Advantages And Challanges Of The Globalization Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Globalization is basically the name for the process of growing the connectivity and interdependence between the markets and businesses of the world. There is a dramatic increase in the process since the last two decades, as the advancement in the technology makes it a lot easier for the people of the world to do things to regulate their routine matters such as travelling communicating and doing business internationally. Following is the definition of globalization

"Globalization" refers to the growing interdependence of countries resulting from the increasing integration of trade, finance, people, and ideas in one global market. International trade and cross-border investment flows are the main elements of this integration".(World Bank, nd)

It is said that globalization started after World War II but has speeded up the significantly since the mid-1980s. This acceleration was driven by two main factors. First factor is technology which have reduced the communication barriers, cost that was being paid for the transportation and has eased many other factors that help in doing the trade. This has also made it practicable for a firm to situate different stages of production in different countries.

The other influencing factor is the growing liberalization of trade and capital markets. The governments of the many countries want to give a chance to their trade of countries for taking step with the foreign world and pay different types of taxes and tariffs on making imports but willing to make restrictions on exports and avoid provision of quotas. A number of international institutions established in the wake of World War II-including the World Bank, International Monetary Fund (IMF), and General Agreement on Tariffs and Trade (GATT), succeeded in 1995 by the World Trade Organization (WTO)-have played an important role in promoting free trade in place of protectionism. ( World Bank Group , nd; Gupta & Govindrajan , 2002)

2.0 Understanding the global environment

The word globalization is itself quite new a term. But the actual process towards global interdependence and exchange started centuries ago.

There are mainly four forces behind globalization:





As Organizations have different cultures, countries have cultures too which are strongly lead by their religious backgrounds. A religion is the set of values and attitude shred by individuals from a specific country that shape their behavior and their belief, about what is important in a situation. Research indicates that national culture has greater effect on employees than organization's culture. So manager's working outside the country must be familiar about the national culture of that place to understand the responses and perception levels of the people he is going to work with.

Technological developments are conceived as the main facilitator and driving force of most of the globalization processes. Before thinking on the consequences of several technological developments, we must go through the definition of technology as a sociological term, so that we can further explore the social and political role of technology in the globalization process.

"Technology can be defined as the socialized knowledge of producing goods and services. We can describe the term technology with five important elements: production, knowledge, instruments, possession and change". (MEDIAIF ,nd)

The first task for any manager is to take stock of the situation. Like a poker player, a manager needs to look at the cards dealt before making strategic decisions. The manager examines the situation, evaluates the competitive players, and assesses the markets served. It is vital to understand available assets such as finances, employees, patents, and brand recognition, channel of distribution, and existing products and liabilities including obsolete equipment, technologies, and debt. When this has been accomplished, the manager in a position to evaluate the risks for your bets. In other words, a successful company of any size must identify its strengths and weaknesses, then decide how to position itself in the market. But nothing is more important than understanding who is your customers and what are their needs. (Victor, 2010)

The global manager must be aware of the economic issues when doing business in other countries. First thing to understand is the country's type of economic system. There are two major types:

Market economy

Command economy

The market economy is one in which the resource are owned and controlled by the private sector. And command economy is one in which the decision are controlled by the central government. However no country in the world is having completely market or command economy. As taking the example of USA and UK both are more market economies but the government has its rule in certain areas. Instead if we take a look at China it is having a command economy by time it is moving towards being market economy. (Drucker, 1997)

Managers may also have to understand currency exchange rates, inflation rates and diverse tax policies. A firm operating its function globally can have different profits depending on the strength of its home currency and the currency of the country in which it operates.

Another issue is inflation, it means the price of the products and services are going up. But it also affects interest rates, exchange rates and cost of living of the individuals. It destabilizes the general confidence on country's political and economical systems. So the managers need to need to monitor inflation so they can make good decisions and anticipate the possible changes in a country's monetary policy. (Gunther ,2005)

Finally the changing tax policies are the major worry for global managers. Managers need to have a clear idea about the tax policies in the country they wish to do the business so they can minimize their tax obligations.

