Effects Of Globalisation On National Economies Business Essay

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Firstly we must look at globalisations from a macro standpoint. The definition of Globalisation is the process by which people of the world are unified into a single society

The word Globalisation can also be used to describe the how the world's economies now operate. This thereby guides us towards the first are, which we need to understand which is how globalisation has affected the various different economies across the globe.

The movement of national economies to global economies over the past few decades has occurred due to a number of factors these being

• Trade

• Technological advances (e.g. Internet)

• Foreign Investment in overseas business

• Financial Stability

• Ease of Travel - Migration

The above are underpinned by the dissemination of cultures across the globe, which in turn has allowed the dissemination of language and ideas to move freely throughout the world.

Globalisation is closely linked to the economies of the worlds and how these have developed over the years. Some economies have been allowed to bloom over the years due to assistance of various institutions, which will be discussed later in this report.

Globalisation is not a recent occurrence and some say has been around since ancient times when the trade routes opened up across Asia. This increase in technology has increased dramatically the rate at which globalisation has occurred over the last number of decades.

The 20th Century has seen unprecedented growth, the most occurring during the latter half of the century. During the war years although a 'World' war was being fought the thought of internationalism and also with certain economies, namely the Americans coming out of depression, Globalisation was affectively placed on the back burner and protectionism became the way controlling the economy.

1.2) The Influence of International Institutions on organisations

It was the latter years of the war where such institutions as the IMF and World Bank were created, with a "goal to stabilize exchange rates and assist the reconstruction of the world's international payment system." (Condon, 2007)

In addition the IMF "sought to build a framework for economic cooperation that would avoid a repetition of the vicious circle of competitive devaluations that had contributed to the Great Depression of the 1930s." (IMF)

Both institutions concern themselves with economic issues and concentrate their efforts on broadening and strengthening the economies of their member nations. - reword

But what is the affect of International institutions? As stated above both of the main institutions are interested in ensuring the viability and stability of economies of their member states. In addition it is the purpose of some of the abovementioned institutions to assist those poorer countries in the world by opening up extra trade routes, increasing capital flows and also the spreading of knowledge and technology.

The best example we can draw out is in difficult times both IMF & World Bank has given foreign aid to Sri Lanka trough long term loans. In return both institutions request the Local authorities to lay effective & efficient rules & regulations. This pressure is passed to the Local as well as foreign institutions which operate in the Island to have good governance in place within the organization. So it is advisable that HSBC to lay necessary guide lines to all of its stakeholders in advance, so that when a new rule is brought by the Central Bank of Sri Lanka, the Bank need not worry since it is already practiced in the organization.

1.3) The role and responsibility of European Union membership on the workplace

In addition to the institutions mentioned the United Kingdom is an integral part of the European Union. Being a member of this Union has a dramatic effect on the workplace and also ensures the protection of the workers within its member states.

To ensure commonality across all of the member countries the EU has developed an rolled out over the years a number of directives which are European law. These laws are agreed by all of the member states but it is the responsibility of each country to implement their own laws to ensure that the directive is implemented.

There are a large number of directives which have been passed that have a direct affect on all businesses within the UK. It covers areas as follows.

Conditions of employment (Example- working time, part-time and fixed-term work, posting of workers, discrimination, equal pay and the protection of pregnant workers)

Informing and consulting workers (Through works councils and in collective redundancy and business transfer situations)

Protection of personal data

Even though HSBC is operating in Sri Lanka, it is bound to oblige to above mentioned EU employment laws since its head office is based in the UK. HSBC should take necessary steps in combining laws laid down by the Sri Lankan as well as EU authorities when designing work place job roles & responsibilities. This in return will help the Bank in many ways as it will attract foreign as well as local clients since the Bank is governed by EU & Sri Lankan Laws. This will create a good image among investors leaving the organization to be an ethical bank to deal with.

2) Effects of environmental legislation, directives & guidance on organizations

2.1) Economics of adopting a policy of environmental awareness in organizations

The second task requests to investigate the range and affects of Environmental legislation and the economies of adopting such policies.

The EU and the Government are dedicated to driving environmental legislation with and aim to cleaning up and sustaining the environment.

Due to the vastness of the environment and its far-reaching and direct affect on human beings and also wildlife and animals, environmental directives and laws have a lot of power placed upon them to ensure that the laws are met. It is an unknown fact that the HSE although a Health and Safety organization has little power in comparison to the UK Environmental agency that have the power to immediately close a facility if deemed necessary. This demonstrates the power and also the UK governmental stance on the environment and therefore the positions in which UK business find themselves.

The second task asks what are the ranges and effects of Environmental legislation. To understand this question we first have to derive what Environmental legislation or Law.

"Environmental legislation is a complex and interlocking body of statutes, common law, treaties, conventions, regulations and policies which, very broadly, operate to regulate the interaction of humanity and the rest of the biophysical or natural environment, toward the purpose of reducing or minimizing the impacts of human activity, both on the natural environment and on humanity itself."

