Positive and negative effects of the process of Globalization
Positive and negative effects of the process of Globalization
Positive and negative effects of the process of Globalization
Globalization facilitates the integration and interaction of the people, companies, and countries across the globe. Interconnectivity of nations has made it possible for international trade, outsourced manufacturing, and foreign direct investments to increase across the world. The core drivers of the changes are improvements in transport and communication systems that transcend national boundaries. As a result, citizens can move goods from one region of the world without hitches. The globalization concept has many advantages that the senior management of multinational corporations (MNCs) should exploit to reap from the advantages while avoiding possible disadvantages.
Growth of International Trade. Globalization is responsible for the growth of international trade as most countries are taking advantage of their competitive edge to thrive. In this regard, companies from the developed nations build their production plants in the developing nations in which they have access to cheap labor, which reduces their production costs. For example, American corporations produce goods in China and export them to the domestic market. In this type of arrangement, China gains through Foreign Direct Investments (FDI), that injects capital to the local economy and provides direct and indirect employment. On the other hand, corporations incorporated in the United States pay tax for goods produced domestically or abroad. Additionally, the imports are subject to excise duty on arrival. The practice of investing abroad today is easy and makes trade between countries to thrive. Consequently, other business in retail, shipping, and marketing, also perform better. Therefore, globalization leads to an increase in international trade that leads to the growth of different sectors in local economies.
International trade helps companies grow beyond their national boundaries. It provides them with alternatives that they cannot find in the domestic market. At the global levels, multinational corporations pursue their interests, which in most cases is profitability. When operating in foreign markets MNCs must respect the people and their traditions to gain acceptance in these markets. For example, an American banking institution interested in investing in Saudi Arabia must develop Islamic compliant lending products to satisfy the needs of the market. International trade provides firms with many market options but they must be compliant with the beliefs of expectations of the people.
The advent of globalization and the resultant international trade forces countries to work hard to maintain bilateral and multilateral relationships. All nations desire to derive maximum benefits from the integrated markets and are always working to minimize or eliminate trade barriers. They also create the best environments for business to thrive and attract multinational corporations in their countries. For example, many nations across the world have liberalized their economies to attract foreign direct investments. As a result, states are proactive in advancing international trade through globalization for their benefit.
Emergence of New Cultures. Globalization leads to the emergence of cultures of tolerance and mutual understanding. Most multinational corporations have to deal with cultural differences between the home and host countries. They have to manage the differences well to improve their performance. Professionals who have to move from their home countries learn that their success depends on their abilities to interact with local communities (Li and Guisinger 685). At the same time, workers from the host countries get the opportunity to learn about the organizational culture of the firm from the home nation or through training. Through these interactions, the two groups understand their cultures and learn to respect each other. Eventually, the firm benefits when all its workers focus on delivering their mandate rather than struggling to adapt to the local culture. Globalization makes it possible for multinational corporations to invest abroad and bring several cultures together, which forces the professionals to learn the traditions of other communities to lead to a culture of tolerance.
As a future manager, I have learned that globalization is responsible for increased competitiveness. A competitive market is good for the business and the consumers since companies work hard to satisfy the needs. At the same time, firms ensure that they produce high-quality products as they try to wade off competition from abroad. Fighting competitors entails improving their standards for them to compete at the international level. Moreover, the products and services must maintain the goodwill of the new country. In fact, local firms and MNCs must produce high quality products to compete internationally.
Global Security. Globalization is responsible for the enhancement of global security. It has become difficult for countries to attack each other as their economies are interconnected. Most countries use economic sanctions to prevent their political competitors from break international law. For example, when Russia annexed Crimea, the western countries led by the United States imposed economic sanctions to discourage it from continuing with the process. It is possible that the world would be experiencing deadlier conflicts if countries did not rely on each other economically. Multinationals use the tranquility that globalization creates to expand their operations across the world. Undoubtedly, globalization has enhanced global security since nations are unwilling to confront others because of the economic gains they accrue.
Globalization has allowed citizens to question the relationships between their countries, especially those that have poor human rights records. For example, the media questions the relationship between the United States and Saudi Arabia because of the latter’s disregard for human rights. Although the situation is always uncomfortable for the US government, the media feel that it is a legitimate question to ask because the country supports Saudi Arabia’s economic activities in the Middle East. If America were to withdraw support, the state would suffer economically, which would encourage it to advocate for better human rights. The western nations champion human rights as a condition for maintaining trade relationship, but that has not been the case with Saudi Arabia. Therefore, globalization promotes openness and transparency in governance structures but there are challenges ensuring uniformity.
Conflicting ethics. Business ethics is an important issue that multinational corporations, workers, and managers have to deal with on a daily basis. The senior management must work hard to guide the colleagues understand the business ethics practiced in various regions of the world where they have branches or subsidiaries. Ethical demands across the world are diverse and at times contradictory. Some of the moral values that workers take for granted in their home countries may become big issues in new markets (Crane and Matten 20). Therefore, it is essential to prepare workers for these possible challenges before they travel to their new work stations.
