Four hundred years ago the United States of America did not exist. A few hundred years ago there were only a few governments that were able to dominate the world. In other words, there was a time when the world was not yet as complicated as today. It is interesting to point out that there was a point in human history when a few European nations were able to control markets in different parts of the globe. But in the 21st century the interconnections between different countries could be seen in an unprecedented scale. It could be argued that all nations are experiencing a different level of interdependence and interconnection. This phenomenon is called globalization. However, it is important to find out if globalization is a positive or negative force. At this point there is no definitive answer to this question. Nevertheless, it could be asserted that globalization could be a beneficial force depending on the policies enacted in a particular society. On the other hand, globalization could be harmful if respective governments were unable to prepare for the various implications of globalization.
Globalization is brought about by heightened interconnectedness through advancements in telecommunications and improved transportation. In other words, it is now possible to establish business and personal relationships in the most cost-efficient manner, in a level that was not possible a few centuries before. Aside from the radical changes in technology, globalization was brought about by the realization that global expansion of a particular business could result in significant increase in revenue. Thus, economies of scale could easily increase the profitability of a particular business.
The use of effective transportation systems such as giant cargo ships, faster trains, and bigger airplanes made it easier for businessmen to establish markets in far-flung places. Transportation and communication enabled international businessmen to have the capability to draw in more people and to expand their reach. As a result, they also increased their influence to every corner of the globe. Therefore, company headquarters are still located in London, New York or Paris but their operations span the globe. The great distances that separate their headquarters from their factories do not pose a problem for these companies because this type of business model is the norm in a globalized economy.
The benefits of globalization could be appreciated through the analysis of expanding markets. A company operating in the heart of the United Kingdom can do everything in its power to increase production and to improve the quality of its products, however, the limited number of clients in an area would negate further enhancements to their business model. The absence of a strong and consistent demand means that there could be no incentive to expand and to pursue higher goals. Globalisation is therefore one way to find new markets and therefore sustain a high demand for a particular product.
A firm in Arkansas or a firm in Cambridge, UK may be struggling to meet their sales quota by selling to local consumers, but when the company expanded to Latin America, Asia and other parts of the world, the profitability of the business suddenly reached unprecedented heights.
Although an economy of scale is a powerful motivator to leverage the forces of globalization, it must also be made clear that globalization is a double-edged sword. In an instant, globalization could negatively affect businesses in different parts of the world especially in emerging markets such as in India, Thailand, Vietnam and the Philippines. Third World countries and their respective leaders must be careful with regards to the creation of policies aimed to promote globalization.
There are so many views with regards to globalization, therefore there is no agreement as to what it truly means (Scholte, 2005, p. 90). Globalization is a complicated concept, like a diamond with multiple facets. Globalization has made it possible for people of different cultural backgrounds and religious orientation to communicate and collaborate. At the same time globalization made it possible for people to be more mobile. For example, it is now possible for a person to be born in France, lives in New York, and yet works in Hong Kong.
Those who believe in the positive impact of globalization points to increased efficiency in the supply chain management of businesses. At the same time there is the belief that globalization provides the incentive for simplification and integration in order to develop cost-efficient systems that in turn would produce high-quality products and services. Consider the following commentary:
An ancient explanation of why some people take up commerce and others do not is the differing resource endowments. Currently, in a materialist hopeful mode, many Indians cherish that economic globalization is about worldwide systematic interdependence, integration, mobilization, and redistribution of global resources that is likely to lead, at least in theory, to partial economic parity and equilibrium among the system members.
Interdependence is not interpreted as a negative force because it does not highlight the weakness of the collaborators but the ability to replace weakness with strength as businesses work together in a complimentary way. At the same time integration and mobilization provides a way to utilize resources in the most efficient manner.
Another unexpected byproduct of globalization forces was the creation of a community of commentators and watch dogs who could provide a more reliable feedback mechanism in order to determine the quality of a particular product or service. Take for instance the following observation:
Implicit in the concept of generic globalization is the idea of emancipatory potential. Capitalist globalization, so utterly reliant on the electronic revolution, cannot prevent counter-hegemonic challenges on the Internet and related media. Despite the ever-present inducements of the culture-ideology of consumerism every time one logs on to the internet, through on-screen advertising, stock market data, and celebrity gossip, there is plenty of opportunity for those who wish to get past the primary consumerist gatekeepers to do so … in the interests of global capital could in principle be challenged almost instantaneously by first-hand testimony broadcast globally via the internet. The possibility for mobilizing against corporate malpractice by this means is historically unprecedented (Sklair, 2009, p. 530).
