Category: Globalization

Economic Impact of Globalization in India

The term ‘globalization’ refers to the free and flexible movement of products and services across borders. The process follows an integrated and well-managed manner. It opens a gateway to be a part of the global economy and trade. The globalization directly impacts on the economy of the country as it attracts foreign direct investment by opening global trade opportunities. Furthermore, if one looks into the impact of globalization on the Indian economy, it is quite visible that it helped in attracting prosperity, increasing volumes of trade, foreign direct investment, and growth.

This essay highlights how globalization attracted prosperity and increased trade volumes for India, which allowed the country to cope up with its increasingly decreasing GDP in the 1990s. It allowed India to participate in the global markets of trade and helped in routing foreign investments for the country, which directly impacted its economic boom. The barrier-breaking globalization did allow India to capture a tremendous landscape for trade and helped in increasing its living standards and created many employment opportunities for labor. Still, it also negatively impacted the daily wagers of the country.

Benefit

Globalization is the critical driver of hike in employment rates, the surge in compensation, enriched the living standards, and positively impacted on purchasing power as it helped in wealth creation. Moreover, the impact of the globalization overall is constructive for the economy of India as the GDP is increasing, the business of exports and imports is also flourishing.

Globalization also allows India to exchange its culture by tourism, which attracts foreign investments. It also equipped India to uplift its poverty line and created many opportunities for national and international employment. It helped the Indian economy to connect with the global economy and increased the per capita income of the country. However, the human development index of India is still moving with a snail’s pace. Furthermore, according to Shastry (2012), the Indian government always promotes its technology sector, and this globalization helped them in accelerating their IT industry. In addition to it, the IT industry of India attracted many investors as they showed their interest, which positively impacted the economy of India.

Drawback

Globalization also had a negative aspect to it, which created an unpleasant situation between rural and urban areas of India. Moreover, one cannot neglect its impact on the production of agriculture which affected the daily wager community of India, Furthermore, it also impacted on the employment opportunities creating an uneasiness of inequality between rural and urban areas.

Solution

The solution towards uneasy situation between rural and urban areas can be eliminated by educating them and by developing the human development index. As education will allow equal employment opportunities for both areas and will deal with the inequality issue between both of them.

Conclusion

In a nutshell, this essay can be summarized as: globalization is the critical driver of the increase in employment rates, enriched living standards, and helped the economy cope with its negative pattern by wealth creation. On the contrary, its human development index is still not gaining momentum. Moreover, an uneasy situation is also there due to globalization as it affects the production of agriculture and employment opportunities in rural and urban areas. However, the overall impact of globalization is constructive for the economy of India as it increasing its GDP, per capita income, and trade volumes.

References

1. Baafi Antwi, J., & Oppong Kwakye, F. (2010). Globalization and Its Influence on Economic Growth Performance.
2. Choudhary, S. (2012). Globalization and Its Impact on Indian Economy. International Journal of Behavioral Social and Movement Sciences, 2(2), 192-201.
3. Shastry, G. K. (2012). Human Capital Response to Globalization Education and Information Technology in India. Journal of Human Resources, 47(2), 287-330.
4. Malik, T. (2012). Impact of Globalization on Indian Economy: An Overview. Fibre2fashion. Fibre2fashion. Web, 23.
5. Bala, S., Gupta, S., Anshuman, K., & Ajay, A. P. Globalization and Its Impact on India. Bajaj, Ankit 197 Bakry, Mohamed Abd El Latif 28 Bala, Shashi 414 Baporikar, Neeta 118, 414.
6. Roy, S. S. Globalization and its Impact on Indian Economy: Development and Challenges.
7. Mohanty, M. (2015). India: Globalisation and Growth. Indian Institute of Management, Calcutta, Working Paper Series WPS, (762).

Reflections on Whether Globalization Is Good for Indian Economy

Openness of the foreign trade and investment explains the rapid growth of India. Since the Indian government adopted economic liberalization policy in 1990s, improved the employment situation in India. According to the International Labor Organization, the number of Indians in workforce increased by 80 million over the last decade (Economist 2010). The foreign firms attracted by the inexpensive labor cost of the country, therefore they decided to establish their business abroad and hire workers, manufacturing job to high technical position. Since the last fiscal years, the manufacturing sector has contributed 16.1% of India’s GDP. Globalization reduces the unemployment rate in India. The relation between foreign companies and Indian workers creates an economic interdependence that puts both a side win-win position.

Due to substantial reduction of unemployment in India reduces the poverty. Now, the urban middle-class has started emerge in the country. After meeting their basic needs, large number of Indians can afford to buy better consumer goods and services due to their stable revenue. In 2005 middle class accounted for 5% of the Indian population. However, the National Council of Applied Economic Research forecasts the middle class will rise to over 40% of Indian population in 2025. The emergence of large middle-class signifies that poor becoming richer and having a superior living standard. As more people move to middle class, the number of poor people in society reduced, thus discrepancy between rich and poor also gets reduced.

Due to increased employment opportunities in bigger cities, large number of rural workers moved to urban areas. However, workers have a common problem of transferring the money securely to their family because bank always don’t exist in rural areas. This inconvenience inspired two young brothers, Abhinav and Abhishek, who later became the founders of EKO Indian Financial Services. They created a software program allowing small grocery store in rural areas to became a virtual bank where workers can deposit and withdraw money. The small fee was kept by the grocery’s store owner each time a transaction was made. Subsequently, this not only helps in transferring money of migrant workers but also benefits the grocery’s store owner. Beside the example of EKO, other young entrepreneurs were born and its leads to globalization. Another pertinent example is GLOBALS, one of the fastest growing Indian IT companies founded in 2000. It has offices in 11 countries across the world. Since globalization, there are increased number of skilled and ambitious young people who wants to succeed in business world by becoming self-employed. Traditionally people in India do the same job as their parents. Thus, children from poor families could not be able to change their fate. Globalization helped to open their eyes. Foreign companies brought their technology and value to India, influencing young people to overthrow the existing social order. Globalization made these young people that anyone can be financially successful. They want to keep up with the economical developed countries.

In order to maintain the economy growth, Indian government ensures that they have enough resources for young workforce who replace the elder ones, when they retire. The Indian government system is currently focusing on the education system and the human resource development, planning of opening 14 universities with a world-class structure. The Indian government knows that an educated workforce directly impacts the Indian economy’s growth. Thus, globalization has fostered the quality of education system in India, which benefits the country.

Globalization had touched every aspect of technology advancement, enhancement in quality and improved modern techniques. All three sectors of agriculture namely farming, marketing and industry had made a tremendous progress. In farming, globalization had introduced new techniques to the farm. Many new techniques are been used to develop the seeds and production. In marketing, globalization has helped the farmer to fetch the new market. This gives the boost to the Indian agriculture sector by exporting and importing goods to abroad. They offer them good procurement price which help them to continuous production. In industry, globalization helped in increased consumer which leads to increase in food production industry.

There are large number of advantages towards Indian economy include the possible to get more benefits from economy of scales. Due to globalization, in many parts of country cultivators, raisers, farmers benefited from tie-up and collaboration with many companies to get more profit in income like ketchup, fruit juice, potato chips, etc. Fishermen in Kerala have boosted their income using their mobile phones to find out where the market price of fish is highest on each day. Lock-outs and strikes have reduced to insignificant low-level because labor is satisfied. Due to globalization selling product and doing business has no boundaries: they can sell their product in any part of the world. It has included the odds of laying hands on the worldwide market and advances which helps in expanding the nature of expectations for everyday comforts. Globalization causes Indian business person to find out more about challenge, recent trends, quality of product. Aides in sourcing new innovation to enhance their brand quality. Great presentation of Indian brands to abroad market. Because of increment of competitions in the market, Indian brands must enhance their quality of product and administrations to customers. Its point is expanding the generation of food and increment in economy and social state of agriculturists. It would expand efficiency of labor. Utilization of seeds and substantial machine has increments in horticulture efficiency. It enhanced creature husbandries would almost certainly import great breed creatures from different nations. Farmers get the benefit of global market through agribusiness efficiency.

There are a few drawbacks of globalization on Indian economy. Rise in demand of labor and wages rate leads in the increment the expense. An excess of rivalry in the market prompts increment in the efficiency, upgrading the administrations and quality of product to get by in the market. An excessive number of offers people are pursuing to customers. There is a central issue with the globalization which will cause international pressure and trade disputes without catching the procedure. Indian ability pulled in towards other nation due high pay and remittances. Because of overwhelming tax assessment and tolls, item cost is higher than the imported ones. Globalization has also enabled introduction of cigarettes and tobacco in India, which has adverse effects on the well- being and financial cost appended to them. Modern communication has spread an awareness of differences between nations, which prompts increment sought after of vagrants to more extravagant nation. Globalized rivalry can force to ‘race to the base’ compensation rates and work measures.