As can be seen from the above definition, the environment issue is global and as such has global organizations set-up to manage enforce the agreed international laws. Environmental law can cover a large number of areas such as,

Air quality

Water quality

Global climate change

Agriculture, biodiversity

Species protection

Pesticides and hazardous chemicals

Waste management

Remediation of contaminated land and Brownfield's

Smart growth

Sustainable development

Impact review


Stewardship and management of public lands and natural resources

Due to the UK's membership within the EU, all of the agreed environmental directives are implemented with the UK either by UK law or directly from EU legislation.

In order to implement the above there must be appropriate guidance given not only by the EU but also the governments of the members states, this is done by way of implementing policies which are a method of ensuring an action is taken to manage human activity.

But what are the economies of adopting such policies. As detailed in the previous task there are a number of policies, which are required by the international organizations and also the EU that have a direct affect on businesses.

Over the last few decades and more so since the 1990's there has been an increased environmental awareness, which has been highlighted in the media. This has been predominately about 'Climate Change' and how everyone has part to play in minimizing the effect.

So what are the benefits if an environmental policy is adopted, what are the economies' or 'savings' to the individual and organizations and what guidance is and processes are required?

It is firstly dependent in which arena in which the business operates which will determine the environmental policies, which the company will adopt. For the purpose of this assignment HSBC have been chosen due to my familiarity with this company.

"Every business has an impact on the environment. To ensure that this level of impact remains within acceptable limits, there is a need to comply with environmental legislation". But how does the Bank manage the implementation of environmental policy. The company should first as stated, recognize that is has an impact on the environment and that a need for a sustainable and healthy environment is beneficial not only to the business but also to its employees and stakeholders.

The company must also ensure that all of employees at all levels will devote their best efforts to ensuring environmental practices are implemented and sustained within the business. There also has to be an understanding by all employees that implementation of environmental employees will have an impact on the current and future generations.

2.2) Actions that need to be taken by organizations to maintain the environment

Companies thereby implement as part of their business a form of self-regulation, which can be implemented in the form of Corporate Social Responsibility policy. This ensures that the company manages itself to ensure that it not only meets the needs of the business but also ensure that is keeping within the law and is displays good working ethics in the business environment. This is even more important in the current climate. HSBC should make sure that its entire staff engages in these activities to feel the importance of maintaining a good environment.

To ensure that this is implemented and managed correctly a company is required to implement what is entitled an Environmental Management system (EMS) An effective EMS will,

Define environmental responsibilities for all staff.

Identify opportunities to reduce waste, including raw materials, utility use and waste disposal costs.

Increase profits.

Reduce the risk of fines for non-compliance with environmental legislation.

Ensure all operations have procedures to minimize their environmental impacts.

Record environmental performance against set targets.

Provide a clear audit trail.

Attract shareholders and investors.

As can be seen from what an effective EMS will achieve there are business benefits such as increased efficiency and profitably which are economies, which can and should drive the Environmental policies within a business.

2.3) Measures that exist to improve workplace health and safety practice

Within the UK this is covered by "The Workplace (Health, Safety and Welfare) Regulations 1992", which encompass a wide range of health and safety and welfare issues. As with all employers it is their duty under legislation, Health and Safety at Work etc Act 1974 to ensure the Health, Safety and Welfare of employees at their work. This also includes those who are not direct employees but may require the same welfare levels, this included visitors and contractors.

But how is the above measured. This can be done in a number of ways and is subdivided under three main headers.




An example to determine if the health, Safety and Welfare requirements are being met could relate to the ventilation, temperature and environment of the work place. To determine if these are being monitored and managed efficiently and also improving the health, Safety and Welfare of the workforce these have to be assessed by the company to determine if they are with acceptable operating parameters to ensure that they are not detrimental to the workforce. Ways to assess can be,

Introduction of Engineering measures

Restriction of Exposure

Medical Assessment of Employees

Correct Clothing for the Workforce



Correct Supervision

3) Socio-cultural, ethical & moral issues that affect organizations in the current economic environment

3.1) Responsibilities of organizations to improving workforce welfare

With all companies this is an integral part of the CSR of a company as detailed previously in this report.

As mentioned previously the CSR of a business should act as a self-regulating mechanism, which ensures that the business is working within the law in a number of areas. This of course should mean that a business should welcome the responsibility of how their business impacts on all stakeholders involved in the business. Such stakeholders can be customers, consumers, suppliers, and the workforce, their health and welfare and also the world in which we live in; it's wildlife, the Environment.

Therefore the CSR of a business has a direct bearing on a number of factors namely socio-cultural, Moral and ethics

Socio- Cultural

There are a number of ways in which socio-cultural issues can have an affect on how a company operates. A business should actively encourage the development of community development a growth. Such examples of business involvement in the community can be sport club sponsorships. It is after all the workforce, which enable to company to operate and it is in a company's best interest on.