One could just imagine the ripple effect of the creation of a community of ever-vigilant guardians for the common people so that companies are always on their toes. Their slightest mistake could compel loyal customers to look for alternative products.
Aside from the creation of a system of checks and balances, globalization also induced the following effects:
According to the liberal perspective, the positive impact of globalization on respects for rights occurs through a variety of mechanisms. Among them are the following: (1) FDI generates more wealth, and wealthier countries tend to be democratic. In addition, democracy in these states is more stable and democracies respect human rights better than other forms of government. The penetration of MNCs in developing countries leads to improved working conditions and increased health benefits. Companies are more likely to invest in states where respect for human rights is high, and therefore, states will improve their human rights record in an effort to attract these investors and the wealth they bring. Economic liberalization generates more wealth for the government to redistribute in areas such as education and health care.
Globalization creates a chain-reaction of events. Beginning with the creation of an environment to attract foreign investors, foreign direct investment pours in to transform the economic landscape of a particular county or region. At the same time the same forces of economics compels business leaders and national governments to sustain the type of environment needed to attract more investors. At the end, the result is not only limited to economics but also on the social component of business.
There are additional benefits aside from the capability to pull in investment money. Aside from the creation of factories and the rise of employment opportunities, globalization captures non-tangibles that help in the improvement of the economy as well as the other social aspects of managing firms. Consider the following commentary:
Additionally, FDI is said to bring new technologies, managerial experience, and training into the country. Especially for developing countries, entrepreneurial levels could also rise as the availability of foreign VC increases. Since capital accessibility is seen as one of the top start-up difficulties, raising external capital input may satisfy the entrepreneurial sector’s need for start-up financing in a country.
Jones (2006) also states that FDI may create supplementary business opportunities for local entrepreneurs.
The ripple effect continues down the line as local companies are exposed to better management techniques and the chance to pattern their business models to world-class standards. At the same time, globalization compels business leaders to find better ways to lower costs and deliver products in the least amount of time possible. The following example proves the benefit of globalization in the long term:
In Prince Rupert on the west coast of Canada, a new container port with enhanced rail infrastructure supported by upgraded roads and highways plus an advanced multimodal inland port near Manitoba is designed to offload a container directly from the ship to a train and have it in Chicago within 100 hours (Carmel, 2011, p.115).
The establishment of an enhanced rail system or an improved delivery mechanism helps to reduce the carbon footprint as well as reduce fuel costs. In other words, there are indirect benefits of globalization that would add up in the long run.
Greater Interdependence and Collaboration
When investors pour in foreign direct investments, they are not merely injecting money into the economy. In order to increase their chances of successes, investors needed to partner with various stakeholders including local leaders, local businessmen, local suppliers and the workers hired from the local labor market. As a result, the interaction produced higher levels of interdependence and collaboration. According to one commentary:
The globalization is the result of the commerce, investments and financial transactions’ internationalization. It also contributes at the acceleration of the economy’s liberalization process worldwide. The dynamic factor of the interdependencies deepening process is the expansion of the international commerce. The impact of this explosive expansion on the above mentioned process is manifested under a double aspect: under the aspect of the “external” dimension by the creation of some international commercial exchange networks that fortify the external dependence of the participating countries, and, on the other hand, by the accentuation of the internal dimension through the deepening of the dependence from within of the countries on the evolutions of the world’s economy.
There are unexpected positive results such as the increased appreciation in the way local businessmen come to view the international markets. In addition, standards of excellence are challenged and radically altered to improve the capabilities of workers and managers. Consider the following report:
For a nation, entrepreneurship engenders economic growth, productivity, creation of new technologies and products, market place change, conservation of foreign exchange, development and effective utilization of local resources; propagation of interdependence among business organizations; and redistribution of wealth leading to economic egalitarianism among members of society. It is also important to point that entrepreneurship provides a method for bridging the gap between science and the market place. It helps to convert invention to productive and profitable venture. Thus for any nation, entrepreneurship is the engine of economic growth.
Globalization does not only benefit the factory workers and the capitalist eager to utilize local resources in order to create a profitable business. Globalization also made it possible for great minds and innovative strategists to come together and pool their resources together to arrive at a solution for a global problem. Take a closer look at the following example:
Increased cross-border human activity has led to more frequent international cooperation. Take pollution, for example. Pollution crosses national boundaries, contaminates global commons such as the seas, and may even lead to a rise in world temperatures. A single nation cannot undertake unilateral action to successfully regulate pollution of this kind, and international cooperation would suffer from free riders: nations that benefit from the reduction in pollution but refuse to contribute resources or bear any costs to improve the environment. Similar problems are faced by efforts to combat international terrorist groups, control the international drug trade, or stop the spread of nuclear, chemical, or biological weapons technologies (Ku & Yoo, 2011, p.433).
