What is Globalization?
Discuss about the Management of Organizations Systematic Research.
Recently, globalization has completed changed how companies operate because the world has become more and more interconnected. Globalization affects how an organization does business including, marketing, production, and distribution operations. Today, the actions of an organization in a local geographic location do not stop there because they are related to other things that are taking place in other parts of the world. People, neighborhoods, cities, and countries have now become closer than never before through sharing food, music, information, and ideas. As a result, the world has become a global community. Generally speaking, globalization has made it easier and efficient for local and international businesses to manage their activities. This is possible due to advancement in technology, communication, infrastructure, education and even fair trade regulations that favor all parties equally. However, due to all these favorable factors that attract more people to do businesses, competition has become very stiff. Therefore, international managers within companies in global face ought to make wise decisions and do proper planning if they must stay ahead of the game.
Globalization can be defined as a continuous process through which people, cultures, economies, and regions have become more interconnected through the ongoing and improved processes of communication and trade (Boboc, 2017). Through globalization, people can now move from one country to another and do business there freely due to advanced technology and reduced trading restrictions. The world is becoming smaller day by day because globalization has successfully integrated world economies. The use of mobile phones and the internet has made it possible to communicate and do business with other people in different parts of the world (Daniels & Krug, 2007). Improved transport systems have also encouraged work outsourcing and offshoring since people are now able to reach their destinations within a short period of time. This means that goods and services that were only found in western countries can now be found in the other parts of the world. Additionally, through globalization, people living in developed countries can benefit from industrial and scientific advances extended to them by the developed countries.
The process of globalization has mainly been facilitated by rapid technological advancements which make global communication and transport possible. All these activities give companies more opportunities to open up and spread to other parts of the world. On the other hand, despite the fact that globalization has come with numerous benefits to local and international companies, it has also brought some problems. Nowadays, the widespread of western culture has dramatically made other people forget their cultures especially in Africa where people are trying to copy everything from western including foods an dressing. Besides, globalization has also led to dumping and competition which has forced local businesses to close down due to their inability to compete favorably with international companies due to lack of resources. Although globalization has been there for so many years now and has been spreading enormously over the last century, it is so unfortunate that it is not helping bridge the gap between the poor and the rich countries. The truth of the matter is that the developing countries continue to be exploited by the rich and the developed countries under the pretense of development and business sharing. For the third world countries, they seem to experience more of the negative effects of globalization while the developed nation enjoy more benefits through outsourcing and carrying out their businesses in these countries (Haugen & Mach, 2010).
Advantages of Globalization
Through global communication and production, more and more countries have opened their global markets. Major national currencies such as Euro, American dollars, and Yen circulate around the world and they can be used anywhere. This has been an advantage to local and international companies because it means that they can operate efficiently and freely around the world. With modern technology, companies can do businesses with their customers through electronic money transfer systems such as ATMs and credit cards. It merely means that buying and selling goods and services is no longer a problem despite where one is at the moment. Additionally, the opening of capital markets has attracted foreign investors who invest in their foreign currencies and as a result, these funds can be used to develop the infrastructure and grow the economy (Teagarden, 2015).
Globalization has opened many opportunities for many companies to go international. It is no longer safe for any organization that aims to remain relevant and competitive to think about operating within its boundaries. Perhaps this is because of easy communication and internet which has made the world a small village. Globalization has opened more opportunities for countries in the global economy to do business in other countries (Shin, 2011). Spread to other countries increases a company’s profitability and market share which means that there is an increase in the number of transactions across the border. Globalization has led to multinational corporations whereby a company can have several outlets in different countries. This means that a company can enjoy economies of scale through the enlarged markets. Companies like Coca-C-la and Toyota have greatly benefited from global markets.
Foreign trade has expanded around the world recently due to globalization. People and companies can export goods and services anywhere around the world. This means that people can get anything they want from any country (Boreman, 2013). Many businesses which do businesses through import and export enjoy many benefits because of reduced restrictions imposed on exported and imported goods and services. For companies, it means that there exist other international markets for their products where they can sell at favorable prices to boost their profits. Sometimes, the prices at the local markets prices of goods and services tend to be lower compared to other countries. This leaves companies with the option of exporting their goods and selling at a higher price. On the other hand, imported goods sometimes may come with lower prices which then favor the local customers (Zhu & Dowling, 2000).
