Globalization and Its Effects on Businesses

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Table of Contents

Introduction
Globalization
Effects of Globalization
Globalization and Outsourcing
Information Technology and Globalization
Conclusion
References

Introduction

Due to easy availability of substitutes for most commodities and the increasing number of firms, competition has stiffened as firms try to outdo each other. It is, therefore, the aim of each firm to try and enhance its market share as well as increasing the demand for its goods, so as to increase the profit margin that the firm earns.

Due to the decreasing local demand, many firms have sort of going international and establishing business units in foreign markets. This has been facilitated by the increasingly high correlation between firms from different regions of the world.

Consequently, globalization has resulted, which has lead to emerging of different ways to accomplish various tasks and necessitating improvement in technology besides varying effects both on the people and the companies.

Globalization

This is a term that is used to refer to the linkages between countries which have led to the reduction of barriers of trade not only among neighboring countries, but also with countries all over the world. In many instances, globalization is used to refer to the economic interdependency that has emerged among countries, where countries depend on one another for demand and supply of both raw materials and finished products (Stiglitz 2003).

Globalization involves free movement of goods and services across borders, movement of information and technology from one country to another, and exchange of culture resulting to specialization and comparative advantage, among other advantages.

Effects of Globalization

Globalization has had many far-reaching impacts on the way that firms carry out their functions and the behavior of people, not forgetting the advancement in technology that has helped to propel globalization even more. Economically, the volume of trade has been increasing over the years since countries agreed to open their boundaries to international markets.

Countries have increased demand for their goods which has made them increase their production, thereby increasing employment besides increasing their profitability (Steger 2010).

On the same note, due to reduced barriers to trade, many firms, especially from the developed countries, have invested in developing countries creating employment opportunities for the people who could have remained unemployed, therefore improving the economy of these countries (Braudreaux 2008).

Due to the competition, companies are constantly researching ways of improving their products so that they can stand a chance of competing favorably. This, in turn, has led to increased research and development and consequently advancement technology hence, coming up with more efficient ways of production as well as value addition on end products.

In conjunction with that, there has been increased concern about the conditions of work and the safety of the workplaces for employees of various companies in the wake of globalization. This has made many companies to change the working conditions for their employees, especially in developing countries, where terms of employment, as well as working conditions, were bad.

Employees have, therefore gained immensely due to globalization (Steger 2010). On top of that, the companies have found enough market that has encouraged expansionary decisions due to high demand, thus, leading to an increase in output and consequently revenues.

Additionally, people have gained significantly through globalization in different positive ways. To begin with, there has been an increase in employment opportunities because one can search for employment even in foreign countries or in the foreign firms that invest in their local economy.

On the same note, foreign firms have always had to employ people from different cultural backgrounds, which has necessitated employee training so as to enhance good coexistence (Lechner 2009). Employees have been on the receiving end as their knowledge has constantly been improving.

Furthermore, globalization has enabled people to access various goods and services which are not produced in their country, therefore, increasing their choices besides improving their living standards.

However, globalization has not only positive impacts on the globe but also some negative ones as well. Due to globalization, companies have been hiring even from foreign countries which have led to migration of skilled workers from the developing countries to developed countries where wages are high, and working conditions are better.

Globalization has also led to developing countries borrowing from the rich countries thereby, becoming economically and technologically dependent on the rich countries, which have allowed rich countries to control the economic and political affairs of developing countries (Stiglitz 2003).

Globalization and Outsourcing

Outsourcing refers to the process of contracting another firm to perform certain functions which were being performed internally, in order to gain competitive advantage or increase efficiency in execution of these duties. Some firms go to the extent of transferring the whole department to the outsourced firm, including the employees (Lechner 2009).

Globalization has also increased the ability of firms from developed countries to access cheaper labor from developing countries where wage rates are low. This has made these firms to reduce the number of employees in the developed countries while they increase their outsourcing from the emerging markets.

Consequently, rich countries have found themselves in a mess as employment is shifting to emerging markets while employment rates are declining in the developed countries due to high labor costs.

Information Technology and Globalization

Globalization has led to rapid improvement in the information technology sector due to the need to communicate with both customers and suppliers in various parts of the world, while at the same time firms are striving to use the most recent technology in production.

It is evident that information technology has led to improved access of information, which has led to increased efficiency in the way tasks are accomplished as well as raising the economic potential of firms (Schwalbe 2009). Advances in computer software and modes of communication have also enhanced information exchange between various regions, as well as enabling digital processing of information, thus increasing convenience.

On top of that, the widespread use of internet has improved the speed of communication and modes of marketing various products. Thus, making it easy for a firm to sell its products in foreign markets. The internet has also brought revolution in the way people make decisions and organize for production.

Additionally, management can be carried out from different places since the internet has made it possible for meetings to be held online through teleconferencing, which facilitates decision making (Schwalbe 2009). Furthermore, it is possible for people to get anything they want online be it a job, a product or information about a given company.

Conclusion

Globalization has led to advancement in the way companies accomplish their activities through increasing efficiency, thus, enhancing competitive advantage. Information technology is an inevitable component, and a driving force for that matter, which pushes globalization and should be handled with care because without it, globalization cannot prosper.

However, globalization has negative effects also which should be taken into consideration for they may end up being detrimental to world economies if not adequately addressed.

References

Braudreaux, J. D. (2008). Globalization. Santa Barbara: ABC-CLIO.

Lechner, J. F. (2009). Globalization: The Making of World Society. Hoboken: John Wiley and Sons.

Schwalbe, K. (2009). Information Technology Project Management. Stanford: Cengage Learning.

Steger, M. (2010). Globalization. New York: Sterling Publishing Company.

Stiglitz, E. J. (2003). Globalization and its Discontents. New York: W. W. Norton.

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