Globalization can be defined as the process if interaction and integration of people, organizations and the governments of diverse countries. Globalization is mainly attributed to international trade and global investment, which have been facilitated by information technology such as the advent of the internet and fast data communications (Hill & Cronk, 2010). In the business context, globalization serves to eliminate the variations that exist within the global economy, which implies that global trade is conducted on a universal platform. The concept of globalization is not new to business environment. This business-economic event influence many concerns and issues to the international business environments. Its related concerns and issues usually affect businesses positively and other negatively (Moore & Lewis, 2009). Business enterprises enjoy the positive benefits of globalizations and there is a need to participate organizations in counteracting the negative effects. The purpose of this paper is to conduct a critical analysis of the reasons for growth of globalization, with reference to the advantages it imposes to businesses and suggesting ways in which they could bring about cultural, social and economic change and discussing the effects on their employees in particular and the worldwide workforce in general.
Policy and advancements in technology have played significant role in facilitating international trade, immigration and international investment. The present status of globalization can be attributed to integrative policies such as trading blocs, which have played a significant role in fostering international trade and the opening of economies at the national level. Integrative policies paved way for the reduction of the trade barriers and establishment of free trade policies. Business enterprises exploited the opportunities presented by globalization to expand their scope of operations to a global perspective. Technology advancements can also be considered a major driver of globalization. Technology advancements in information technology have played a significant role in transformations of the economic life. For instance, information technology has revolutionized the manner in which business is conducted and elimination of the geographical constraints and barriers previously associated with international business. In addition, advancements in IT served to offer frameworks through which businesses could recognize and trail trade opportunities through avenues such as speedy transfer of resources and assets, analysis of the economic trends and collaboration with global partners. Eradication of capital exchange controls, increase in free trade, and change in consumer tastes and emerging markets in the developing nations form other factors that helped to accelerate globalization.
Trading blocs are one of the outcomes of globalization that led to the establishment of free trade areas/zones. Free trade implies that barriers to trade have been eradicated, making trade cheaper, which in turn increases investment at an international level. The first significant advantage of trading blocs that it results to increased production; this is primarily because free trade policies facilitates the specialty in the production of goods and services that nations have a comparative advantage compared to other countries (Moore & Lewis, 2009). The basic inference that can be made from this theory is that even if a country has a higher efficiency regarding the production of goods and services, that country can still benefit through conducting trade with a country that is less efficient in the production of the same goods, provided that have dissimilar relative efficiencies. This means that nations that specialize in the development of products and services whereby they have a comparative advantage are likely to increase their production, which in turn helps in increasing the production efficiency. Therefore, through specialization, countries can effectively allocate resources and at the same time acquire less costly resources from other countries.
The second advantage of trading blocs is that it ensures consumer satisfaction. Free trade in trading blocs plays an important role in the development of global markets; as a result, the end users are likely to benefit from the increased competition and product variety. Consumers are also likely to benefit from the innovations. This is because the expansion of free trade imposes increased competition. This means that companies must develop strategies of strengthening their comparative advantage through innovations, which in turn results to the development of quality products at cheaper prices (Moore & Lewis, 2009).
The third significant advantage associated with trading blocs is that it results to increased employment and economic growth. The outcome of trade liberalization due to globalization is that resources will be allocated effectively to productive sectors of the economy. Employment opportunities will be increased in the exporting industries. In addition, countries that are engaged in free trade arrangements are experiencing improved living standards because of increased incomes and economic growth; this can be significantly attributed to the increased productivity and efficiency that results to increased domestic output. Additionally, free trade facilitates the entry into the global marketplace, which results to increased revenue for the country. The removal of trade restrictions also implies that the exports of a particular country will be easily accepted by other countries in the global marketplace. This results to an increased export for a country that engages in free trade (Peng, 2008).
Globalization imposes significant advantages to organization depending on the scope of its operations. The impacts of globalization vary depending on the geographical location and the specific industry. A notable advantage associated with globalization to organizations is competition, this is mainly because globalization results to deregulation, which in turn encourages the opening up of new foreign markets and innovation of new commodities and markets that impose significant challenges to the industry leaders. It is arguably evident that selling from a global perspective results to significant advantages associated with the economies of scale. Participation in international trade is viewed as an effective strategy to exploit the benefits associated with unrealized advantages of economies of scale. Conventionally, international trade relies on specialization, whereby each country that specializes in the production of a specific commodity attains the competitive advantage (Moore & Lewis, 2009). With the potential benefits that can be accrued for operating in large scale, there are numerous advantages with regard to specialization and participation in international trade even in instances whereby there are no variations in production efficiency of the goods that the country produces. For instance, suppose that a nation enjoys the economies of scale when producing a specific product. However, this nation is producing the product within a low output level resulting to a high average cost for unit production. As a result, this country does not have a comparative advantage when exporting the commodity due to the high costs of unit production. Suppose another country specializes in the production of another commodity, and that economies of scale exist in both the commodities produced by both the countries, firms in the industries can make use of combined markets of both nations and offer goods at relatively lower prices compared to a situation whereby their target market is limited at the domestic level. An example of such is the European Common Market. In addition, economies of scale due to learning in the context of international trade results to a decrease in the average unit production cost with an increase in the economic effectiveness because of learning. For example, with regard to the aircraft and machines industries, the manufactures are informed of the reductions in unit cost production due to economies of scale in learning. It is approximated that the average unit-production costs reduces by 20% every time the cumulative output increases twice. This is mainly because of economies of scale learning within the firms’ employees and efficiency improvement, which can be significantly attributed to globalization. In specific industries whereby learning is a critical success factor in causing economies of scale, there are significant business advantages in the country that specializes in the production of that commodity. This implies that specialization in international trade can result to a reduction in the average unit-production costs and retail prices compared to operating on a domestic market (Hill & Cronk, 2010).