Managers are no longer restrained by boarders. It is seen that BMW builds cars in south Carolina, MecDonald's sells it burgers in China, these examples and many more around us illustrate that world has become a global village, and this leads to important change in manager's job.(Stephen & Mary, 2001)

Being a manager even in your own country you will find yourself working with people from many different countries and cultural backgrounds, and because of that, what motivates you may not motivate them. Or say your style of communication is direct and straight forward and they find it threatening and be uncomfortable with this. To work with diverse people the managers will need to understand how there culture geography and religion have shaped their values, attitudes and beliefs and then they have to adjust their management style in accordance to that.

In global context companies have managers at national levels but at the same time Multinational corporations have president and CEO's who act as global leaders. A global manager has to be influential not for special sector of people but for employees spread all over the world. He must also know how to motivate diversified employees. Leading at global scale is critical as input from various employees is to be received and analyzed. CEO of CISCO systems listen to calls of unsatisfied customers. According to him that I can analyze the same by E-mails but while hearing the calls I go through their real emotions. Now that it is how a global leader may act, as his area of influence is very wide. As discussed earlier that technologies are promoting the globalization, same is changing the manager job too. Leaders are shifting organizational boundaries, using virtual workplaces and globalization is also increasing competition.

Managers at global companies such as Coca-Cola, McDonald's or Proctor and Gamble have come to realize that economic values are not universally transferable. Management practices need to be modified to reflect the values of different countries in which that organization operates. Thus, Globalization actually means that businesses can hire source and sell wherever they want. With those managers all around the world have to face the challenges caused by globalization.(Malcolm, 2000)

Businesses produce the same product for all over the world with unique standards. Their customers are diversified at belong to different regions and cultures and one product may fit and delight all. By technology and turning world as global village level of consumer awareness is also increasing that is giving management more challenges to satisfy customers?(lowrey, 2002)

Any manager who finds himself in a foreign country faces new challenges. If we take the example of they are accustomed to stable legal and political systems. The stability of laws governing the actions of institutions and individuals allows for accurate predictions. But the same can't be said for all the countries. The managers must be informed about the economical changes which may occur in the region they are intending to do the business. Managers of businesses in countries with lower stability levels face dramatically greater uncertainty as result if instability. In addition political interference is a fact of life in some regions, for instance many large businesses have postponed doing businesses in china because the government controls what an organization do and how they do it.(Stephen & Mary, 2001)

When a manager will be planning at global scale, Goals will be defined beyond the national boundaries. The purpose will be to define goals and than making strategy to achieve them. But in context of globalization the manager must make goals for all over the world where they are competing. Toyota offer same Corolla car for all over the world, the strategy must not have to be for specific culture or geographic place. Multinational corporations set their goal while studying all of their market places a fine example can be from Coca Cola which is currently operating in 200 countries. The Headquarter is in Atlanta, Georgia, while their geographic segments are in Africa, East and South East Asia and Pacific Rim, European Union, America and Middle East. Somehow they cover whole world. For instance in order to change the brand logo coke is not targeting a small geographic area. If they want to start an advertising campaign, planning must keep eye on all segments. For global managers planning is to understand the global moves and changes. Global Manager must understand people of all segments before setting a target. A choice for Americans cannot be a favorite one of Chinese as Toyota experienced in China, by stepping in China market Toyota first offered Videos which failed. Chinese consumer showed interest in known brands. Going global and understanding globalization is very important for managers so they can tackle people from various cultures and race. (William et al., 2009)

Managers monitor activities to ensure that they are accomplishing as they planned. They have to match the actual performance with the benchmark. But setting a benchmark for multinational organization is difficult. As they have to monitor the same product/service in various parts of world. As McDonalds, is also operating in Asia and there it is considered to be expensive and luxurious meal. On the contrary in America and Europe it is a quick and economical fast food. The standard cannot vary but it can be difficult to achieve by a special segment or geographical area than a multinational organization also have to compete and maintain local standards while also maintaining then international standards. (Amir, 2010)

