Effects Of Globalization On An Organization

Introduction

Globalization is the process of international integration resulting from continuous interchange of ideas, cultural aspects, products and other world views. The process of globalization in the modern day has been caused by the advancement in transport, infrastructure and telecommunication sector. The invention of the internet has led to the massive international integration promoting trade and various political interests. The development of global monetary systems such as PayPal and Visa has accelerated economic integration among several countries in the world. The continued growth in mobile telephony has also provided convenience in the globalization process through allowing global routing of voice and data. In the modern day, people are able to network and conduct business across the globe from the comfort of their homes.

The process of globalization has greatly influenced the normal business and organization’s operations with several organizations being forced to adjust to several changes in order to remain relevant and profitable in the current global markets. The research question the report will be seeking to explore is: – what are the effects of globalization to an organization?

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Considering the numerous international changes that have taken place because of globalization in political and economic front, it is very paramount to establish the response of various organizations to the same changes. Therefore, this report is very appropriate because it seeks to expand the study and focus on individual firms.

Globalization has brought about a sea of opportunities for organizations to exploit, but has also brought about several challenges too. There have been reported cases of loss of culture, insecurity and unemployment among many other challenges. This research will seek to identify several negative and positive effects of globalization in the context of an organization.

The entire issue of globalization is very broad and is therefore impossible to comprehensively exhaust it. However, the study will seek to streamline on a number of positive and negative effects of globalization on an organization and leave room for further study on the topic.

Literature review

According to Theodore Levitt (1983), the difference in preference in business and consumer patterns would eventually disappear ushering in an era of global production of goods and services. This prediction has been realized in the 21st century whereby most of the firms develop products with a global perspective. The global integration foreseen by Theodore in the 1980s has provided a myriad of opportunities to organizations in the modern era.

A report by the World Trade Organization (WTO) in 2003 indicated that globalization has resulted in increased productivity due to the increasing international trade. Several trade agreements enabling entry of non-tariff barriers for products from various sources within the globe have been accented opening a new page in the global trade. This move has increased industrial developments within member countries. Rodrik (1997) argues that the introduction of non-tariff barriers has led to accelerated economic growth in the developing countries because of availability of markets for their products. Most established multinational firms have found it cost-effective to relocate to developing countries to establish plants there in order to cut the cost of labour. This has resulted in the creation of employment opportunities to the people in the country these firms are established. Availability of the outsourced labour has increased on their profitability as documented by Rodrick (1997). According to Stiglitz (2003), relocation of multinational companies to developing countries has increased pressure on the labour market resulting to massive restructuring of the firms in the developed countries.

Globalization has enabled most of production to migrate from mass production under Fordism to customized and value added products in the current post Fordism era in order to satisfy the growing customer base. In the current dispensation, product branding and brand development has taken centre stage outshining the actual product development. According to (Klein, 2000), most of the corporations in the modern era have invested a lot of money in branding and brand establishment through advertisements and sponsorships. The aspect of value addition has resulted in an urgent need for adequate market researchers to satisfy the ever changing consumer’s needs fully (Klein, 2000).

Technology has been embraced by most corporations as a result of globalized markets. The stiff competition within the global market has led most corporations to seek alternative methods to reduce on cost of production. As outlined earlier most firms have opted to relocate to places where the cost of labour is considerably cheap according to (Stiglitz, 2003), but still technology has been embraced as a tool to reduce on the cost of production. Most firms have computerized their operations reducing the cost of labour and used the computer networks to seek markets for their products hence reducing on advertisement and promotions costs. To cut the cost of middle-men, firms have opted to embrace technology according to (Thomas, 2000)

According to (Carr & Chen, 2001), most organizations have been able to tap on availability of integrated systems of global standardization to advance to new markets. An integrated intellectual property rights and patent systems allow an organization to retain their intellectual property rights anywhere in the world provided they are registered. This has helped curb piracy and duplication of copyrighted materials. Therefore, the parent organizations are given an opportunity to venture new markets without undue harassments.