Globalization created the platform as well as the means for disparate groups to come together and settle their differences for the common good. In the past nations were expected to solve their problems on their own. But there are issues that affected everyone and it makes more sense to work together rather than to duplicate efforts.
From the Context of Multinational Corporations
In the past nations were governed by easy to understand systems like monarchy or a republic. The changes of government are made possible through diplomacy, elections, or coup attempt. No matter the strategies used to effect change the end result remains the same because there is usually an absolute ruler or an oligarchy that controlled the nation. In the present time the same thing could not be attributed to how countries are being managed. It could be argued that citizens of a particular country are affected, controlled and managed by national government but also by multinational corporations.
It must be made clear that globalization should not only benefit the multinational corporations. If the fears of many people could be justified by evidence that the poor could only become poorer while CEOs and corporate shareholders are the only who were enriched through the direct or indirect effect of globalization, then, there is little if any motivation to pursue globalization.
One way to view the impact of multinational corporations is to figure out if national government and their respective citizens could help mitigate the negative impact of multinational corporations or figure out a way to use the presence of multinational corporations to their advantage.
Upon closer examination, it could be argued that multinational corporations have a degree of influence over people; however, multinational corporations have a relatively small influence when it comes to how people behave. The basis for this assertion could be seen after determining what motivates people to go to war. According to one analyst, trade and industry is not the only reason why people go to war (Huntington, 2004, p.36). Thus, nations go to war because of differences in culture, religion, and ideology (Huntington, 2004, p.36). Nations and its citizens are motivated not only by the products and services that corporations produce and sell but also by ideas of ethnicity, religious beliefs and national pride. It must be pointed out that a corporation requires a stable political and commercial environment to thrive. As a consequence multinational corporations are also limited by the actions of national governments.
In the absence of stabilizing forces like the United Nations multinational corporations could not thrive in political hotspots and other problematic areas in many parts of the world. The absence of international laws would make it impossible for multinational corporations to make a profit or to increase their investments in a particular area because of the lack of assurance that there would be a guaranteed return of investment.
A related issue to the discussion on the power and influence of multinational corporations is the relevance of the national governments wherein their headquarters could be found. For example, there is no surprise to the realization that many of the world’s richest businessmen lived and operate their businesses from countries like the United States, United Kingdom, Germany, France, Japan and Norway. These countries are also examples of political and commercial stability.
The assertion that national policies could significantly determine the success and failure of multinational corporations could be seen in the way businesses failed or thrived in 21st century China and North Korea. These two countries are founded in the doctrines of communism. However, therein lies the beginning and end of their similarities because the Chinese embraced capitalism while North Korea failed in that aspect. China has become the destination of foreign direct investments while global companies find North Korea an unattractive place to establish businesses.
Multinational corporations benefited greatly from globalization but the presence of multinational corporations form only a small part of globalization. It could be argued that globalization is the end result of the accumulated actions of individuals and organizations that include official institutions, firms, civic organizations, and small groups (Scholte, 2005 p.91). Thus, these actors work together to produce the forces defined by globalization. However, it has been made clear that multinational corporations do not have what it takes to control geopolitical nations.
There are those who see globalization in a negative light, for instance there are those who pointed out that globalization results in eradication of diversity because of the inevitable emergence of a dominant culture. For example the Internet has made it possible for the United States and other European countries to export their culture to Third World countries.
The influence comes in a subtle way, since the UK and the U.S. are successful in terms of finances and technology; it is easy to understand why citizens from Third World countries would consider them as more superior. As a consequence, it is easy for citizens of these nations to emulate American or British culture to the detriment of their own. This is another way that globalisation could destroy the beauty and diversity in this planet. There is therefore a need to find out how to resist the overwhelming forces of globalisation in the context of the relationship between highly industrialised nations and less developed countries such as India, Thailand, Vietnam, Cambodia and the Philippines.
On the other hand, there are those who contend that perhaps globalization does not eradicate ethnicity and culture but to reduce the diffference between two groups in order to find common ground. Consider the following observation made by analysts on global trends:
However, it is important to note that the decline of cultural distinctions may be a measure of the progress of civilization, a tangible sign of enhanced communications and understanding. Successful multicultural societies, be they nations or other groupings of closely interrelated states, discern those aspects of culture that do not threaten union, stability, or prosperity, and allow them to flourish (Doku & Asante, 2011, p.4).