Globalization influences not only to agriculture production yet additionally employment opportunities in the provincial parts, imbalance between urban and rural regions. Globalization is considered as an amazing transformative power in charge of a huge shake-out of economies, countries, universal foundations and the entire world. Hence, we can say that the higher the dimension of international exchanges/partnerships, the higher will be financial development, expectations for everyday comforts and pay level. Globalization has brought numerous occupations and huge investments to India. India’s economy has been developing at exponential rate from recent years and opened numerous new chances to India. Still, India remains very poor. The vast majority of the individuals who take benefit from globalization is privileged class people, numerous in lower class level being uprooted and experiencing hopeless work condition. Globalization made the economy of one nation reliant on the other nation’s economy. Any adjustment in economy of one nation will influence the economy of other. In this way, the legislature turns out to be progressively worried about everybody to control the practical uneven characters between them. Globalization has made a substantial monetary blast in India with to a great extent constructive outcome. We are everything by globalization, we are nothing by globalization.

Truly, globalization has been useful for Indian economy this far. Indian must focus on 5 follow areas to accomplish this objective. The regions like new business opening for little and medium undertakings, innovative enterprise, quality administration, privatization of money related organizations and new prospects in country regions. There will be a prospect development of the Indian economy rely on public support in the worldwide race.

An Analysis Of Globalization And Money Laundering

ABSTRACT

Money laundering is a crime of many approaches, and a host of different laws, as countries do not always have consistent approaches. Combating money laundering, therefore, requires consideration of issues of national and international jurisdiction. The countries world-wide face the greatest challenge of protecting their economy from the menace of money laundering as it seriously affects the economic growth and has the potential to upset the programmes of the economic planners. Banks are used as an important channel by money launderers for transmission of illegal money known as ‘Black Money’ to different entities across the globe. Thus, the main objective of this article is to: Firstly to trace the historical background and the working of money laundering and, secondly the nexus money laundering has with globalization. This article would also be to analyze whether the provisions of Indian legislation is sufficient to support the international efforts to combat money laundering.

INTRODUCTION

Money laundering has become one of the great moral panics of our day. A range of sources, including mass media, emphasize that it is bad, very interesting, and slightly daring, but do not deal so much with what it is, how it is done, or why (otherwise than as a form of complicity in some previous offence) it is so damaging. One of the elements of the Westphalian conception of sovereignty is the power of each nation-state to write and enforce its distinct criminal laws. That power was one of the last to be swept away by globalization. Other specific crimes have been of focus from time to time such as sex tourism bribery of foreign officials, and terrorism offences, but this article will suggest that money laundering, more than any other, is the crime that reflects about globalization, and that it seeks attention in that context.

Money laundering is the process of concealing the source of money obtained illegally by passing it through a complex sequence of transfers or commercial transactions. Money laundering revolves around mainly the criminally acquired property rather than property itself. Money laundering is an essential component of any profit generating crime, for the reason that without the laundering, crime would not pay. Many support the view that “going after the money” is the best way to tackle organized criminal activities.

Corruption and money laundering often occur together, with the presence of one reinforcing the other. Corruption generates billions of dollars of funds that will need to be hidden through the money laundering process. At the same time, corruption contributes to money laundering activity through payment of bribes to persons who are responsible for the operation of Anti- Money Laundering AML systems. The close linkage between corruption and money laundering suggests that policies that are designed to combat both crimes will be more effective. Global and electronic financial services are allowing world-wide transfers of money in seconds. In addition, international communications are easier and less expensive than ever. Criminals have adapted to new means of communication and have taken advantage of facsimile transmissions, mobile encrypted telephones, and the Internet faster than most law enforcement agencies.

Not only do we no longer live in a world where not to be a gentleman was a withering criticism; we also live in a world of euphemisms, such as money laundering itself. As a subject of regulation, it leads our eyes away from the immediate sources of serious crime to their mediated proceeds.

PROCESS OF MONEY LAUNDERING

The process of money laundering comprises three phases namely,

1. Placement
2. Layering and
3. Integration.

In placement stage, the illicit funds are infused into the financial system, or the retail economy. The placement techniques include:

• Structuring, this is an act of depositing the bulk money into the bank after breaking it into numerous small amounts to avoid cash reporting requirements;
• Smurfing – the illicit money is injected into the banks with the help of third party personnel, called as smurf, who make multiple deposits into multiple accounts at any number of banks;
• Money mule transactions – the illicit money is injected into the banks with the help of third party personnel, called as money mule, who often for a receipt of certain commission payment, receives deposits through cheques or wire transfers, and then transfers these deposits into the accounts of other individuals held on behalf of the launderer;
• Alternative remittance systems such as Hawala;
• Buying items of high value like diamonds, gold, vehicles, and real estate using the illegal money, often in the name of family members and close associates;
• Repayment of bank loans using the illegal money;
• Smuggling of cash, etc.

During the layering phase, the funds are distanced from its entry or placement point through a chain of complex financial transactions. It involves transfer of money among different accounts, in different names, and in different financial institutions, often in different countries by citing various financial transactions among the parties. The purpose of layering phase is to conceal the nature of funds, and the placement of funds by obscuring or breaking the money trail by creating a complex web of transactions layering one upon the other. Breaking the money trail is of utmost importance to the money launderer as it makes very difficult for the investigating authorities to establish where the illicit funds have actually ended up (Indian Institute of Banking and Finance, 2010). Electronic fund transfers, offshore banks, correspondent banking services, shell corporations, trusts, repeat invoicing, resale of assets, etc. are often used for layering of funds.

Integration phase denotes the act of re-entry of laundered funds into the economy through the activities such as purchase of luxury assets, engaging in legal businesses by providing capital or loans, etc. It provides an apparently legitimate explanation for the illicit proceeds (Indian Institute of Banking and Finance, 2010). The methods adopted for laundering under these three stages of laundering varies according to the type of crime underlying the money and the country’s anti-money laundering framework. The criminals are inventing new methods of laundering from time to time such as the usage of prepaid value cards, electronic payment systems and internet banking so that tracking the actual source of funds becomes very difficult.

NEXUS BETWEEN MONEY LAUNDERING AND GLOBALIZATION

The ambit of laundering law has become wider. A common tactic in the extension of criminal law is to select ‘soft targets’, that is, conduct to the criminalization of which few would object, and then advance the frontiers of criminality incrementally from them outwards. Under the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (signed in 1988 and enacted two years later), signatory states agreed to criminalize dealing in proceeds derived from drug traffic; to enable the confiscation of narcotics-linked money and property purchased therewith; and provide other signatories with the widest measure of mutual legal assistance in investigating, prosecuting, and confiscating narcotics-linked money from those who engage in acts deemed criminal under the Convention. In an historically significant move that makes the AML movement much more difficult ever to reverse, the concerns of AML expanded from crimes to do with drugs and regulation of banks (in the 1980s and early 1990s) to organized crime and the financial sector to any acquisitive crime and the professional sector (in the 1990s) to terrorists financing (in the 2000s).

In this globalized world, money economy is heavily dependent on well-functioning of monetary establishments. Financial establishments should be operational with legal, skilled, and moral standards. Reputation of integrity of monetary establishments is utmost valuable. In such integral atmosphere, if funds from illegitimate activities and money laundering activities are allowed to flow through financial organisation, it causes adverse effects on name and will get on national newspapers the next day. Though, once workers or administrators are bribed, funds arising from money laundering activities can flow through that which puts financial organisation into criminal network. Evidence of such complicity will damage integrity of financial institution. When multiple money establishments are involved in such activities, economy can be under risk, and there will be changes in money demand, exchange rates. Eventually, corruptions and crimes are rewarded. Such money laundering damages the integrity of the whole society and undermines democracy and therefore the rule of the law.

The techniques used to launder money are essentially the same as those used to conceal the sources of, and uses for, terrorist financing. Funds used to support terrorism may originate from legitimate sources, criminal activities, or both. Nonetheless, disguising the source of terrorist financing is important. If the source can be concealed, it remains available for future terrorist financing activities. Therefore, for these reasons, FATF has recommended that each country criminalize the financing of terrorism, terrorist acts and terrorist organization and designate these offences as money laundering offence.

Traditionally, anti money laundering efforts have been a governmental role, but over the years, this responsibility has shifted as more emphasis and responsibility has been placed on the private sector. There have been a number of developments in the international financial system during recent decades that have made the three F’s-finding, freezing and forfeiting of criminally derived income and assets-all the more difficult.