Globalization has its impact on other countries as well. In Korea, where conglomerates had aimed for growth at any cost, building up huge excess capacity and running up large amounts of debt in the process, business habits are changing. Daewoo for instance has announced that it will concentrate on making cars along with trading and financial services activities. Daewoo Chairman Kim woo change recently admitted: "Before, assets were most important, but now it is liquidity." (Dianne, 2010)

After setting that manager has to identify that what needs to be done, how it will be done and who will do it. After setting a global target managers at local/national scale must integrate the global target at their scale. The Challenge faced by Krispy Kreme Doughnuts (KKD) was that doughnut is known with different names in whole Europe and the eating habits of people are so different. Americans are not specific but British eat eggs and milk in breakfast, they don't have excessive cars therefore they can't stop on drive ways. A manager of KKD at Britain will have to put extra effort to increase sale and to compete the rivals like Dunkin Donuts.

In this age the impact of globalization is so visible. Huge corporate brands are everywhere in the world. Some of them are doing their social role in reasonable manner. Customers all over the world are entertained by global corporate brands. Globalization is helping people to make better choices and is also providing best products with international brands in every region. Globalization is providing better economics and jobs to people. Product with international and unique standard is launched all over the world at same time. This eliminates the factor of discrimination among people belonging to different nations.

Managers have to charge competitive price because of globalization, which is giving awareness to customers, to choose the best product with in economy. High competition forces manager to produce products with low price. Because of that local producer, companies and brands will also put competitive price for the customers. (Ashish, 2006)

Globalization helps managers to learn about various experiences worldwide. An idea tested at certain continent or geographic area can help to make prediction in other parts of that continent.

3.0 advantages and disadvantages of Globalization

Today globalization has become a permanent trend. The countries that are said to be Developing economies started to prosper, and began interact with the developed countries. But now due to global economic crisis the question comes to mind is whether globalization is sustainable or not. Seeing with the prospective of a manager, today earth has a huge way exchanging everything including the human resource and that is called globalization. It's simply is a process by which has unifies the worlds into a single society. (World Bank Group ,nd)

Globalization ropes output, culture and cash flow into the developing countries. The times have also cleared that globalization certainly increases the productivity and enhances the life standard of societies. Another considerable outcome of globalization is the difficulty of competition, which leads to innovation and creativity. The globalization has helped remove limits between that trades of the companies. The managers are preparing the workforce to compete not only with the national competitions but also they are being trained for the international competitions. They need to be conscious on making their business strategies as being in being in a more rigorous and challenging competitive atmosphere to maintain continuity and development. There are around 7 billion people in world who globalization responds to. And now the standards of the life of the people is much better than what of was 50 years ago as there are more technological advancements done in the developed countries which are helping out in different scenarios all over the world.( Jan-Erik, 2006)

Another significant effect of globalization is the complexity of competition. At every era of globalization the trade amongst the nations has started to remove any limits. The business houses are trying to give competitions to not only the national competitors but also the international ones. The poor citizens have more requirements due to globalization. The communication all over the world have become far easier as the cultural mergers are enlarging due to globalization

Workers in less developed countries now have increased wages and better living benefits. Because of the improvement, their rising standard of living helps them consume products from developed nations. That is how a righteous circle is being created by a whole new middle class that didn't exist. Peace has becomes easier to maintain amongst nations like never before as no country has left inaccessible in this new world order. As we can take the example of the relationship of China and the United States which has changed dramatically as their trade partner status has increased over the years. Globalization has also can helped bring up to date the developing countries. This has helped business managers explore and experience new techniques and ideas of doing work and also have helped them dealing with a diverse workforce. We can better see that now Products can be purchased much cheaper in developing countries as well, this increases the lifestyle of the people. As they pay less for ordinary and commonly used items, so they have more to spend on big ticket items, which fuel higher paid manufacturing jobs in developed countries. (Darren, 2009)