Globalization is indeed a double-edged sword and the best way to illustrate its dual effect is through the illustration that globalization has flattened the hierarchical structure that was used to describe the geopolitics of the world. A flat structure means that nations could no longer exist in isolation. At the same time, those who are seen as superior to other countries could no longer depend on their economic might because sooner or later these countries would require the assistance of other nations when it comes to raw materials and human resources.
The rewards of globalization from a businessman’s point of view goes beyond expansion of the market share but also on the discovery of new methods to optimise production and as a result reduce costs and therefore increase profit margins. Entrepreneurs would capitalize on this opportunity and therefore find it beneficial to embrace globalization. In addition, businessmen are given additional choices when it comes to where they could establish their factories. At the same time they have the capability to hire skilled personnel all over the world. There is no limit when it comes to the labor market because workers could be hired from any part of the globe.
At the same time there is no longer any limitation when it comes to transferring manufacturing facilities from America and Europe to other locations in Asia or Latin American countries. Emerging economies such as in India, Thailand, and Vietnam are now some of the top destination of foreign direct investments.
The negative impact of globalization is echoed in the concerns raised by many analysts. The fear is in the imbalance produced by the presence of big companies exploiting the desperate needs of certain economies. For example, Wallerstein, a prominent social theorist observed that, “patterns of European development and Third World underdevelopment as interrelated phenomena … gains of the one generated the impoverishment of the other” (Beiharz, 1991, p. 216). Wallerstein also pointed out that behind the rhetoric there exists an organized world system. In other words, there exists a “world capitalist system, wherein developed nations impose their will on Third World countries” (Roberts, 2000, p.2). This phenomenon could be understood by tracing the finished products coming from the assembly lines of developing nations and where it would end up. It was discovered that the same products the local workers endeavored to complete using raw materials indigenous to the area could be sold back to the local economy at higher prices. In an ideal situation the laborers are supposed to be able to afford the same products. But it is the reality of the game that these laborers will never be able to purchase the items that they produced.
Wallerstein contends that nations are linked together by needs and aspirations but he also said that it is a complex relationship and not between equals. For Wallerstein there could be no equality in a global stage where everyone competes against each other. For this eminent sociologist, the world may be flat, however, there would always be a center and a periphery. In the center one could see the rich and powerful nations, while in the periphery of the global diagram would reveal the weaker states that were forced to accept what highly industrialised nations are telling them to do.
Wallerstein made the argument that, “a European world economy was established during the course of the long sixteenth century by the uneven structuring of trade and development patterns between a West European core and an East European and Latin American periphery” (Beilharz, 1991, p. 216). This so-called uneven development still persists today and it must be included in the ongoing discussion on globalization.
If Wallerstein made the correct assessment, then, nations from the 16th century onwards did not develop outside the context of colonialism but in fact perpetuated a world capitalist system wherein poor countries were exploited by the rich and powerful nations. As a consuquence the following generalisations could be made:
Industrialized nations exploit natural resources of less developed nations.
The exploitation of the natural resources results in the degradation of the environment.
It is now more difficult to sustain this type of highly exploitative practices (Beilharz, 1991).
It is has been made clear that globalization is not simply about improvements in the telecommunication and transportation sectors that made it possible to conduct highly efficient supply chain management structures. Globalization is also about exploitation as well as the amplification of wrong practices that could easily destroy the planet as well as to widen the gap between rich and poor countries. It is not good news for those who are in the periphery and eager to swallow up the crumbs that fell from their master’s table.
For countries who are unfortunate enough to belong to the “periphery”, they are outsiders looking into the more enviable life of their trading partners who are enjoying opulence and excess. In addition, Wallenstein’s theory also suggests that those who belong to the “periphery” are powerless to deal with the power of the capitalist system that could perpetuate a system of exploitation.
It has to be pointed out that less developed nations are not only being exploited in terms of raw materials such as precious stones, wildlife, or timber; these nations are also being fleeced when it comes to human resources. However, the effect may be indirect, as the number of graduates from Third World countries rises, there was a corresponding rise in unemployment rates. As a result there was also an emergence of a new breed of highly skilled workers that could not command the same wages as their European counterparts.
Globalization also resulted in the proliferation of overseas contract workers wherein young people, parents, and even the older generation are being persuaded to leave their countries and search for greener pastures by working as immigrant workers. The lure of bigger pay makes it difficult to resist the offer. However, there are social consequences when it comes to the decision to leave and work for long periods of time outside the country of birth. In most cases parents leave their children behind. However, there is no need for a genius to help someone realize that without a mother and father, a child will have a less than ideal social environment that could provide nurture and guidance.