The international community became ever more aware that globalization is used not only for good but for evil as well. Perhaps the criminal elements are the first to embrace globalization as a means to expand their activities all over the globe. They are the first to meticulously study the new rules and regulations to find loopholes for their activity. In response to the monumental collective action problems associated with globalization, it is becoming increasingly apparent that radical changes to global governance are needed and that robust normative principles are also needed.

There are many national and global organizations which are actively trying to combat money laundering. Efforts are in place to aim increase awareness of phenomenon and to provide necessary legal or regulatory tools to the authorities. In United States, Department of Justice, State Departments, Federal Bureau of Investigation, International Revenue Service, Drug Enforcement Agencies and other regulatory agencies have divisions investigating money laundering and underlying structures that make money laundering work. Most nations have declared money laundering as crime. The global community is combating money laundering through various organizations such as Financial Action Task Force (FATF). The United Nations, the World Bank, and the International Monetary Fund also have anti-money-laundering divisions. These organizations actively monitor and enforce laws and regulations on any institution or corporation involved in money transfer. These institutions include Banks, Insurance companies, Money Serving Businesses, Asset trading businesses, etc. Besides enforcing these regulations, regulatory organizations also publish criminals publicly to avoid further future crimes.

MONEY LAUNDERING IN INDIA

Indian Mafioso principally operates in India’s metro-cities and also in its various States capital cities. The two important notorious gangs comprising Indian Mafioso are the Dawood gang and the Rajan gang. The chief of these gangs is always the’ unchallengeable leader and commander’ with all control power and command functions vested in him. The second rung leaders operate with a sub-group of four to five operatives in their assigned geographical areas. These operatives are assisted by foot soldiers including persons with specialized knowledge and skills. About the operations of these gangs, it has been commented that their activities seriously jeopardize the smooth functioning of the administration, and the safety of life and property of the common man causing a sense of despair and alienation among the people. At times underworld mafia push the State apparatus into irrelevance.

Certain sting operations conducted by Cobrapost have suggested that officials of certain public sector undertakings involved in insurance and banking business and certain private sector banks were willing to facilitate money laundering in the country. The Cobrapost expose shows bankers allegedly marketing insurance products to convert black money into white. The demonetization of higher denomination notes in November 2016 by the NDA v Government had opened the floodgates for money launderers. In December, 2016, two Axis bank managers were arrested in Delhi who worked in tandem with a net work of jewelers in laundering demonetized currency. In its aftermath, the Income Tax Department sung into action against tose misusing to convert black money into ‘white’. [17: Delhi based online portal: www.cobrapost.com alleged in 2013 the money laundering by top private sector banks- HDFC bank, ICICI bank and Axis bank.]

Steps taken by the present government for checking black money has brought enforcement of the Prevention of Money Laundering Act into focus as there are growing efforts on the part of holders of unaccounted wealth to launder it and there has been a concerted effort by the Enforcement Directorate to counter counter such activities.

The Black Money (undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015 targets undisclosed foreign income and assets. Another important step taken by the government is to strengthen the Benami Transactions (Prohibition) Act, 1988.

All the efforts were made in order to fight black money and in turn curb money laundering activities.

CONCLUSION

Money laundering has become a quintessential problem in the current day and age, The governments worldwide collectively have acknowledged this issue and are aiming to reach practicalities in parking this issue. One of the major methods implemented to curb this issue was to build organizations or agencies specifically to fight it. Combating money laundering has become an international priority. Fighting money laundering requires help and compliance from many entities and resources involved on the prevention and detection of money launders. Prevention, detection, and reporting should be performed by private partners such as banking institutions. Public partners such as law enforcements should be responsible for analytics and repression.

Complying with laws of various countries requires extra activities to be performed while ensuring efficiency in daily business operations. These can become quite costly for financial institutions and require extra efforts from financial institutions. These efforts include maintaining special compliance department, monitoring payment messages, implementing ‘know your customers’ policy, identifying and implementing appropriate risk based approach, and housing appropriate technical solution to meet compliance requirements.

It is important that global citizens understand the concept of money laundering and play active role in combating it. For example, if someone offers $1000 cash and asks for legal check worth less than cash value, it is likely that individual is trying to legalize cash holdings. Global citizens should not only stay away from such activities but also report to authorities. Bank secrecy act allows filing suspicious activity reports by any individual; the filer doesn’t have to be financial institution. It is recommended that in any occasion citizens see any suspicious activities being offered or performed, even without citizen’s involvement, suspicious activity report should be filed.

Money laundering is quite widespread and seems to find a route in most verticals. Most profit generating crime results in some form of money laundering. Eliminating money laundering could solve most tasking issues, however completely eradicating this is non-trivial. This is a global issue and it needs to be treated so, the government alone cannot be held responsible with the daunting task of eliminating money laundering. An efficient combat to money laundering depends on the joint efforts of competent authorities, banks and employees.

REFERENCES

BOOKS

1. MONEY LAUNDERING PREVENTION: DETERRING, DETECTING AND RESOLVING FINANCIAL FRAUD, JONATHAN E. TURNER, 2011 EDITION.
2. GLOBALIZATION: A BASIC TEST, GEORGE RITZER, 2010 EDITION, BLACKWELL PUBLICATION.
3. GLOBALIZATION: DEBUNKING THE MYTHS, LUI HEBRON AND JOHN F.STACK Jr, ROWMAN AND LITTLEFIELD PUBLISHERS, 2010 EDITION.
4. UNDERSTANDING GLOBALIZATION- A MULTIDIMENTIONAL APPROACH, KAVOUS ARDALAN, TRANSACTION PUBLISHERS, 2014 EDITION.
5. GLOBALIZATION- THE MAKING OF WORLD SOCIETY, FRANK J. LECHNER, WILEY BLACKWELL PUBLICATION, 2009 EDITION.

ARTICLES

1. JOHN L. EVANS, INTERNATIONAL MONEY LAUNDERING: ENFORCEMENT CHALLENGES AND OPPORTUNITIES, 3 SW. J. L. & TRADE AM. 195 (1996)
2. MONICA SERRANO; PAUL KENNY, THE INTERNATIONAL REGULATION OF MONEY LAUNDERING, 9 GLOBAL GOVERNANCE 433 (2003)
3. M.S. KRISHNA KUMAR, FUNCTIONING OF ANTI-MONEY LAUNDERING LEGISLATION IN INDIA – A CRITICAL STUDY, 2015.

Driving Factors Of Globalization And Its Advantages

Globalization, in general, has received a lot of harsh criticism which are usually pointed to the negatives. In most cases, these criticisms emanate from the group that stands against the free market economy. Most of the criticisms contend that globalization does not reduce poverty, but rather maintains it. Particularly the distribution of new technology and investment in the foreign currency by developing nations might have boosted inequality levels. Only a fairly small number of nations are relishing the benefits tailored by globalization while most of the negative effects are perceived by third world nations (Macleod). This primarily relates to companies and organizations that have shifted their operations to cheaper nations, a situation whose aftermath is negative impacts on employment in already developed nations. As such, the question is, do the benefits outweigh the cons?

The factors that have been identified as the drives of globalization in the recent past include; Technology, Trade, and Investment. Technology plays a crucial role in the entire process of globalization. Most people contend that technology is the utmost and the most compelling propeller of globalization, which helps in the easier movement of goods and services, as well as ideas across nations. The development and improvement of transportation infrastructure, for instance, has made it easier to move huge amounts of people and commodities in a short period of time. Automation on the other hand has boosted production as well as the distribution of goods and services (Sullivan). In the same manner, telecommunication gave people the chance to interact and communicate especially through social media platforms

The impact of trade is often built on its ability to boost and reinforce relationships between different nations. In the contemporary world, it has become almost impossible to be autonomous. The global marketplace was fashioned through the elimination of barriers and the reduction of limitations in foreign investments. However, it was the global investment that spearheaded globalization by incrementing integration. A lot more countries have enjoyed the benefits of foreign direct investments, loans, and foreign portfolio investments. These have formulated new and fresh companies, as well as new sources of revenue

The existing level of competition in the current world market is an obvious result of globalization. Competition in a global context leads to the production of high-quality goods and services. In other words, when there is a chance of choosing from substitutes and alternatives, the consumer demand grows, and companies have to reiterate by creating the best products just to stay in the market. Generally, companies that still need to stay relevant and up to date achieve this by increasing the quality of their goods and services.