Globalization has improved free trade between nations. Due to the increased liquidity of the capital the investors from developed countries are now tending towards investing in developing nations. Business of globalization organizations are now having greater flexibility to function across borders. Global mass media ties the world together and have named it as a global village. The tremendous boost that communication is getting, that is helping in sharing very vital information between individuals and corporations around the world. Globalization is certainly providing faster and better ease and speed of transportation for goods and people. As if we observe around us at our place of work we will find ourselves working together with people from many different countries. Globalization has caused lessening of cultural obstacles and has increased the global village effect. Globalization has spread democratic ideals to developed nations. It has helped getting the sense of Greater interdependence of nation-states. Another benefit of globalization is that it has reduced the likelihood of war between developed nations. This has created an easy and smooth working environment for the businesses all over the world. Globalization has also made and Increased environmental protection in the world. (Ruud,nd)

With good there is always bad, some researchers believe that globalization is causing more problems than the benefits world is getting from it. Globalization has certain burdens too. The increasing number of the failure is the most important disadvantage of globalization. The industry gravitated into some particular countries after the industrial revolution. That made this country having a power in industry, this affected and decreases the production and the unemployment also increased in the other countries.(Yergin, 2003)

As the technology prevailed in every department of the work places that need of manpower decreased which eventually became the main reason for decreasing the employment level. As stated at Wikipedia, "many workers found themselves suddenly unemployed, as could no longer compete with machines which only required relatively limited work to produce more product than a single worker."

Another noticeable aspect that occurred due to globalization was that nations started losing their own cultures. At the present time the countries which have more economical power their culture is even more dominant than others. Countries having more of wealth produce things that are affecting the cultures of the rest as we see around the clothes movies and technological parts produced by other countries are being used so openly. The much global community is increasing people are becoming ignorant towards their social ethical and moral values. . Therefore it is seen as a big disadvantage of globalization that it is, damaging small cultures which are now in risk of being extinct.(Yergin, 2003)

The higher paying jobs in the developed countries do no longer exist as it is easy for the companies to get a lower cost labor who are skilled enough for that certain job. People who are walking on pins and needles because of the threat their job will be moved to another country are not the most confident consumers around The threat of jobs being of shored is enough to keep morale low in many industries. The new workers which are replaced at the place of those old ones they may take time to be familiar with the work and the and do not have the same skill level as the old ones in such a case the quality of the product come down. Globalization can cause social instability as it represents the transfer of social ideas from one country to another and at some places it may not be acceptable. On the other hand sharing traditional behaviors because them fading as boundaries are disappearing. The companies are now in race of maximizing their profits and that causes the real threat to the workers from less developed countries. As in order to maximize their profits companies any not pay them as much they deserve to be paid. In order to provide the products worldwide the companies are bearing far more transportation cost than ever that disturbs the whole estimated costs for the year and makes that job of a manager tougher.( SQUIDOO, online)

Due to globalization energy costs are going higher, as Energy consumption in developing markets is increasing, which is putting pressure on domestic supplies and pricing. Energy costs are going up for everyone as more people are competing for the resources. Globalization has increased the risk of unintentionally transporting the incurable diseases between nations. The lifestyle and attitudes of the people had become more materialistic and this has made them believe that consumption is the only path to prosperity. International bodies like the World Trade Organization infringe on national and individual sovereignty. (kurlantzick & Allen,2002)

There are also some disadvantages of globalization. For instance starting from WTO, it is to mention the companies emerging from developing nations cannot afford the cost of WTO and document complexion. Globalization must not be a term of developed nation and the developing nation must also get a chance to participate. In developing nations the cost of WTO cannot be adjusted at local scale. Globally nations going through power crisis may not be able to keep the WTO and EU standards of trade. (Robert et al., 2007)