Challenges of Globalization
Majority of multinational corporations which find themselves operating in different countries can easily find cheap labor from the locals in the host country. A company can now employees working in various offices miles away from the headquarter and this saves the organization a lot of money and other resources. Using local labor helps the company adapt quickly to the new environment through interactions with the local people. It is also of the essence to acknowledge that it is not only the company that will benefit from local staffing but also the people and the country as a whole. Remote staffing creates job opportunities hence improving their living standards. On the other hand, the host country benefits through taxes from these international organizations (Rumbles & Rees, 2013)
In this globalization era, companies can now operate their businesses freely in any state due to the existence of standard rules that control these markets. It is easy nowadays to work under the universal accounting, tax, and auditing standards. Formation of groups like OPEC and NAFTA which cater for trade needs of specific countries promote smooth trading and business operations (Kingsbury & Casini, 2009)
As earlier mentioned, globalization has some negative impacts on businesses especially the local companies in developing countries. Economists argue that globalization has widened the gap between the rich and the developing countries and therefore it has not yet achieved the economic goal of equality. Below are some of the adverse effects of globalization (Teagarden, 2015).
One of the viable adverse effects of globalization is competition. Some of the foreign companies which enter other countries are large and the technology they use cannot match that of domestic companies. With the entry of such large companies, competition increases and since home countries lack resources and technology to compete favorably, they end up closing down (Rumbles & Rees, 2013). Competition forces them to produce high-quality products to meet the customers’ demands which may not be possible because of financial strains.
Another big problem that is associated with globalization is dumping. Due to use of advanced technology in production and available resources, multinational corporations charge low prices on their products which give them significant market shares. Most of the local producers cannot afford to sell their products at low prices and this makes them lose market share on their products. Dumping is also what influences competition in these markets (Naghshpour & St. Marie, 2009).
Impact of Globalization on Local Businesses
As countries try to globalize their economy, they have encouraged foreign investors to come in and do business. In the process, every country, especially the developing countries in Africa have extensively exhausted the available natural resources such as petroleum and forests. The implication is that these resources will be finished in the future. Resources such as water and oil are essential which should be protected for the sake of the future generations (Wang, 2008).
With globalization, inequality in terms of skilled labor and economic development has increased like never before. The gap between the rich and the poor has widened because it has not yet achieved to provide equal opportunities for all without discrimination and considerations. Companies operating in third world countries are still struggling with issues such as climate change, technology, and education, while those in developed countries have almost achieved everything in these sectors (Artis & Hoffmann, 2008).
Since globalization has been there for so many years and it is here to stay, there is the need for international managers to embrace the opportunities brought by globalization to stay ahead in the competitive global markets. To achieve this, managers should revise their marketing, production, operation and distribution practices (Haugen & Mach, 2010).
Practically, marketing is one of the most effective ways of doing business globally. Managers in international companies must choose the most effective marketing strategies. This involves the use of social media platforms such as Facebook and Twitter. It also relates to delivering marketing strategies in each country depending on the culture of the people found there (Bartlett, 2011).
Global companies mostly depend on local business partners to help them adapt quickly to the new environment. It is advisable for international managers to establish these relationships so that they can cover their gap to do business. The success of any company in a foreign country depends on the relationship with local governments and the host country workers (Park & Harris, 2014).
The most effective way to succeed in global business is to set offices in the host country to manage operations. Some of the processes such as warehousing, marketing, research, recruitment, and decision making cannot be carried out from headquarter which is so many miles away. International managers must understand that having offices and employees in each country is an effective way of managing resources and these business operations (Deresky, 2010).