Market efficiency on the other hand has been achieved through an equilibrium of buyers and sellers where there are willing buyers and willing sellers at the same time. In this case, no party seeks to exploit the other (Eriksen & Hylland). In other words, both parties exist in a free market where they are driven by will. If companies can boost their production by outsourcing or by making purchases of discounted products, they can then replicate this to their market prices where they can offer goods at low and affordable prices. Nonetheless, if companies do no spread the price reduction to their customers, they can still reciprocate the subsidization by increasing their employees’ wages and salaries or even invest in expansion

Since the world, today has become a “global village” nations hugely depend on each other. As such, it is very rare for them to jeopardize their relationships. This clearly implies that; they ensure stable and boosted security as far as operations are concerned. More on this is that human rights have been improved as a result of the diversity of interacting/trading nations.

While economists refute the effect of globalization on variation, it’s impossible to find instances of developing nations that were in a position to grow over a long period of time without subscribing to trade. In some sense, globalization alone cannot be held accountable for the deprived conditions of third-world nations. Their situation has more to do with poor governance, weak economic policies, and futile reforms.

In the same manner, there is no justification that trade can increment poverty levels or reduce growth rates. On the contrary, when nations subscribe to trade, their growth tends to escalate and the living standards as well increase. The benefits and advantages of growth in developed nations also narrow down to the developing nations. Nonetheless, it’s not often simple to underpin the manner in which developing nations have profited. This is simply because globalization clenches such a huge effect on different levels, adjusting, for instance, technology and the macroeconomic situation (Yusuf et al.). There is also no justifiable data or information concerning the general welfare of people in these nations.

When assessing the social effects of globalization, one must put into consideration a number of factors including environmental harm, instability in the job market, and fluctuation of prices. Globalization sires escalated production which implies a rise in the utilization of natural resources. More trading activities also imply the existence of increased transportation which translates to a rise in the use of fossil fuels. The aforementioned when brought together boosts pollution rates and accelerates a change in climate which has turned into a serious threat to humanity.

The escalated competition within the market has resulted in price fluctuations. Developed nations have been compelled to lower their prices in order to maintain their competitive point against exploiting countries such as China that can produce similar goods for half the market price.

Due to globalization, the Job market is insecure and more positions have been rendered temporary. This has highly impacted developed nations where firms can outsource help for some of their processes and positions including customer support. The aftermath of outsourcing is the reduction of jobs for people in the first world. Globalization has also suffused culture where there have been claims that it has broken a considerable number of cultural boundaries. In other words, the increased rising interaction of western culture and local cultures has led to the dismissal and at the same time the assimilation of cultures from either side. As such, cultural lines and boundaries have been greatly breached and are still in the course of being broken. More people have been fascinated by the cultures and lifestyles of the people they are interacting or doing business with. And due to the desire of human beings to fit in a given society, more people have relinquished their cultures in search of a new and “descent” way of living.

Global Product As A Result Of Globalization Process

In conditions of globalization, not only business freedom but also home country facilitate their entrepreneurs and helps to go globally. To encourage globalization you have to reform some policies and procedures which is possible with govt help. They need to have important factors of resources such as technology, finance, etc.. to globalize. To gain market strength as compared to competitors you need to have Low costs& prices, product quality, product differentiation, and technological superiority then your company will be successful in the global market.

In Developed and developing countries rising of marketing is connected to the globalization process. We need to create an effective market to create more value for the companies. The best marketing planning process for international expansion strategy is the core element to develop a successful company. It should be more effective to build a successful company and during this process, you must focus on innovation and development of new products and services. McDonald’s, pizza hut, Coca-Cola, Nike, Ford, BMW are examples of globalization marketing.

We can’t ignore Market segmentation: Geographic, Demographic, Psychographic, Behavioral for internationalization in each country. For internationalization, businesses can’t ignore the economic gap between countries and their buying behavior which is different according to geographically, Demographically, Psychographically, and behaviorally in Multinational countries. In the segmentation of Demographic companies have to be careful and they need to know the culture, age, gender, occupation and according to their culture provide their products because in globalization companies do not have just need to think like a local community but internationally about the global market to make their strategy successful and in order to get loyal customers, otherwise the companies who think it also locally they failed. The biggest reason for the failure of global marketing is the lack of internal communication in the company with their team. Companies need to have similar demands to satisfy the customer with the same product for the business development. Before entering into the international market globally you have to Analyze the environment of the international market to assess that whether it’s worthwhile or not. You need to know the customer’s needs and wants and determining them at the right price than produce and sell them. Positioning: To become successful in the market and to find a strategic position it is very important for a company to consider its own language and culture to market its product and services. They could also face many challenges so they need to plan also the source, activity, transportation, and as a result, they could get the result to vary from country to country. To build a successful business companies also need to be responsible socially and environmentally for some actions.

For Example, we can take the example of Apple which is a branded iPhone in the global market and which is not a brand from starting. They did many struggles to get success in starting Apple faces many threats but within time in Adv they just did not show the image of their product but it positions their product in that place according to demographic segmentation and show to a new generation that how it can change their life in many ways. And how they have developed advanced technologies and they make also its look beautiful. So they get many loyal customers that now it becomes the competitors of Samsung and some other technologies. So, as a result, we get that our brand products should be innovative and awesome to integrate into people’s lives.

In Adaptation of Marketing Mix is a process from the local market to the foreign market. It has 4 factors Product, Place, Price, Promotion. For Example a French Cakes In the step of production we will see what we are producing cakes desserts and in which style and taste sound and look better. It comes towards prices we decide the price of products according to the cost of products and it also depends on the place and region how much that people could pay. We can sell our more products by offering some discount. Place: Then you decide the place where you can place your product, for example, we can place our French cakes in Restaurants, Cafes, Catering businesses. The last step is Promotion It is a process to attract and keep customers so they buy your products and generate loyalty.

Critical Evaluation of Effects of Globalization on Lego Company

Introduction:

The company that has been chosen to be analyzed is LEGO. LEGO is a company that manufactures a line of plastic construction toys and is owned by The Lego Group. It was founded in 1932 by Ole Kirk Kristiansen in Denmark initially. After passing over almost 85 years – LEGO has accomplished its transformation from a small carpenter’s workshop to a modern, global enterprise. Correspondingly, Lego groups contain 17,000+ employees in 15 countries nowadays. (Lego.com, 2019). It becomes the world’s most valuable toy brand, with a brand value that now stands at US$7.6 billion at present (The annual report on the world’s most valuable toy brands, 2017). Not only limited to the little bricks, but their brand had also developed into various markets, like Lego theme movies, games, clothes (En.wikipedia.org, 2019). Besides, they even erected eight Legoland amusement parks in seven countries as well, including Denmark, United Kingdom, United States, Japan, Germany, Malaysia, and the United Arab Emirates (Lego.com, 2019). Obviously, LEGO has achieved an extraordinary result in the past few decades. Their revenue had increased in every region up to DKK 36.4 billion (The LEGO group – Financial Highlights 2018, 2018). The market share of LEGO has grown in all major markets, bucking overall industry trends. While global consumer sales also presenting a dramatic growth (Lego.com, 2019).

2. Key Stakeholders and Beneficiaries:

In a corporation, stakeholders are the members of the groups who care about a company’s operation situation. Without those concerns and support, a company would cease to exist (R. Edward, 1983). While for LEGO, they have three key stakeholders which are government, local community, and customer. (stakeholders mapping for LEGO).

The government has a high influence on the company. Because they are responsible for the whole market regulation and impose a corresponding tax for every industry. The attitude of the government and how they implement the relevant laws and policies are extremely important for such a multinational company once those companies want to succeed in a new foreign market. LEGO must fully engage with the government and make the greatest efforts to satisfy them in this case. The customer is another stakeholder group with high power and interest for the particular company. They support every purchase and provide a guideline for the company of what to invest and how they can improve their service or products. By engaging with customers, LEGO got the chance to cultivate a strong understanding of customer’s preferences and further lead to an increase in sales and revenue. While the local community also plays an important role as a key stakeholder. Although the local community has a low influence on the company, it still maintains a high interest. By adapting to local principles, LEGO can address not only business sustainability concerns but also local community issues (Weber and Weber, 2019). These principles are public perspectives towards the company and will further influence customers’ desire to buy.

3. Analysis of the effects of globalization:

3.1. Analysis of the effects of economic globalization

The form of a company’s response to global marketing is shaped by its international marketing orientation. By applying the EPRG model, LEGO can be classified as geocentric orientation. As geocentric approach is blending the ethnocentric and polycentric views to work out a balanced strategy to realize both global integration and local responsiveness (https://www.facebook.com/marketing91, 2019). Correspondingly, LEGO issued assorted products within a different country. While to conduct suitable plans for each country, LEGO has to take the economic situation of those countries into consideration. The fluctuation of the economic situation may lead to an uncertainty of the local’s purchasing power and their intention. As LEGO is founded in Denmark, here comes with huge profits benefits that it is under the European monetary union. This promotes the international competitiveness of LEGO and reduces transaction costs and risk simultaneously. As Denmark maintains independent currencies, the exchange rate for Denmark Krone plays a crucial role in international trade. From the data found in the World Bank, the exchange rate for Krone is decreasing overall since the year 2000 (Data.worldbank.org, 2019).