Than come the global differences which are inevitable. Globalization may refer to a world with no boundaries and wall. Standardization of product has helped the concept of globalization. A product invented in one part of the world will be accepted in all demographic regions. But due to existence of various cultures and beliefs the product cannot be launched at global level. Certain products belong to unique society and it is not possible to go global with those. Than various standards are in practice for advertising campaigns. Local managers must merge the global campaign at national level in those standards. Especially for beverages and medicines the local managers may go through some hard time to commercialize the product. (Jan-Erik, 2006)

For Niche marketing going global is not that difficult. But for the conglomerates and global companies who provide various products can't work over customization. As the globalized companies have to cover a larger area to provide products/services. Therefore for a global company providing FMCG or diversified products cannot work over every customer. They provide standardized products and customization can lead to very high cost. But same can be adopted by a niche targeting global company. (Salah & Erdener, 1994)

Later it may get difficult to translate global company mission and vision into local languages. As at global scale various languages are in practice. It can also act as a constraint to promote global approach. But that may not eliminate the local culture. Entities of different cultures must be protected in this vision of border-less world. (John , 2004)

Especially for managers, if globalization is not resulting in extra sales and profit the company managers must work at national scale to strengthen themselves. To compete at global scale a company must identify its competitive advantage. A special value for customers at global scale must be established first. It also gets difficult to measure the product life cycle at global scale. How can one measure that product is getting obsolete, when to launch the new product. As demographically there is such diversity of human choices that at one end people want a new model and at other hand people may be demanding the same old one.

An organization or conglomerate competing globally may also face a tough time by competing at local level simultaneously. A global company is competing in twofold, one at global scale and one at national/local scale. That is when a local company can emphasize on their products/services at local level. (Oliva et al., 2001)

Broken borders, world without walls terms must not only be used for low cost and higher profits. Globalization must bring harmony, opportunities and facilities to all parts of the world. Borderless world must be applied with its real spirit, to bring facilities and amenities to all parts and peoples of this world. Due to globalization the chances of civil war has increased between that developing countries and an open war is there between developed countries as they are in race of getting more of world's resources to use them for their benefits. Globalization Decreases in environmental uprightness as corrupt corporations take advantage of weak regulatory rules in countries that are struggling to develop. Due to globalization there is an increase of skilled and non-skilled jobs from developed to developing nations as companies want to get the cheapest labor in order to minimize their cost and get more of profits. Increased liking for economic disturbances in one nation is affecting all nations of the world. Because of globalization corporate influence of nation-states far exceeds that of civil society organizations and average individuals. There is an increasing Threat that control of world media by some specific companies will limit cultural expression. And the minor culture will soon be eliminated. And in order to preserve any cultural heritage the chances of reaction against globalization are far more by the nations. (Ruud,nd)


The push to go global has been widespread. Advocates praise the economic and social benefits that come from globalization. Yet that very globalization has created challenges due to the openness that is required by it to work. Globalization is meant to open up trade and to break down the geographical barriers separating countries. At the same time opening up the borders means opening up for good as well as the bad. From the Philippines and the UK to Israel and Pakistan, organizations and employees face the risk of terrorism. Another challenge from openness is the economic interdependence of trading countries. If one countries economy falters, it could have a domino effect on the economy of the other country. But the manager's must not only be prepared for the challenges caused by openness. The biggest challenge for the managers is to face the fundamental cultural differences. Such differences include civilization, history, religious beliefs and deep-seated values. Managing in such an environment will be extremely complicated. Consequently, managing in today's global environment will require incredible sensitivity and understanding. Managers from any country will need to be aware of how their decisions and action will be viewed, not only by those who may agree, but more importantly by those who may disagree. They will need to adjust their leadership styles and management approaches to accommodate these diverse views. Yet as always, they will need to do this still being as efficient and effective as possible in reaching the organizations goals.