The ability to work in It is easy to understand why maladaptive behaviour can develop in homes where parents are not present to guide and nurture their children.
One of the most controversial aspects of globalization is the phenomenon that compel business owners to ship jobs overseas. Jobs that were once the pride and joy of Americans are now performed by workers in countries like Chile, Thailand, the Dominican Republic, Mexico and others.
A pervading fear exists in the hearts of workers because they are no longer able to hold on to job security. In the past high profile and white collar jobs were the positions that have little job security. In a globalized economy however, even factory workers do not have job security. The word indispensable suddenly disappeared from the vocabulary of employees and human resource managers.
There has been greater unease in the lives of American and European workers, it is an unease rooted in the fear of a bleak economic future for those who do not have the skills neededto deal with rapid changes in technology. It has to be pointed out that factory workers are not the only at risk employees in a globalized economy. Take for example the farmers producing corn. In the American market, corn farmers supply giant corporations such as cereal makers like Kellogs.The dominance of Kellogs as well as the fact that cereals has become a staple of American diet assured American farmers of continuous demand for their product. However, if Kellogs suddenly experienced a financial crisis, the company would be forced to find effective ways to reduce its operational costs. An area that could be considered is the supply of corn from the local market.Thus, if the American farmers could not lower the price of their corn, Kellogs on the other hand could pursue suppliers overseas.
The corporate leaders at Kellogs could easily tap corn supplies from international markets, to the detriment of local farmers. If this is not practical, Kellogs could choose the alternative way of producing cereals and this could come in the form of the construction of factories in places like China or Mexico. It is important to realize that it would only require a fraction of the company’s budget to construct and maintain factories in other countries as compared to doing the same process in the U.S. mainland or in the United Kingdom.
Friedman also made the following warning:
The more we push out the boundaries of knowledge and technology, the more complex tasks that machines can do, the more those with specialized education, or the ability to learn how to learn, will be in demand, for better pay. And the more those without that ability will be less generously compensated. What you don’t want to be is a not very special, not very specialized, not very anchored, or not very adaptable person in a fungible job.
It is a matter of practical business sense that compelled corporate leaders not to build First World economies but transfter the manufacturing side of their business to countries that offer cheap labor. In the case of China and Mexico, it has to be acknowledge that these countries have an advantage when it comes to low-wage production as well as the availability of cheap raw materials needed for producing a product (Andreas, 2011, p.425). American and European workers must figure out a way to fight back such as by focusing on providing specialized skills and the production of high-quality products.
The Challenges of Globalization
The benefits of globalization could only be achieved through the expert use of cross-cultural management. In recent decades, businessmen realized the impact of globalization to their respective companies (Andreas, 2011). It has to be pointed out that cross-cultural management deals with the implications of human diversity, outsourcing, multinational organizations, expatriates, and knowledge transfer on business organisations. Businessmen may discover the impact of cross-cultural management in the workplace by utilizing Hofstede’s The Five Dimensions of Culture. A global project based on Hofstede’s theoretical framework called the Global Leadership and Organizational Behaviour Effectiveness (“GLOBE”) was an attempt to understand the impact of culture on business management (Kouzes & Pozner, 2007). An application of the importance of cultural sensitivity could be seen in the following commentary:
The grouping styles of negotiations are most often associated with the negotiations for the six major geographic regions: Europe, North America, Latin America, Arab countries, Asia and Africa. The comparison of cultural models of negotiation styles is monitored by the following five aspects: 1. the use of time (the punctuality at meetings, orientation towards the past, present or future; the rhythm of negotiations) 2. personal / professional relationship 3. rules of communication (how messages are sent, whether it comes to verbal or non-verbal communication) 4. concessions and contracts (the moment of making the most important concessions is analyzed, and the manner in which agreements are made) 5. decision-making.
The failure to understand differences in culture could prove disastrous for investors and expats. The best way to deal with differences in culture is to immerse in the culture of other people and learn its intricacies. There is a need for a deliberate attempt to study the culture of a target economy in order to develop a management style that increases the efficiency of the people and not produce roadblocks that inhibit growth.
Overall, globalization is a positive force that brings about interdependence, collaboration as well as knowledge sharing and technology transfer. In addition, globalization compels Third World countries to make changes regarding human rights issues because investors are attracted to work in areas wherein the rights of workers are respected. Nevertheless, it is important that national governments must do its job such as the creation of policies that would regulate multinational corporations and limit the negative impact of globalization.