Basically, a weak national currency is beneficial for LEGO. As the price of exports decreases, cheaper exports are attractive in the international market. Their price will be more reasonable for foreign customers because of the cut-down price. Especially for the people in a developing country, it becomes more affordable to some extent and hence increases consumer base. Due to the sales boost, LEGO have more potential to obtain profit and hence can put more money on the R&D department to lower their production cost and maintain competitiveness (Shah A.,2009). This enables economies of scale as well, because of the cost advantages and booming scale of operation in the long run.

However, there are also some downsides to this phenomenon. As in the long term, it decreases buying power and efficiency for LEGO resulting in inflation in the meanwhile, ceteris paribus.

Since its main target markets are from overseas (Imf.org, 2019). It is necessary to analyze their market situation globally. Take China, UK, Denmark, and US as the main four domains. It illustrates that China presents the best economic environment among them all. As it has the largest total investment and growing GDP as well as the lowest unemployment rate and government debt. Company is more easily to acquire profit during economic prosperity. This can be proved by the fact that “With declining or stagnating sales in its core U.S. and Western European markets, China is still a bright spot for Lego” (U.S., 2019). Practically, LEGO plans to set up around 140 shops in China this year. The rapid expansion in the Chinese market creates a balance for LEGO so that it can remain unaffected by a broader slowdown in other economies.

3.2. Analysis of the effects of political globalization

The political situation is an important issue for the company that needs to take into consideration. Because government regulation will affect the operation situation of a company. For example, Brexit makes every British and European company re-consider their marketing strategies and change their whole pricing, sales channel, and product strategies, and so on to adapt the changes to the existing market. After UK government announced Brexit news, the inflation rate of UK has hit its higher level and the pound is expected to depreciate in the recent future (The Independent, 2019). Besides, the British tariff will increase correspondingly. This actually damages the net profit of LEGO, as LEGO is a European company and has to pay tax while entering UK market. Hence, LEGO adjusts their pricing policy and are going to ‘raise prices by 5%’ after post-Brexit pound slump under these circumstances (The Independent, 2019). Yet, it is inevitable that Brexit will still further worsen LEGO’s operating situation. Because people’s limited disposable income cannot fulfill their demand, consumer purchasing power will deteriorate markedly. This is a significant drawback that political globalization brings to LEGO.

While the attitude of the local government is also a crucial factor within political globalization. When the new entrants are going to enter the domestic market, they need to premeditate that whether the local government supports or against the particular industry and what are the laws that set for the industry. Take China as an example, Lego toys didn’t enter the Chinese market until the year 1993. (LEGO, 2019). However, the situation in China is significantly various from other countries. Initially, LEGO applied a very unreasonable strategy that leads to a huge loss of assets. They set their price of products at 500~2000 Chinese yuan while most people’s monthly income is only two or three thousand. The most household cannot afford such expensive toys. LEGO has been plagued by piracy at that time because many manufacturers see the opportunities and they can easily imitate to produce those toys and sell it at a much lower price. While China has promulgated series of laws to protect intellectual property recently. Besides, Lego is protected under Chinese anti-unfair competition law because of its distinctive and unique appearance as well. In this case, LEGO builds on strong success with the support of the local government.

3.3. Analysis of the effects of technological globalization

LEGO is a good example of adopting technic changes. They seize opportunities and turn them into superiority. Above all, like what most companies do, LEGO created their distinctive and colorful official website to attract consumers and further boost sales through e-commerce. They also owned an Instagram account that had 4.8 million followers and created a hashtag #Lego that includes 14.4 million posts (Instagram.com, 2019).

In addition, their Facebook homepage posts various interesting events, stories, and fascinating news to attract potential customers. Currently, they have received 13 million followers as well as millions of likes of their posts (Facebook.com, 2019).

In fact, they are doing very well at making interaction with the local community. Their official websites offer several languages for their customers. This provides a more convenient way for those potential customers. Hence, they can browse the website more familiarly and are more willing to explore Lego’s products and the company’s culture. Take China as an example, Chinese people are regulated by the government and are not allowed to use YouTube, Facebook and Instagram, and so on. Under this situation, Chinese people can seldom receive messages from LEGO through these applications. While LEGO performed well in regards to this aspect. To tackle this problem, they set up WeChat and Weibo accounts which are the most widely used communication and entertainment apps by Chinese customers.

They have about 683K followers and so that they can send notifications via WeChat and Weibo official accounts weekly to share some news and promotion events. It’s a great combination of technologic and marketing under the trend of globalization by all means. As it is a digital information epoch, people are pursuing novel and innovative products. To draw customers’ attention, LEGO had launched the Technic series. Technic sets use specialized pieces which including motors and pneumatic elements. In this case, they are creating much more functionality than regular bricks. The new gearboxes and steering systems provide a challenge to the kids who want to build in a more real-life function (Lego.com, 2019). In addition to this, LEGO is ambitioning to use sustainable materials in products by 2030 and packaging by 2025. They have used 83 elements from sustainable sources starting in 2018 to support their objectives (The LEGO group – Financial Highlights 2018, 2018). Practically, these actions stimulate the purchasing needs of consumers who are literally concern about environmental issues. It frames a good corporate image and further expand its influence.

3.4. Analysis of the effects of cultural globalization

As the world’s leading multinational toy company, LEGO put a lot of effort into making its products become more iconic and cultural diversification. It respects to every culture and is trying to integrate these regional cultures into their products. These characteristics can be seen in its series of products. LEGO currently partnered up with many companies and bought the license from them. For example, Disney, Warner Brothers, Blizzard and so on. Under the strategic collaboration, LEGO had launched series of prevalent sets based on different themes like Star Wars, Overwatch, Harry Potter, Marvel, Disney et cetera (Lego.com, 2019). Apparently, this strategy brings significant profits to LEGO due to the large consumers base of those themes. Those avid fans who are very loyal to those games or movies may become potential customers of LEGO products as they are keen to collect the movies/games related products. Besides, this also increases opportunities for those who are not those fanatical people to buy these products. According to the mere exposure effect (Social Psych Online, 2019). People have a high tendency to preferencing things merely because they are familiar with them and so that purchase those goods. In this case, they achieve a win-win situation.

Moreover, LEGO has astutely catered to local tastes and released several special sets in order to fulfill the demands of customers who are from different continents. For example, the LEGO group recently come out its 2020 Chinese New Year sets which is the first time it has done to celebrate the festival. Fans were delighted at the attention to cultural detail (The Economist, 2019). According to Hofstede’s cultural dimensions theory, the company needs to use this framework to discern sundry methods that companies should apply under different national cultures, the dimensions of culture, and business setting (Corporate Finance Institute, 2015).

Take China as an example by applying this model.

Power Distance High

1. Collectivism VS. Individualism Collectivism
2. Uncertainty avoidance index High
3. Femininity VS. Masculinity Masculinity
4. Short-term VS. Long-term orientation Long-term orientation
5. Restraint VS. Indulgence Restraint

It is evident that China retains a distinct belief in comparison with most of the western countries. People in China are deeply influenced by Confucian culture. They are more focusing on a sense of collective honor and maintaining the bonds between every single relationship. Furthermore, Chinese people are long-term orientation and are very willing to invest in children’s education (Earnhardt, 2019). In this case, LEGO’s ideas about STEM class and innovative education are very popular among the newly affluent parents in China. LEGO also established summer camps in China for the children here can experience and gain a deeper understanding of LEGO culture (Prnasia.com, 2019).

These facts reveal that LEGO’s products are ideally integrated and incorporated into the local culture and mainstream entertainment by adopting marketing strategies accordingly. And this increases LEGO’s sales revenue globally.

4. Conclusion

Globalization allows both the local people and companies can enjoy the benefits of scientific advances and industrial progress. Customers have more opportunities while companies can achieve market expansion and revenue increment. In general, globalization is a force for good, especially for LEGO. With entry the several new markets, global companies have received greater development opportunities. Due to the increased value of shared culture, it allows greater customer harmonization and offers advantages in other countries with lower operating costs. The company can obtain a competitive position by gaining new raw materials, resources, and investment opportunities. LEGO as a representative has overcome several crises thanks to its globalization strategies. The company obtains a huge success as they received ideas from different civilizations and backgrounds and created a whole new culture of their brand. Their humanized and innovated products fulfilled customers’ demands. The assistance from the local government protected LEGO’s interest as well. When LEGO is facing the sales declined in one country, its sales revenue from other markets can be the back up for the whole company operation. These can also be applied to other companies. Though, Globalization has led to some side effects like fluctuation in price and damaged to some traditional industries. The multinational company is very restricted by the local environment and are regulated strictly by local government through imposing the tax. Despite this, the merits of globalization still much outweigh the drawbacks.