Another way in which a business can have a direct affect on society is the environmental impact of a business. This is particularly important in relation to Heavy and Chemical industries due to the bi-products of the processes.

Moral Issues

Morality should now even more than before be a key area of business responsibility. It is important to understand that organization or companies are only able to make profits because of the society in which they operate. Corporate Social responsibility has grown from the interaction between the need for profits and society.

Charles Handy writes: "The purpose of a business is not to make a profit, full stop. It is to make a profit so that the business can do something more or better. That 'something' becomes the real justification for the business. Owners know this. Investors needn't care."


What are ethics; these are defined as accepted principles of right and wrong that govern the conduct of a profession. Due to the enormity of the cultural differences around the world due to globalisation this is even more important nowadays and can be detrimental to a business to not ensure that it is conforming to the ethics of the country in which it operates.

Following the un-economical working of the international banking system and the Recession, which has followed, morality in business, is now more key than ever.

In a speech at the CSR Europe's General Assembly in Brussels on 11 June 2009, the European Commission President Jos Manuel Barroso stated, "The crisis resulted, in part at least, from a failure by some businesses to understand their broader ethical responsibilities. Now all businesses must rise to the challenge."

Ethics not only relate to how a business operates but also to how they treat.

3.2) Approaches to the management of diversity in organizations

How do companies manage diversity within the workplace? Today's workplace due to globalization could be described as a 'melting pot' of cultures. Especially in a multinational organization such as HSBC. It is therefore important to ensure that the rights of all employees are maintained. Therefore a number of directives have been put in place by the European Union, namely The EU's Council directive (2000/78/EC) which establishes a general framework for the equal treatment of person in employment.

This as detailed before is interpreted into a policy or act by which UK companies must operate. It is the responsibility of each company to roll out such policies within their business. There are a number of ways in which people can be discriminated against, these are summarized below.





Sexual Orientation

To ensure an effective and productive workplace all persons should be treated equally. The introduction of equality legislation has removed many inequalities with the workplace. A large number of companies now actively participate in ensuring the equality of their employees; this is to ensure a diverse workforce, which reflects the communities it serves. This is again another example of the 'socio-cultural' influences on a business.

There are great pressures on businesses in today's climate due to the increased awareness, globally; of the direct affect business can have on people's lives welfare and health within business. This as detailed is a corporate form of self-regulation, which is integrated into the business model of a business to ensure that it meets its responsibilities.

I have chosen the CSR for HSBC to demonstrate how Socio-cultural factors can have a direct effect on how a company operates. "Our first responsibility is to be a successful company. Success is the only outcome that satisfies all of our stakeholders. Without success, our shareholders would not invest in us, our customers would not bank with us, and good people would not come to work for us. Our success also means that we can fulfill our responsibilities to the wider world, to the communities in which we operate". We can identify that HSBC understands the importance of Diversity as the bank believes that the better its staff reflects diversity, the better it helps to anticipate & meet customer needs. Since HSBC is a one of the biggest banks in the world, the decisions it makes, will make a big impact to the world. Understanding this situation the bank aims to lend and invest responsibly, avoiding projects where the potential for social and environmental damage outweighs the economic benefits.

3.3) Organisational approaches to ensuring positive policies of workforce


Approach that organizations use to manage diversity issues differs one to another. Aronson gives an excellent overview of workplace diversity, outlining how to institute a diversity initiative, summarizing the principles on which it should be based, and providing a substantial number of best practices examples implemented by various companies. The GAO's review included a comprehensive literature review, a detailed analysis of the writings of five diversity experts, and interviews with an additional 14 experts. From this process, they identified nine best practices. The two works complement each other. Aronson's business perspective and wealth of best practices detail is balanced by the GAO's non-profit agency examples and its high-level focus on diversity principles.

The GAO's nine leading best practices are:

Top leadership commitment (A vision of diversity demonstrated and communicated throughout an organization by top-level management)

Diversity as part of an organization's strategic plan (A diversity strategy and plan that are developed and aligned with the organization's strategic plan)

Diversity linked to performance (The understanding that a more diverse and inclusive work environment can yield greater productivity and help improve individual and organizational performance)

Measurement (A set of quantitative and qualitative measures of the impact of various aspects of an overall diversity program)

Accountability (The means to ensure that leaders are responsible for diversity by linking their performance assessment and compensation to the progress of diversity initiatives)

Succession planning (An ongoing, strategic process for identifying and developing a diverse pool of talent for an organization's potential future leaders)

Recruitment (The process of attracting a supply of qualified, diverse applicants for employment)

Diversity training (Organizational efforts to inform and educate management and staff about diversity's benefits to the organization)

By following the above mentioned best practices, HSBC will have a competitive advantage for the rest.

Increasing organizational systems flexibility

Bringing added creativity

Increasing the market scope of products

Broadening the resources acquisition basis

Adding diversity viewpoints to problem-solving in decision-making processes

Decreasing the operating cost