Nations have varying work ethics and morals that multinational organizations have to implement. In that scope, attitudes towards racial and gender diversity in North America differ significantly to those of Middle Eastern countries. For example, women were allowed to drive in 2017 and given driving licenses in 2018 in Saudi Arabia. At the same time, a Chinese executive cannot fire a worker during turbulent economic times because they are trained to be compassionate. However, in the American and European traditions, retrenchment and downsizing can take place at the phase of the company’s growth and development. Again, some Scandinavian countries find it unethical to use child labor while in some South Asian countries practice the same. Multinational organizations have to change their operations depending on the morals of the new nations, but they can disregard some such as discriminating one gender and employing child laborers.
Ethical dilemmas are critical issues that business managers must handle in the globalizing world. However, it is a challenge because these issues are rooted in the cultural, economic, and political history of the countries. For example, Europe businesses organize their values from the continent’s interaction with the Catholic Church while the American firms’ rely on the Calvinist Protestants. Business ethics in European and U.S. institutions follow the Christian traditions while other regions depend on the dominant religion, for example, Saudi Arabia that follows Islamic traditions (Crane and Matten 30). In Asia, some nation’s uses Hinduism, Confucianism, and Buddhism as the base for organizational ethics. Therefore, any organization preparing to expand to new markets must prepare based on the ethics in those nations and train the workers appropriately.
The decision to work in a specific region of the world is made by senior managers and individual workers. As a manager in such a firm, it would be critical to ensure that I understand their professional abilities and attitudes to work away from their homes. It is notable that working abroad is a challenging experience to even the most qualified professional because each region has unique challenges (Crane and Matten 30). Therefore, the character of the individuals working in multinational organizations is critical because they would have to learn and unlearn some practices to be effective in particular markets. Therefore, as a senior manager, I believe it will be my duty to identify such talents and post them to regions where they would be productive for the overall good of the organization.
Outsourcing jobs. Multinationals from wealthy nations are always accused of outsourcing jobs to the developing countries. In the United States, domestic manufacturing employment is continually reducing as American firms relocate their factories to other nations. While the decisions of the multinationals are financially reasonable, they have adverse effects on the wealthy economies. Once a factory relocates, people lose employment and the related sectors lose business and reduce the number of employees (Harrison and McMillan 28). Therefore, outsourcing leads to the closure of factories in developed countries followed by downsizing that leaves many people jobless.
It is crucial for senior managers to consider the consequences of relocating their businesses from the domestic market. The decisions are critical because they can lead to loss of livelihoods for thousands of families. The leadership of a corporation should think of relocating manufacturing as a last resort after exhausting all the possible alternatives of remaining in the domestic market. It is also useful to clarify that business exists to make profits and give returns to the shareholders (Harrison and McMillan 28). Therefore, if the best alternative is to move its operations and remain profitable, the management should not shy from making that decision. Relocating some operations of a business to another nation may be an important undertaking but the firm must exhaust all possible alternatives before making that decision.
Environmental Degradation. Environmental reporting has become an essential feature for multinationals because they are accused of degrading nature across the world. Corporate accountability came to sharp focus after accounting misdeeds of Enron and WorldCom. As a result, global citizens fear that multinational corporations focus on their interests only even if they compromise other features of society (Kolk 146). It is possible that some of them relocate to regions that have fewer conservation restrictions to operate as they wish. For example, most multinational corporations moved their manufacturing plants to China and India in the 1990s when there were no strict environmental laws. The same tradition continues in other regions of the world as more organizations transfer some of their activities abroad. Most multinational corporations have been relocating to countries that do not have strict environmental requirements but environmental reporting is catching up across the world.
Multinational corporations are accused of dumping wastes into rivers and emitting excess carbon into the environment especially in foreign markets. In addition, some firms cut down large sections of forests as is the case in Brazil (Kolk 146). In the process, they interfere with the ecology of the areas, which may have serious consequences on the residents. As Kolk notes, “Multinational corporations (MNCs) are always singled out in the debates about corporate governance and social responsibility (146).” They operate independently with a lot of contempt to the people and the countries that host them. In some cases, the host countries insist that they must commit to absolute minimums about the environmental conservation, observance of human rights practices, and other “externalities” of international trade and production. In this regard, it is important for a manager in a foreign firm to be aware of the global demands on the environment. Moreover, it is becoming increasingly essential for multinationals to limit the amount of carbon dioxide they emit to the atmosphere. Most countries committed to the Paris Agreement in 2015 and firms in those nations are also expected to abide. Some multinational organizations have been involved in serious environmental violations such as dumping waste on rivers and high carbon emissions, which is contrary to the Paris Agreement of 2015 among other environmental regulations.
It is mandatory for the senior management of global firms to ensure that they work with the regulatory institutions to aid in the protection of the environment. It is critical for these institutions to ensure that they are not the source of environmental degradation. Firms that degrade the environment are short-sighted and do not consider their long-term operations (Kolk 146). Companies that destroy the environment can be profitable in the short-term but may be unsustainable. The senior management of the MNCs must ensure that the workers understand the need to engage in environmentally friendly strategies. The firms should develop and implement codes of conduct that all staff must follow. They should also publish environmental reports in the same way they generate financial statements. Reporting on their ecological sustainability activities integrates conservation efforts to the core organizational operations (Kolk 146). Multinationals, managers, and workers must appreciate the importance of environmental protection and work together with the relevant authorities in the host nations.