Essay on Human Resource Development and the Impact of Globalization on It

Globalization is the integration of the world due to the explosion of international trade and technologies that make communication easier. Therefore, the world has become a global village in terms of values and even cultural preferences. Globalization has implication on HR practice because companies can hire global talent and use the newest technologies to manage talent. The biggest opportunity that the trend presents to HR managers is the chance to adopt global practices in human resource management and recruiting global talent but at the same time, a more diverse workplace is harder to manage.

Trends in the Business Environment and Their Impact on Human Resource Development (HRD)

New digital technologies that have made communication easier have contributed significantly to the integration of the world and subsequent globalization. Those technologies include web 2.0 that gave rise to Facebook, Gmail, Twitter, or social media in general. Moreover, international trade itself has been growing, and therefore technology has only accelerated a trend that had already started. Globalization refers to the tendency where domestic companies expand their operations and go international. It also describes the growing interdependence world’s economy, technology, people, information, and investment (Christiansen, 2013). Technology and international trade are responsible for globalization and the shift towards a more integrated and interdependent world economy has implication for human resources due to factors such as diversity of employees, and managing employees across various cultures among others.

The roots of globalization started immediately after the Second World War. The relative peace in most parts of the world, including Germany and Japan, created an incentive to focus on trade and development. Moreover, the allies established most of the global institutions that fostered economic integration such as the predecessor to the WTO and UN that offered a legitimate platform for policing world peace. The sustained peace further led to inventions and innovations especially in the 90s in various fields such as the personal computer, the internet, World Wide Web, broadband internet, among others. More recently, the invention of the smartphone had delivered computing devices to billions of people across the world.

In terms of human resource management, globalization has had a massive impact. One of the impacts is on the area of recruitment. Traditionally, companies relied on newspaper ads, preference for internal hiring, use of banners to announce vacancy, and telephonic interviews (Ja’Far, Santoso, Oktavianingrum & Yulindasari, 2019). However, in the modern global world supported by technology, recruitment has moved away from those traditional methods. Companies rely on ads posted online and interviews are sometimes online via teleconferencing tools. Human resource managers rely on internet sites such as LinkedIn to shortlist candidates before the actual interviews. Such platforms allow employees to display their skills and even share projects they have done in the past on GitHub in the case of software engineers. Employers are also interested in the social media activities of their employees to determine their personality, interests, and general temperament. Such tools did not exist a few decades ago.

HR practice has also evolved in key areas in response to the opportunities and challenges presented by globalization. Consequently, while traditional HR was administrative in focus, modern HR is strategic. Hiring employees is part of the strategic orientation of companies to position themselves in the market and gain a competitive edge over rivals. Thus, HR managers are proactive, always looking for the kind of employees who can bring a difference using their skills and experience. Traditional HR function was reactive and only hired in response to outside factors such as an employee quitting (Khan, 2017). As mentioned earlier, the HR function is a strategic activity of the modern firm and therefore, the HR department is a key part of the organizational mission. It does not operate as a separate or isolated from the mission and the strategic goals of the organization.

Other emerging HR practices include service focus, investing in people, and hiring HR specialists with broad skills. The service focus is in response to the need to deal with people coming from various backgrounds and dealing mostly in the service industry. Under globalization, most companies have a focus on selling and offering service to their customers with production serving a small part of their operations and that explains the service focus. Also, companies view employees as investments and not as expenses.

Other trending concepts under globalization include specialized application, reducing manual efforts, use of information technology, diversity in the workforce, and work-life balance. HR managers have to consider diversity in the workplace because global companies have employees from different companies. Without diversity training and inclusion, relations can quickly deteriorate. Work and life balance is also an emerging concept as employees try to foster emotional stability and reduce stress. Moreover, the younger generation including generation X is prone to stress and depression and work and life balance is crucial to promote mental health and maintain productivity. In addition, the use of information technology is a critical aspect of human resource management especially recruitment and employee training and development.

International human resource management has to include cultural training, language training, and practical training. The training is critical to prepare employees to deal with fellow employees in cross-cultural environments as part of intercultural communication. Intercultural communication refers to the mastery of communication across cultures under different cultural backgrounds. It involves learning various cultures, communication styles, and cultural orientation under models such as Hofstede’s cultural dimensions theory. However, the most important consideration is employee retention.

Opportunities and Challenges Globalization Present for HRD Professionals

Globalization presents opportunities for HR professionals to adopt best practices in the management of employees. Some of the practices include employee training and development, which is critical in the improvement of the quality of employees. There is a growing realization that employees are the most important resources for any company. Therefore, the emerging global practices demand continuous employee training and development to impart new skills and improve employee productivity. For employees, those practices promote their welfare and therefore globalization is making employees well off. Another global best practice is the use of innovative remuneration and job enrichment a practice pioneered by American technology companies.

Remuneration is an important aspect of employee motivation and traditionally, remuneration took the form of the payments only. However, in recent years, HR managers have experimented with new remuneration methods such as offering free food, transport, and childcare, and the result indicates such approaches, in addition to good remuneration, motivates employees to work harder and longer. Globalization offers opportunities to try those new approaches including job enrichment strategies such as allowing employees to pursue personal programs to boost their motivation (Hunter & Katz, 2012). The integration of the world makes it easier for managers to identify new practices and try them in their workplaces. Moreover, by adopting good practices, it makes organizations more competitive in the labor market.

Globalization is also making HR managers recruit the best talent regardless of nationality. In the technology sector, getting global talent is critical, and it underlies the success of American technology companies. Companies able to attract and retain global talent stand a better chance in the market where competition is stiff. Therefore, global companies seeking to invest in the best talent are not restricted by nationality. Despite the opportunities globalization presents to HR, it also brings challenges. Perhaps the biggest challenge is managing employees from different cultures. Companies have to invest in training HR managers to improve their capacity for recruiting and integrating employees from different cultural backgrounds (Marquardt & Berger, 2003). The process is hard as predicted by Hofstede’s cultural dimensions theory. Also, globalization increases diversity which also demands diversity training to create a conducive work environment. Most companies might lack the resources to invest in training and handle the challenges that come with managing diverse employees.

Recommendations for HR professionals

The first recommendation is that companies should approach the HR function as a strategic function. It is essential to integrate organizational strategies with those of HR function so that recruitment aligns with the organizational objectives. However, due to the challenges of managing diversity, companies need to include intercultural communication, diversity, open communication, and intercultural understanding and communication in the training and development programs of the company (Narula & Dunning, 2010). Such approaches make it easier for companies to take advantage of global talent, which multinationals require to manage their operations in various countries around the world. Another recommendation is to stick to professional ethics to avoid exploiting labor especially when companies take production to onshore locations to take advantage of cheaper labor in emerging markets.

Conclusion

In summary, globalization is a trend that is changing the nature of human resource practice. New technologies make it easier for HR managers to recruit and manage talent. However, at the same time, they have to contend with the challenge of managing a diverse workforce. The solution lies in investing in promoting the capacity of HR managers to manage diversity through training.

Advantages and Disadvantages of Globalisation

The following essay will be discussing the advantages and disadvantages that are linked around globalisation. ‘Globalisation describes a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration and transportation.’ (Lexicon, 2018) It is driven by many factors such as trade and technology.

A key advantage of globalisation is the free movement of labour. Free movement of labour ‘means that workers are entitled to look for work in another country, without requiring any visa.’ (Pettinger, 2017) An example of this is the European Union, where all EU citizens are allowed to freely move within the EU to find work. Free movement of labour acts as an advantage to both the workers as well as the recipient country. This is a huge advantage for citizens in seek of work as it provides them with many opportunities without many restrictions holding them back. For example, if a country is having issues with high unemployment, people have the option to move elsewhere where the unemployment rate is lower. This makes it easier for people to find work reducing hassle. It is also beneficial for the recipient country as more workers coming in means there is a larger amount of the population with disposable income which will flow into the economy. As a result of a more stable economy, it will attract Foreign Direct Investment. FDI ‘is an investment made by a firm or individual in one country into business interests located in another country.’ (Investopedia, 2018) This can especially benefit developing countries as it can help them advance faster in ways such as technologically. This will have a positive impact overall, as it will benefit trade around the world as well as build relationships, which could last long term helping future projects. However, a disadvantage of FDI is that it can lead to financial problems. For example, in the 1970s and 80s countries like Mexico, Thailand, Indonesia and Brazil got a lot of money from investors who hoped they could build new businesses there, however, the new companies often were not successful which resulted in investors pulling out their money.