Globalization has come with numerous positive effects. However, according to a study by (Oxfam America, 2002), globalization has brought about several negative effects among them increased insecurity. However, the issue of insecurity and global terrorism has been a subject of concern leading to the establishment and empowerment of international police and UN peace forces according to a publication by the UN Security Council, 2006.

Research methodology

Several research methodologies were used to collect the data for this study. The major method of data collection was reading the already published articles and academic materials on the same topic. Several online journals, books and academic papers were read to provide data for this research. The information from the existing literature was discussed by the group members to reach a consensus on what to include on the final report. To help remain objective and focused on the study, several research questions were developed.

To ensure data collected is relevant, representative and consistent with study under review, a careful sampling technique was developed in the distribution of questionnaires. Video call and social media interviews were also carefully reviewed to ensure that relevant candidates were interviewed. For the video call and social media interviews, people currently working in multinational firms were interviewed. Data collected from online books, academic papers and other forms of written sources were also carefully reviewed to ensure information retrieved is consistent with the subject.

Interviews were another method used to collect data for this study. Social media interview via twitter to an employee of a multinational organization was organized whereby the respondent responded to several questions we posted to him. The aim of the interview was to establish some of the gains and challenges the firm experiences as a result of globalization. The responses were documented and used in the data analysis phase of the research. The questions asked were simple, clear and short to avoid confusing the respondents. Absolute care was taken to avoid open ended questions which could influence the respondent’s responses. Additional questions were posted to the same respondent via an internet call using Skype. Similarly, questions asked through this method were short, concise and structured to avoid influencing the responses. Questions and answers provided by the respondent were recorded and used for data analysis.

Questionnaires were also developed for the above study. The questionnaires were developed and distributed randomly to several respondents within the college. A total number of 75 questionnaires were distributed, and the respondent’s responses used to analyze the data. The questionnaires were structured in such a way that they were concise, clear and short so as to avoid any confusion to the respondents. The interviewer was available upon request to aid clarifying issues where necessary, but very careful not to influence the respondents responses.

A random sampling technique was used in the distribution of the questionnaires. A sampling factor aimed at achieving a 6% of total population representation in the college was developed and questionnaires developed and distributed. Based on the college population, 75 questionnaires were distributed representing a sampling factor of 6%. In order to ensure that all the students had an equal probability of being chosen as a sample, a random picking was employed within the population. This method therefore ensured that every student had an equal probability of being selected. Data collected from the questionnaires was used in data analysis.

The big questions

The entire research was meant to establish the effects of globalization on an organization and all the questions asked to the respondents whether in the questionnaires or interviews were meant to answer that research question. In order to exhaustively cover the question, several other questions were developed to aid in the data collection. The questions were:

• What is globalization?
• What are the causes of globalization?
• Have you witnessed any global change in your lifetime?
• How has globalization positively affected your life?
• How has globalization negatively affected your life?
• Which specific areas have improved as a result of globalization?
• Which specific areas has globalization affected negatively?
• How has globalization affected organizations in your locality?
• What are some of the suggested solutions to the challenges associated with globalizatio?

Analysis and findings

Data analysis

From the responses, 57% of the respondents were for the opinion that globalization has a net positive influence to local organizations with 28% holding the opinion that globalization has net negative effects to the local firms. Of the total respondents, 15% were not sure whether the net effect of globalization has either negatively or positively affected local firms. The graphical representation of the respondents responses is demonstrated below.

It was clear from the questionnaires that a majority of the respondents identified several areas as the biggest beneficiaries of globalization. The four major areas that have been positively affected by globalization are: –

Foreign trade at 29% according to the respondents
Labour mobility 24% from the data collected.
Products and service standardization at 12% of the total respondents
Infrastructure and transport at 35% of the total interviewed respodents

It is necessary to note that this list is not exhaustive of all the responses the respondents gave but a summary of the major areas identified by the respondents. Areas like healthcare, sports, tourism, wildlife conservation and global peace initiatives were noted as having improved with globalization but had negligible percentages to be tabulated as compared to those represented below.