Globalization is responsible for a sharp increase in cross-border crimes such as financial fraud and cybersecurity. The advent of technology that connects the world through the internet has made it worse as more networks for criminal activities emerge. While the internet is facilitating the commission of new modes of crimes, it is notable that traditional criminals are taking advantage to continue with their illegal activities (Aguilar-Millan et al. 41). Multinational corporations must be aware of these challenges to come up with sustainable strategies against them. The integrations of countries and corporations have led to new criminal activities that multinational organizations must understand and avoid.
The advent and growth of the internet have given multinational corporations the opportunity to reach global audiences without the brick and mortar branches. However, criminals are always looking for weaknesses to steal anything they can (Aguilar-Millan et al. 43). The fraudsters give the company a bad name if they deceive customers successfully. Moreover, no customer would wish to lose their money. Therefore, senior managers must ensure that the platforms they use are secure to avoid any customer fraud among other criminal activities.
Police can counter criminal activities through cross-border cooperation. Today, most nations are members of Interpol, which is an international policing organization that aids in investigating crimes across the world. Inter-country cooperation becomes important in ensuring that crime does not interfere with the movement of business products as well as the people. Moreover, the movement of goods and services from one country to another creates an opportunity for criminals to conduct their illegal activities. All member nations of Interpol should support the organization’s initiatives through the provision of the necessary infrastructure and resources. Interpol, the international policing organization has been playing an important role in combating crimes across the world to ensure that global business is uninterrupted.
Consumers may be caught up in globalization conflicts involving some products and services. Moreover, some maybe legal in one country but illegal in another. For example, online gambling firms operating in the United Kingdom provide service across the European Union (Aguilar-Millan et al. 43) but they cannot operate in the United States. Nonetheless, some Americans may participate in sports betting through online platforms, which may have serious legal implications on them and the service providers. Although globalization is universal, nations have varying perceptions about some products and services, which may lead to conflicts between nations.
Globalization facilitates the interaction and integration of people, businesses, and nations. Moreover, citizens from various regions interact thereby leading to increased international trade characterized by the movement of goods and services across regions. In most cases, transactions are made over the internet and the products purchased are transported to the purchasers through the sea, air, and road systems. Most countries are always working hard to maintain good working relationships to ensure that they can continue to benefit from international trade. The interconnection that comes with globalization has also led to global security. Moreover, most countries treasure the trading partnerships they have with others and would do anything to maintain them. The economic benefits of international trade are the reason conflicts among nations have reduced significantly in the twenty-first century. Therefore, globalization has enhanced connections that most nations are willing to maintain to continue benefitting through international trade.
Opponents of globalization argue that the concept has led to the outsourcing of organizational activities to emerging economies. The developed nations suffer since firms have to downsize their operations in the home country. Other firms involved in the supply chain suffer from the high cost of acquiring goods and services. The higher expenses are pushed to the final consumer, which is a disadvantage to them. There are suggestions that firms should try to maintain operations in their home countries and use outsourcing as the last resort. However, most firms are unwilling since the developing nations offer cheaper labor, which can allow them to make more profits. Multinational organizations must understand the cultural and ethical requirements of the host nation to avoid unnecessary conflicts. Moreover, traditions in India, China, Europe, Africa, and America differ depending on the dominant religions. Therefore, organizations need to consider the local market before they outsource operations, and when they do, they must strive to understand the host culture.
The advent of the internet has led to the emergence of new crimes that are challenging to police. Moreover, criminals conduct illegal activities through networks spread out across the world. However, Interpol has been working to ensure that criminals are caught wherever they might be. Nations that allow the organization to operate in their jurisdiction should provide resources and infrastructure to assist it in its mandate. Multinational organizations have also been involved in illegal activities such as environmental pollution and increased carbon emissions. The major concern is that they deliberately move to nations that lack strict environmental regulations to continue with the vices. However, most nations are putting in place strict environmental laws guided by international forums such as the Paris Climate Change Agreement of 2015. Globalization and the internet have led to crimes by traditional criminals and multinational organizations that are challenging to address.
Aguilar-Millan, Stephen, et al. “The globalization of crime.” The Futurist, vol. 42, no.6, 2008, pp. 41-50.
Crane, Andrew, and Dirk Matten. Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford: Oxford University Press, 2016.
Harrison, Ann E., and Margaret S. McMillan. Outsourcing jobs? Multinationals and US employment. No. 12372. National Bureau of Economic Research, Cambridge: MA, 2006.
Kolk, Ans. “Environmental reporting by multinationals from the Triad: convergence or divergence?” MIR: Management International Review, 2005, pp. 145-166.
Li, Jiatao, and Stephen Guisinger. “The globalization of service multinationals in the “triad” regions: Japan, Western Europe and North America.” Journal of International Business Studies, vol.23, no.4, 1992, pp. 675-696.