Another advantage of globalisation is free trade which is developed by trading blocs. ‘A trading bloc is a group of countries that sign up to free trade between them, protected by a tariff wall against imports from outside.’ (Hammond, 2017) Free trade allows countries to exchange their goods and services without any barriers, for example, quotas or tariffs. An example of this is the North American Free Trade Agreement (NAFTA), countries within NAFTA have access to free trade, meaning there are no tariffs or quotas. Free trade also allows countries to specialise in the things they do best, gaining a comparative advantage. ‘Comparative advantage is an economic term that refers to an economy’s ability to produce goods and services at a lower opportunity cost than that of trade partners’ (staff, 2018) If countries are specialising in specific goods it allows them to take advantage of economies of scale therefore, lowering costs. This will benefit consumers as it will lead to lower prices as well as benefitting the exporting firm as they will have enhanced efficiency. No tax on imported goods will also directly benefit consumers as it allows them to purchase better quality products at cheaper costs. Furthermore, this will benefit the country as the standard of living will be better off, if more people can afford the products.

On the other hand, a disadvantage of globalisation is poor working conditions which occurs more in developing countries rather than developed countries. ‘Many multinationals have been accused of social injustice by exploiting labour in underdeveloped countries in order to cut costs.’ (Bahl, 2016) Globalisation creates competition between firms which can be healthy however it can also be negative as firms may try to decrease costs by making working conditions worse off. This benefits the company as their overall costs are lower meaning their profits will be higher, however, they will have demotivated staff which could have a negative impact in the long term. This can also be seen as an unethical thing for a business to do which could impact their reputation enormously if it ends up on media. This could also affect trade for them as other companies may no longer want to do business with them if they are known for being ethical companies.

Another disadvantage of globalisation is that it creates unemployment. Jobs are lost in developed countries due to businesses relocating to lower cost countries. China alone has ‘drained away 3.2 million jobs, including 2.4 million manufacturing jobs.’ (Collins, 2015) This puts the jobs of many people in danger which creates uncertainty of the future for them. Workers in developed countries such as America have also been threatened with exporting jobs if they do not agree to pay cuts. This puts many workers at risk as they could be earning just enough to pay their bills, meaning if there is a cut to their wage it could cause them financial issues, which could result in a loss of their assets. Another problem which arises from globalisation is tax avoidance. ‘Tax avoidance is the legitimate minimizing of taxes, using methods included in the tax code.’ (Murray, 2018) Amazon is a key example of a business who has tax avoided, they had sales of ‘£3.35bn in the UK’ (Barford, 2013) in 2011 however they only showed tax expense of £1.8m. This meant the UK government missed out on a lot of money which should have been paid as tax but it is legal so nothing can be done about it. This can be seen as an unethical thing to do as the UK uses tax money to fund schools and the NHS. It is also unfair competition towards other firms who do not avoid tax.

To conclude, I think that the advantages of globalisation outweigh the disadvantages. I believe this as there are various key advantages such as free trade and free movement of labour which have many knock-on benefits to them. Free trade benefits businesses located in countries which are a part of a trading bloc by improved efficiency, as well as directly benefiting consumers with quality products at cheaper prices. Free movement of labour also has a lot of benefits too, the main ones being having many job opportunities as workers can move freely to find work. This means there is less risk for them as there are not as many restrictions. Free movement of labour also benefits the recipient country as there will be more money flowing through their economy which strengthens it. I also believe some of the negative aspects of globalisation can be controlled, for example, poor working conditions can be fixed over time however, it will come with a cost which businesses may not be prepared to take.

Essay on MacDonalds Globalization

1.0 Introduction

Globalization is about the interconnectedness of individuals and businesses throughout the world that ultimately leads to global ethnicity and political, legal, and economic integration. It is the aptitude to move and communicate easily with others all over the world in order to conduct business internationally. Although globalization has occurred throughout history, the end of the 20th century and the beginning of the 21st have seen a rapid increase in the economic, cultural, and technological interactions between nations. In enterprise business, globalization is defined by a largely international free trade economy, meaning the prices of goods are generally uttered by supply and demand.

Today even very young companies and start-ups are expanding internationally. The rationale for a move into a new market may be one of opportunity overseas markets may offer exciting new prospects, high growth potential, or the chance to better serve existing clients. Alternatively, it may be one of risk, for example, entrepreneurs could be responding to a domestic market that is saturated, slow-growth, or too competitive. Either way, internationalization is a challenging process. The potential benefits accruing from internationalization are so many that many companies in the contemporary business world seek to globalize and operate in foreign countries and regions in order to exploit the opportunities they offer for increased profitability, growth, and sustainability. As a result, companies increasingly perform their business functions (including manufacturing and sales) not only at home but also abroad thereby leaving business executives with no option but to follow events as they happen in other parts of the globe in order to optimize their chances for growth and sustainability.

Companies all over the globe are looking for expansion and ways of entering new markets that are profitable through different entry modes. Managers look at different strategies that can be used to expand internationally . There are many reasons for companies to go global or expand overseas. There are reactive and proactive reasons for the same. Increased global competition, customer needs, potential opportunities, declining foreign trade barriers, and increasing expenses in domestic markets are some of the reactive reasons for companies going global. To achieve economies of scale, expanding the base for growth and profits, cost savings, and access to different resources are some of the proactive reasons for companies going global.

This report looks at globalization as a whole and how McDonald a global food chain can take advantage of doing business in West Africa. Detailing and evaluating West Africa’s political, economic, cultural, legal, and financial climate. And lastly, key strategies to get it implemented in West Africa.

1.1 About the Company

McDonald’, the most renowned fast food chain in the world, was started in 1955 by a visionary named Raymond Kroc. Kroc played a significant role in revolutionizing the fast food industry in America, and currently Mc McDonald’s is serving over 60 million customers in over 117 countries on a daily basis . The company has a global brand value and worldwide recognition. It is one of the most widely recognized icons of the world in the fast-food restaurant industry.

Mcdonald’s Corporation is an international chain of hamburger fast food restaurants, which operates and franchises McDonald’s restaurants worldwide. The Company’s restaurants offer various food products, soft drinks, coffee, and other beverages, as well as a breakfast menu. Its menu also includes salads, fish, wraps, smoothies, and seasoned fries.

Despite being an American base, McDonald’s respects the markets, cultures, beliefs, and likings of other nations. Customers identify with the brand name and “the Golden Arches” are recognized not only in America but in foreign countries as well

Chapter 2

2.0 Literature Review – A Critical Review

Economic theory suggests that firms should pursue positive net present value projects whenever and wherever they arise. For many firms, this will entail developing and adopting new technologies or diversifying one’s product portfolio. But geography also offers one of the most basic sources of diversification and growth.

This report focuses on the international expansion of McDonald’s into the West African market. Economic theory here tells us that assuming risk neutrality, a firm with opportunities abroad should pursue all of them. In fact absent any form of constraint on capital or managerial time, and ignoring issues of learning, the theory would imply that firms with opportunities abroad would pursue all of them aggressively and rapidly. If firms face constraints in terms of capital availability or managerial capabilities or if there is option value in accumulating information about a market opportunity gradually, economic theory suggests that firms will maximize profits by following first the highest expected profit opportunities around the globe and allocating resources across markets in a way that exploits all the best opportunities first.

The markets they first enter under this scenario may be markets that are similar, culturally or in close proximity, to the ones they are already operating in because the firm might expect customers in such markets to behave similarly to those they know like their product. Internationalization theory, however, with its focus on risk aversion, also suggests that firms expand abroad only once they have exhausted opportunities within their home market and that they then expand first in markets that are familiar to them, namely markets similar culturally or in close geographic proximity to those they are already in, and that they exhaust opportunities in each market before moving into new ones. Economic theory suggests instead that the firm will continuously pursue the best opportunities across all markets.

Contrary to a manufacturing firm whose options include exporting, a retail firm such as McDonald’s has no choice but to go abroad, where the customers are, if it is to sell its product outside its home market. While McDonald’s cannot export its product, it can choose among different modes of operation in each market, some of which involve a higher degree of commitment of resources than others. In particular, it can open a subsidiary that franchises directly, enter into a joint venture with a local partner, or establish a master franchising arrangement whereby the master franchisee owns and operates all the outlets in his or her territory or finds franchisees to do the same. While the level of investment that McDonald’s commits to these markets differs across these different governance modes, in all cases McDonald’s will exert significant control over the number of outlets and the growth in the number of outlets in each market. Consequently, in what follows, we assume that it internalizes the cost of expansion to a large extent – though potentially to varying degrees depending on governance within each market – and that it gets to set the expansion path within as well as across all markets.