The respondents had also the opportunity to identify several areas they thought globalization has negatively affected. The major areas identified were;

Environment at 31% of the total responses
Security at 12% of the total interviewed
Employment at 12% of the respondents
Marginalization of local firms at 24% of the responses
Culture and tradition at 21% of the total data collected.

Just like with the positive effects, the one’s represented by the bar graph above are not exhaustive of all the areas given by respondents but a summary of the major points raised. Terrorism, global recession, colonialism and illegal trade were identified as additional negative effects of globalization.

Findings

Benefits of globalization

Expanded markets

From the above data, it was found out that most of the respondents perceived globalization as a positive move and supported it as long as it brings economic growth and expanded markets. It was clear that globalization has expanded the markets for organizations and therefore making them more productive and profitable. However, most organizations have been forced to restructure in order to produce globally acceptable products. The current growth in the infrastructure, internet and telecommunication sectors globally was identified as the primary reason for the expanded markets. Internet has been perceived as the greatest contributor to the reduced advertisement and marketing costs and therefore leading to reduced costs of the products. This has made such products competitive in the global markets.

Free flow of labour

Globalization has enabled free flow of labour and therefore able firms have been able to recruit the best talents in the world without boundaries. This has enabled the firms to be more productive. However, this opportunity has been misused resulting to brain drain in the developing countries. . Cases of workplace discrimination, child labour and slavery have also been reported in the current times and this has been attributed to globalization.

Improved infrastructure

In order to trade efficiently, countries have developed several world class infrastructures. International roads, railways, telephony, internet, ports, air ways have been developed and constantly improved to ensure convenience and safety in movement of goods, services and data across the globe.

Negative effects of globalization:

Environmental degradation

From the respondents, globalization has resulted in over utilization of environmental resources resulting to environmental degradation.

Marginalization of local firms

As most of the multinationals relocate to the labour friendly countries especially in the developing countries, the existing local firms have either been acquired or economically crippled. This has negatively affected the economies of these countries.

Unemployment

As the multinational organization firms relocate to the developing countries, many jobs in the firm’s original home are lost as a result of such restructuring. Continuous relocation has been accused of destabilizing trade unions in developed countries therefore weakening their bargaining powers on behalf of their members.

Conclusion

In conclusion, globalization has greatly affected the normal and strategic administration of organizations in the world today. Most of the organisations have been forced to restructure their normal working processes in order to satisfy the growing customer needs. Globalization has further opened global markets for products leading to increased productivity.

Globalization has to a big extent led to industrialization in developing countries due to relocation of big organisations to such countries in search for cheap labour. This has consequently led to the creation of employment hence accelerating economic growth in these countries. Globalization has led to poverty reduction in the developing countries by helping in reducing the gap between the rich and the poor through creating job opportunities. (Adams, 2003)

Apart from the many positive effects globalization has brought to organizations, there are several negative effects associated with it too. Some of the major effects include: –

Environmental degradation

Due to the expanded markets most of the natural resources have been over exploited resulting to degradation. Globalization has further accelerated industrialization which has led to over-establishment of industries above the nation’s carrying capacity leading to a net carbon production. The excess carbon emitted to the environment forms the component of the green-house gases, which have been ingredients of global warming.

Loss of culture and traditions

Most of the organizations have lost their culture and traditions because of the exposure to the global markets. In order to fit in the global markets, several local firms have been forced to restructure and invest in market research and innovative product development to satisfy the diverse customer needs.

Loss of employment

According to a UNCTAD, 1996 report, several workers in the developed countries have lost their employment in the restructuring processes within the organizations particularly in relation to relocating firms in the developing countries in search of cheap labour.

Victimization of local small and medium enterprises

Most of the relocated multinational firms use their financial power to victimize their competitors in their new countries. Lack of proper monitoring and policy formulation gives multi-nationals a competitive edge over their competitors forcing them into acquisition or insolvency (Boyer&Drache, 1996).