General Motors Company is an American corporation that was founded in 1908 by William C. Durant. The company manufactures, markets, and assembles automobiles and vehicle parts with outlets in more than 37 countries which are sold in various brands. Since June 2009 when financial strains hit general Motors and became bankrupt the company has been struggling to recover and grow relevant in the automobile industry. Outsourcing and offshoring has been an outlet for this company in the struggle to compete with global companies such as Toyota Motors. Outsourcing and offshoring are the most commonly confused terms in global business management. Outsourcing involves obtaining services from the third party regardless of where the contractor is located. Unlike outsourcing, offshoring refers to getting goods and services from companies in another country. Given that globalization has now become part of doing global business, these two processes have contributed significantly to globalization.
How International Managers Can Stay Ahead in Global Markets
One of the common and the most apparent reasons for outsourcing and offshoring by General Motors Company is to gain a competitive advantage in global markets especially in Australia and the United States. Before the fall of the company, United States used to be the top selling market for GM but Toyota Motor Company has overtaken it. During the first quarter of the Company’s financial report in 2009, only a quarter of the total vehicles manufactured were sold in the USA, with the highest number of cars sold in Asia. The company aims to penetrate the United States and other leading markets through offering quality products and job creation so that they can be able to compete favorably with other leading automobile companies. General Motors use outsourcing as a way of developing their core business. By outsourcing and offshoring, the company has been able to change some fixed costs to variable costs. For instance, when the company decided to outsource its IT services, they went from having 18 IT services to only 6. The company also decided to create a single global IT organization in 2006, which saved the company a lot of money (Oshri, Kotlarsky & Willcocks, 2015).
From 2011, GM started importing more cars to Japan, China, Mexico, and South Korea. With this, GM hopes to make car manufacturing in the Company more versatile. To achieve this, however, they will need to create similar car designs. Instead of buying overseas cars, the company works with these companies to integrate the technologies to become global car manufacturers. GM which produces approximately, 800,000 cars yearly, aims to use outsourcing and offshoring to offer efficient services and quality products worldwide. The recovery journey of GM Motors can be described as a rough one. With most companies going international the company still has a long way to go. From the above discussion, it is clear that outsourcing and offshoring have contributed to globalization in that they both involve doing business outside geographical boundaries.
Globalization has brought so many opportunities, challenges, and even problems to companies, people and states on earth (Galavotti, Cerrato & Depperu, 2016). One of the opportunities that come with globalization is job creation. Through outsourcing, people have been able to secure jobs from the contracted companies. With GM shifted to other countries like Mexico and China, it means that more people will be employed to work in the company’s firm. However, it is crucial to note that outsourcing is a double-edged sword because other people lose their jobs in the process. When GM decided to close down one of their plants in Jonesville, Wisconsin, more than 2196 people lost their jobs. From the case study, it is clear that globalization and more specific outsourcing has led to stiff competition between global corporations.
Competition forces companies to produce quality goods and services if they need to remain ahead in the market (Mudambi & Venzin, 2010). For instance, with GM starting to close down some of its firms and opening others in different countries, it is affecting other car manufacturers. For example, Toyota had to close down its plant in Fremont California in 2009 when Pontiac shut down because they were working as a partnership. All this was because GM opened a new plant in Fremont. Generally, the developing countries like India are most likely to benefit from outsourcing. The economies of these countries are expected to grow due to high opportunities provided by foreign companies (“Offshoring vs. Outsourcing”, 2018). For example, GM opening new plants in Mexico and South Korea means that these countries will get revenue from these companies and people will get jobs.
Conclusion
To sum it all, globalization has affected everything in different ways. Like any other thing that affects humankind, globalization has aspects that are good and bad. Almost all countries and industries all over the world have experienced positive and negative impacts of globalization. Globalization has made countries welcome foreign nations to do businesses with them and as a result, they have benefited with economic growth and job creation. Companies can now do businesses anywhere in the world freely because of globalization. Today, most of the third world countries are enjoying advanced technology due to globalization. Globalization has widened the gap between the rich and the poor where developed nations continue to be exploited by the developed countries. Therefore, since globalization is a result of human activities, he can still control the harmful effects of globalization to make the world a better place where all people will have equal opportunities.
References
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