2.1 McDonald’s Needs to Expand into West Africa

Going international is a strategy that is influenced by a variety of factors and is typically implemented over time. Companies go international for a variety of reasons. In general, companies go international because they want to grow or expand operations. More specific motives include generating more revenue, competing for new sales, investment opportunities, diversifying, reducing costs, and recruiting new talent thus;

2.1.1 Improving Profit Margins

Expanding into foreign markets will enhance revenue growth while improving the company’s return on capital and reinvestment rate. Revenue growth from non-domestic markets typically comes faster, while adding new revenue streams will help McDonalds maintain security and stability.

2.1.2 Broader Market Base

In an era where global branding is more critical than ever before, the acquisition of a wider customer base and a broader brand footprint pays significant dividends. Additionally, McDonald’s with an international presence can leverage their specific understanding of global markets. This kind of “on-the-ground” expertise is often vitally important in terms of competitive advantage and client service.

McDonald’s can tap into higher profits and faster growth by entering overseas markets with more favorable prevailing conditions.

2.1.3 Diversifying the Business

The international expansion allows a company to diversify its business in a couple of key ways. First, you spread the risk of slowing demand across multiple countries. If one market never gains or loses interest in your offerings, you can pick up the slack with success in other countries. In addition, you can connect with suppliers in international markets and take advantage of raw materials and resources unavailable in domestic markets.

2.1.4 Gain a Competitive Advantage

Thinking globally is becoming less of an option and more of a requirement when it comes to keeping up with the competition. In fact, 56% of middle-market companies include global expansion in their growth strategies. Taking your business international presents growth opportunities by expanding options for talent, and customers, and creating cost-savings for imports and manufacturing.

Chapter 3

3.0 West Africa Market and Macro-Environment Factors

West Africa’s current population is estimated at about 362 million. Over the last two decades, the economy has enjoyed increasingly stable and deepening democratic governance strengthening the effectiveness of key national institutions, enhancing investor confidence, and anchoring the economy in an environment for positive growth.

Today, Ghana is not only the best place for doing business in West Africa, but the fastest. The West African market has developed into an established business destination for investors seeking a conducive business environment, committed and progressive government-private sector participation, political stability, transparent regulations, and a dynamic private sector ready for partnerships. The governments backed by ECOWAS are committed to implementing policies that reduce the general cost of doing business to promote investor confidence in the country. Below are the macro-environmental factors that make the West African sub-region a conducive market for doing business Political, Economic, Legal, Financial, and Legal factors.

3.1 Political

The West African political environment is ranked to be one of the stable political environments within the African sub-region. It has established democratic institutions and systems to ensure good governance and rule of law in the country. Investing in West Africa will provide companies with low political risk in their portfolios and enable McDonald’s to develop long-term strategic plans.

3.2 Economic

There are 15 countries in the Economic Community of West African States (ECOWAS): ECOWAS works to promote cooperation in the region on a range of economic activities. The strong economic growth among member states coupled with a fast-rising middle-class society makes the region an ideal place for business growth.

3.3 Legal

Legal environment forces include labor law, antitrust laws, regulations, occupational health & safety policies, and other laws of a country or pertaining to the particular business environment that industry within the business environment must with those rules. The legal environment has strong laws and institutions to ensure businesses thrive

3.4 Financial

Governance and growth rates have improved to the point where West Africa has been the fastest-growing region of the African continent for some years. Inflation has dropped, fiscal policy has improved and investment returns have increased. Good tax policies and access to financial instruments have improved significantly over the past decade.

3.5 Cultural

Conducting business in West Africa requires social-cultural awareness and effective cross-cultural communication skills. What might be acceptable in Asia, for example, may be unacceptable in West Africa. Do not expect French or Portuguese-speaking business people to speak to you in English even if they understand it. Business objectives may be the same, but ways of implementation and communication differ greatly. West African culture is very diverse but most people within the region have a good taste for foreign products. The new crop of more assertive middle class with disposable wealth and an appetite for consumer goods provides a good market for McDonald’s.

Chapter 4

4.0 International Strategy and Entry Mode-Transnational Strategy

Overseas market requires an extremely high degree of local responsiveness hence the need to manage business spread across different regions effectively and efficiently. McDonald’s should employ the use of the Transnational Strategy in terms of local responsiveness and global integration as its market entry mode into the West African market. The value chain will be constructed taking into consideration local culture, legal-political, and economic environments in mind. It is important to note that along with maintaining product and service standardization, McDonald’s must take into account local tastes and preferences when developing its menu and engaging in marketing efforts.

As a transnational company, it is essential to have a standardized system and process in place for effective and efficient management of the businesses running in different territories. E.g. McDonald’s forces standard operating procedures like make to order make to stock and just-in-time processes. Implementation and integration of ERP systems across businesses of various countries and with business associates would ensure standardization in their business processes. This would help McDonalds reduce their cost, reduce manual work, more transparency and efficiency in information sharing, better responsiveness to stakeholders, etc.

4.1 Franchising as Entry Mode into West Africa

Franchising can be defined as a contractual agreement whereby someone with a good idea for a business (franchisor) sells the rights to use the business name and sell a product or service (franchise) to others (franchisees) in a given territory in a specified manner. Franchising has become a very popular strategy that many companies have adopted lately; they have a vast number of global outlets operated by foreign franchisees. McDonald’s should use Franchising as its mode of entry into the West African market.

As mentioned above, Franchising will McDonalds to experience significantly faster expansion and growth, helping it to achieve a truly global brand identity and a well-known trademark. The existence of franchise outlets within West Africa will help McDonalds gain popularity and customer loyalty.

McDonald’s will able to gain more income and revenues from the monthly fees (i.e. 5% service fee) and rent paid by its franchisees worldwide, this means they can generate more finance which can later be used to develop and expand the business. Therefore franchising gives the opportunity to franchisors to raise sufficient capital.

McDonald’s will be able to benefit from economies of scale because as their total production levels increase, the average costs tend to decrease. These economies of scale may include marketing economies of scale; McDonald’s for example will be able to have more money to spend on its advertising campaigns if its number of restaurants is higher, and it will also save the company the redundant costs of having separate national campaigns, therefore this helps reduce on the business’ expenses and hence register higher profits. By having many franchise outlets worldwide, McDonald’s achieves diversification and spreads its risks worldwide.

Chapter 5

5.0 Recommendations and Conclusion

5.1 Recommendations

As described in the above sections, McDonald’s has huge potential in global markets to venture out into different areas, especially within emerging markets such as Africa. As these countries are the center of growth opportunities, McDonald’s should focus its internationalization in these areas much more than they are currently doing. McDonald’s should focus on high and low areas of the population, reaching out to more and more sections of society.

McDonald’s can improve its business viability through continued global expansion, especially in high-growth markets. Also, the company can reduce risks by developing new products or entering new industries related to the fast-food restaurant industry.

The road ahead for McDonald’s should be to increase the nutritive value of the burgers and look at certain health aspects to control the increasing waistlines among children because of the high consumption of fast foods, especially burgers. They should look at improving their customer service at the counters by avoiding long queues and providing high levels of customer satisfaction.

5.2 Conclusion

McDonalds is the number one brand in the fast food industry. From the above discussion and findings, it can be concluded that Internationalisation is a process in which the firm gradually increases its international involvement. It has been also found that internationalization is very complex by nature. From the discussion of the influence of various macro environmental forces on internationalization, it can be concluded that there is an increasing influence on the firms to go for McDonald’s to enter into the West African market. They have to successfully implement international strategies where they have to localize and customize processes to adapt to the foreign countries along with maintaining their American origin by having centralized procedures as well.

Your
task for this assg is:
1.    Pick any one (Five Global Issues to Watch in 2

Your
task for this assg is:
1.    Pick any one (Five Global Issues to Watch in 2024) of the global issues. Why is this issue
important to address in the world today? 3 pts
2.    According to inequality.org (Institute for
Policy Studies), the recent pandemic has exacerbated inequality globally. Pick
any two and in 100 words each describe the inequality (this
description must include discussion of three facts and figures). How has this
inequality impacted Americans? 7 pts
·        
Covid-19 and Global
Inequality
·        
Global Wealth
Inequality
·        
Global Income
Inequality
·        
Racial economic
inequality
·        
Gender economic
inequality 

5 Global Issues to Watch in 2024