Another advantage that globalization imposes to business is the choice of location. With globalization and trade liberalization, businesses have diverse options regarding the location of operation. For example, manufacturing industries are increasingly relocating to countries whereby there are low wages and input costs across the global divide. In addition, globalization of markets also presents an opportunity through which multi-national corporations can exploit for global expansion. The concept of globalization cannot be complete without an evaluation of the cultural integration it creates and the resulting business impacts. This means that globalization imposes significant influences on the organizational structure and offers a framework through which individuals and businesses can deploy culture to transform social and economic inequalities and bring about social and economic change. Globalization is mainly responsible for an increase in cross-cultural contacts, which results to a transfer of human resources across the global divide. This is an opportunity, which organizations can use to enhance their efficiency (Moore & Lewis, 2009). The cultural dimension of globalization results to the establishment of new classifications of consciousness and cultural identities that embraces the concept of cultural diffusion, the need to increase the standard of living at an individual level and make use of foreign commodities. Cultural diffusion also embraces the aspect of adopting new technology and practices in order to be part of a global culture. Culture transformation can take place in three dimensions including value conversion, value creation and value connection, all of which constitute to global business. Value conversion mainly involves the replacement of the current cultural norms with new ones; value creation implies the development of new concepts applicable to new situations, while value connection implies the establishment of a conceptual connection between concepts that are not related in any way. Diversification is an important concept of globalization that embarks on human development strategy, establishment of a learning society, creativity and innovation and education. These strategies play an important role in increasing business and individual output, thereby eliminating socio-economic inequality and fostering social change (Moore & Lewis, 2009). Globalization also offers an opportunity through which businesses can enter into new forms of relationship with diverse cultures to enhance diversity and innovation. This is mainly achieved through value creation, value conversion and value connection as discussed above.
Globalization imposes significant impacts on the management of organizations within the various entities of the business ranging from internal operations to external environments such as global scope of operations. This implies that organizations have to tailor their business level strategies to meet the diverse needs of their customers from all over the globe. The significant challenge is addressing the diverse needs of the global customers. With regard to United Bank for Africa (UBA), globalization comes in handy to facilitate the achievement of its becoming a global bank in Africa. Therefore, UBA has to deploy global leadership and management frameworks in order to reap the benefits associated with globalization and operating on a global framework. Employees of an organization are mainly concerned with the aspect of cultural diversity within the workplace. The reliance on a diverse organizational workforce normally serves to be a sign of the diversity of the global community that the UBA undertakes its operations. Ignoring diversity can impose significant effects on the business performance of the UBA, and can additionally impose huge costs regarding the damaged business reputation on a global perspective and compensation payments. Diversity can generally be described as valuing every organizational member as an individual. With this respect, managing diversity is core to the effective management of people within the UBA, and it is usually relevant to the all the business processes and functions. The significant challenge when managing diversity is to establish an organizational culture that meets the values of every organizational member, which is needed to foster employee productivity (Moore & Lewis, 2009).
Despite the business advantages associated with globalization, there are proposition that globalization has resulted to poverty and hardship for millions of workers. This is because globalization is likely to impose structural unemployment in the short term. In addition, globalization is perceived to increase the instability of the domestic economy because of the fact that free trade increases the dependency of the domestic economy on the international markets rather than domestic markets. The global marketplace is not an instance of a level playing field. This is because countries that have surplus products can offer them at the global market at low prices. These conditions impose a negative effect on the competition of the global market and that the competitive environment makes it difficult for countries or industries that are less developed to be established (Moore & Lewis, 2009). This is because the competitive advantage at the global market place is largely influenced by technological factors, which is a significant obstacle for the new industries and countries that economies are still developing (Nandi & Shahidullah, 1998).
Hill, C., & Cronk, T. (2010). Global Business. New York: McGraw Hill/Irwin.
Moore, K., & Lewis, D. (2009). Origins of Globalization. New York: Routledge.
Nandi, P., & Shahidullah, S. M. (1998). Globalization and Development: the Emerging
Dynamics and Dilemmas. Boston, MA: Brill Academic Pub.
O'Sullivan, N. (1998). Concept and Reality in Globalization Theory. In C. Rao, Globalization,
Privatization, and Free Market Economy (pp. 125-163). Westport, CT: Quorum
Books/Greenwood Pub. Group.
Peng, M. (2008). Global strategy. New York: Cengage Learning.