This study has tried to address the issue of globalization in the context of an organization. However, due to the scope of the subject the study has not covered the issue of globalization exhaustively. Numerous effects in relation to political, financial, economic and social implication of globalization have not been covered in this study. This research therefore leaves room for future study on the subject.

Recommendations

Several recommendations are made in order to mitigate the negative effects of globalization and harness the positive influences. Some of the recommendations suggested from the study includes;

Ensure full compliance to local and international law during establishment of multinational firms in the developing countries. This will ensure that the local labour and other resources are not exploited at the expense of their profits. Environmental issues are also addressed at this stage to avoid the establishment of industries that exceed the nation’s carrying capacity (FAO, 2004)
Organizations should embrace the modern methods of advertisements and marketing through the internet and the social media to fully gain from the extensive global population.
The firms should embrace technology as a tool for reducing cost of production. Mechanization would lead to reduced cost of labour hence producing competitive goods in the global markets.
The global consuming market in the world is dynamic and therefore needs constant market research and surveys to ensure that the organizations products are relevant at all times. It is therefore recommended that the organizations embrace market research in order to remain relevant in the market (Klein, 2000).
The local governments should endeavour to protect local firms from unhealthy competition from the multinationals. This can be implemented through government subsidies or tax rebates to the local small and medium firms in order to withstand competition from the multinationals
Governments should open their markets through such innovative products like non-tariff barriers on products from integration members. This would encourage more trade between countries resulting to increased economic growth to the member countries.
Monitoring of labour laws must be closely followed to guard against child labour and work place discrimination. Most of the multinationals established in the developing countries have been accused of child labour, slavery and work place discrimination. Such laws needs to be clearly monitored, and any firm contravening such should have their operating licenses revoked.(Black &Brainerd, 2002)
As the issue of globalization continues to develop, strong intellectual property rights, copyrights and patents monitoring needs to be done to avoid piracy or duplication of copyrighted materials. Such would ensure that firms would establish new markets in a foreign land without fears of copyright or patent infringement.(Thomas, 2000)

References

1. Adams, Richard H. Jr. 2003. International migration, remittances, and the brain drain: A study of 24 labour-exporting countries. Policy Research Working Paper No. 3069 (May). Retrieved August, 16, 2013 from < http://rosalinda.ingentaselect.com/wb/wpaperspdf/3069.pdf>
2. Black, Sandra E.; Brainerd, Elizabeth. 2002. Importing equalityThe impact of globalization on gender discrimination. NBER Working Paper No. 9110 (Aug.). Cambridge, MA, National Bureau of Economic Research. Retrieved August, 15, 2013 from <www.nber.org/papers/w9110.pdf>
3. Boyer, Robert; Drache, Daniel (eds.). 1996. States against markets: The limits of globalization. London: Routledge.
4. Carr, M. & Chen, M. A. 2001. Globalization and the informal economy: How global trade and investment impact on the working poor. International Labour Organization. Retrieved August, 15, 2013 from < http://www.ilo.org/wcmsp5/groups/public/—ed_emp/documents/publication/wcms_122053.pdf >
5. FAO .2004. Trends and Current Status of the Contribution of the Forest Sector to National Economies, FAO Working Paper FSFM/ACC/07. Forest Products and Economics Division, Rome: FAO..
6. Klein, N. 2000. No Logo. London: Harper Perennial.
7. Oxfam America. 2002. Global finance hurts the poor: Analysis of the impact of North-Southprivate capital flows on growth, inequality and poverty. Boston: MA.
8. Ritzer, G. 2000. The McDonaldization of Society. California: Pine Forge Press.
9. Rodrik, Dani. 2001. The global governance of trade as if development really mattered. Background paper for the Trade and Sustainable Human Development Project, UNDP.
10. Stiglitz, Joseph E. 2003. The roaring nineties: A new history of the world’s most prosperous decade. New York: W.W. Norton & Company.
11. Thomas, F. 2000. One Market Under God. London: Seeker & Warburg.

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