decades but has a high degree helped in the development of developing countries. As a result, countries like Mauritius and Sri Lanka were able to transform their public sectors. For instance, Mauritius was voted as the best public service provider in the entire Sub-Saharan region (Chittoo, Ramphul and Nowbutsing 2009, p. 31). Considering the above, it could be arguably conclusive that globalisation has indeed impacted positively on the public sector organisations. On the other hand, although models such as that created by OECD countries having ‘slightly worked' in those countries, it has been argued that this model does not fit every country that is new to globalisation (Chittoo, Ramphul and Nowbutsing 2009, p. 35). It follows therefore, that since the model did not address every aspect of globalisation, such a model need not be exported to developing countries as there are high chances that it would fail as noted by the authors. Firms such as Tesco and Kingfisher were rated as 8th and 18th respectively as one of the transnational retailers in the year 2008 (Wrigley and Lowe 2010, p. 5). To add on this, it is worth noting that through globalisation governments have linked their economies with that of other countries all over the globe through different communication systems such as e-commerce and electronic mails. Examples of firms that have facilitated this include Microsoft, Google and Apple. Globalisation has impacted private organisations on the other end in a number of ways. As noted before, globalisation made it easier for people to interact and do business, socialise and share ideas making them reason together despite being in different geographical regions. As such, the impact globalisation brought to the private organisations cannot be underestimated. The nature of the business relationship between the various states made it a requirement to create good relations between the parties involved. Firms in different countries had to relate hence impacting on the private organisations. Individuals had to interact and exchange skills for the furtherance of the globalisation culture (Doh and Teegen 2003, p. 2). The development of faster means of communication facilitated rapid globalisation which resulted in faster growth of private organisations and promoted private institutions' role in globalisation (Doh and Teegen 2003, p. 2-3). It was a matter of time that these corporations began to take part in crucial decision-making. The fact that people shared information and that labour issues were a worldwide phenomenon, privately owned firms and associations played a vital role in ensuring that there was mutual co-existence between local, international companies and the respective governments. As a result, before any investment decision or economic development plans could be made, there had to be consultations between governments, firms and the non-governmental organisations. Through globalisation, however, private companies and public firms altogether have been forced to direct their operations and services to be in line with global trends. This is because every company looks forward to reaching global markets and international standards to remain in business consequently making it difficult to start in a local market with goods meant for international markets (Farnham 2005 p. 6). Among the impacts caused by globalisation on the private sector is that there is a high possibility that people could lose their jobs as everyone would be trained to the standards required internationally hence the ability to work anywhere. There is also a very high possibility of inequalities in pay, lack of employment in areas where there are free labour markets, and lastly a possibility that job structures could change in line with the global trend making it hard to detect changes. Through globalisation, there has been the development in the transport sectors, communications and production. We have seen technological advancements that have made it even easier to communicate and travel making it cheap and very convenient to get and relay information on new markets. In a way, this opens the interior of new worlds to the global arena by enabling the passage of information about products and services that could have otherwise been unknown were it not because of new firms venturing into new markets. Further, the investment by international firms in new markets has proved to increase trade between these foreign firms and other new markets resulting in little or no production of the same goods and services as most countries have been globalising at different levels. As such, it is evident that when international firms explore new markets, there is a high possibility that the national markets of the newly discovered countries would be filled with plenty of foreign merchandise making it difficult to counter these foreign firms. The previously stated has the potential to deny local businesses a fair chance in developing its businesses to meet the global threshold and standard of products. In other instances, internationalisation has been taking the form of exporting into these new markets. As a result of uncontrolled internationalisation, products from foreign countries fill local markets and compete with local products thereby causing market instabilities as foreign goods may be cheaply availed in the market and large quantities. This had been seen when multinationals from Asian economies otherwise referred to dragon multinationals have forcefully come up and entered new markets with new and cheap products. These products have adversely competed with locally produced products posing a threat to local industries and labour forces. Based on the above assumption, it can be perceived that even though the local firms could be free to venture into international markets, their share at the global level would be so small that it would not help expand its markets beyond its foreign-firms infested boundaries. Most new multinationals lack the familiarity with international markets making it even harder to compete with older and more financially stable multinational corporations. To add to the above, when venturing into new markets, foreign firms tend to employ various strategies that include mergers, takeovers and agreements. Each of the modes of entry poses a threat to the local businesses as the mode either introduces new management tactics that may not be advantageous to the local customers but only favour the expansion of the multinationals. The above was the reason Turkish firms excelled in the years around 2000 as they forged entry modes that favoured them. As a result of the entry modes and governmental incentives, Turkish companies managed to make enormous profits in exports to European countries amounting to more than 20billion USD in 2009 (Turkish Ministry of Economics Report, 2011). Conclusion With the coming in of the concept of globalisation much was made possible in the world of business. Industries were able to expand their markets beyond local boundaries thereby boosting their revenues through the extra markets and increased production. However, as noted above, the whole idea did not come clean but instead brought about positive and negative impacts on the already existing local organisations that were run by either governments or private firms. In view of the preceding, it is necessary to consider a few factors before liberalising markets in tandem with global policies. Every company in national states ought to be given a fair chance to compete fairly with other multinationals bearing in mind that globalisation did not happen at the same time and speed worldwide. References Chittoo, H.B., Ramphul, N. and Nowbutsing, B 2009, ‘Culture Mandala:Bulletin of the Centre for East-West Cultural & Economic Studies, vol. 8, no. 2, pp.30-51. De Vries & Michael S 2001, ‘the attack on the state: a comparison of the arguments’, International Review of Administrative Sciences, vol. 67, no. 3, pp. 389-414. Doh, PJ & Teegen, H 2003, Globalisation And NGOs: Transforming Business,Government, and Society, Praeger Publishers, United States. Farnham, D 2005, Managing in a Strategic Business Context: Published by the CIPD. Hertz N, 2001, the Silent Takeover - Global Capitalism and the Death of Democracy, William Heinemann, London. Oviatt, BM & McDougall, PP 1994, ‘Toward a theory of international new ventures’, Journal of International Business Studies, pp. 45-64. Report on Foreign Direct Investment Stock, 2011, Turkish Ministry of Economics. Wrigley, N & Lowe, M 2010, The Globalization of Trade in Retail Services Report commissioned by the OECD Trade Policy Linkages and Services Division for the OECD Experts Meeting on Distribution Services, Paris 17 November 2010 Read More