Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. In this report the company taken for research is BMW. BMW is a major multinational company.
"Uniqueness through diversity, Leadership, taking Risk, courteous."
"To become the most successful premium manufacturer in car industry."
"Organisation is the foundation upon which the whole structure of business and management is built."
All organizations have a management structure that determines relationships between functions and positions, and subdivides and delegates roles, responsibilities, and authority to carry out defined tasks. Organizations are open systems in that they affect and are affected by the environment beyond their boundaries. (Business dictionary)
Section 1: The key differences between global business operations
1.1: Public Limited Company:
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A company whose securities are traded on a stock exchange and can be bought and sold by anyone. Public companies are strictly regulated, and are required by law to publish their complete and true financial position so that investors can determine the true worth of its stock (shares). (Business dictionary)
For example: Cadbury PLC, Marks & Spencer GRP PLC etc. Governed by a board of directors in an independent manner makes the running of organisation smooth. Despite this independence the government keep a check under the umbrella of a set of business rules to monitor the contra public interest activities and to calculate its financial risks as well.
Basis of a free market capitalist system, it is a business unit established, owned, and operated by private individuals for profit, instead of by or for any government or its agencies. (Business dictionary)
Key differences between the public and private sectors:
The main advantage public companies have is their ability to tap the financial markets by selling stock (equity) or bonds (debt) to raise capital (i.e. cash) for expansion and projects.
The main advantage to private companies is that management doesn't have to answer to stockholders and isn't required to file disclosure statements with the SEC.
However, a private company can't dip into the public capital markets and must therefore turn to private funding, which can boost the cost of capital and may limit expansion.
It has been said often that private companies seek to minimize the tax bite, while public companies seek to increase profits for shareholders.
Human resource management in context:
BMW's human resources policies are critical in the organisations structure, conduct and performance.
BMW like all other businesses require the same basic human resources activities like recruitment, development and training, appraisal and reward systems, and control and feedback mechanisms.
BMW has an equal opportunities none sexual discriminating culture within its organisation.
BMW actively supports young female executives and gives females insight into the field of technology.
BMW also offers extensive training for all level of staffs; BMW Group's Trainee Promotion Programme (TPP) provides the perfect combination of theoretical studies and practical work.
BMW Group trainees receive many benefits in addition to their pay, other social payments such as holiday and Christmas bonuses, meal and travelling expenses subsidies, health programme and PC training.
Corporate social responsibility context:
A commitment to culture. (Promoting the new, preserving the old)
China's splendid civilization goes back 5000 years, and BMW is making a long-term commitment to help protect this unique cultural heritage. BMW also has a stake in discovering and supporting today's artistic talent. BMW's broader goal is to stimulate public enthusiasm for the arts and promote the development of new cultural undertakings.
Education Support. (Investing in people, support talents)
Education is the cornerstone of social progress that requires persistent efforts from all walks of life, while Educational Support has long been a focus of BMW's CSR commitment.
From devoting unremitting efforts to provide traffic safety education to children through BMW Children's Traffic Safety Education program, to initiating BMW JOY Home Children Care Program to join hands with BMW dealers and customers and foster the healthy growth of children in economically disadvantaged regions.
Always on Time
Marked to Standard
Social Contribution. (Contributing to the community with true heart and warm actions)
Since BMW begin in China, corporate social responsibility is always taken an important and genuine role through the enterprise. Facing emergency situation, BMW supports with funds and materials, and invest human efforts to the needed places. The same time, BMW cares about its' own employees, motivating all people to give back to the society.
Environmental Protection. (Advanced technology in the service of the environment)
Environmental protection presents a major challenge. The motivating idea behind BMW's Efficient Dynamics concept is a belief that innovative technologies can reduce oil consumption and vehicle emissions, even as they enhance the joy of driving. BMW has made many decisive contributions, including advanced engine technology, intelligent lightweight construction, and the development and promotion of the BMW Hydrogen 7.
1.2: Responsibilities of organisations operating globally:
The adoption of global responsibility is an act of leadership, a voluntary and wilful deployment of the resources of an organization towards building sustainability including:
New mental models
Corporate social responsibility
1.3: Strategies employed by organisations operating globally:
Global Business Strategy can be defined as the business strategies engaged by the businesses, companies or firms operating in a global business environment and serving consumers throughout the world.
The main reason behind the success of BMW was their changing strategies from time to time. Whenever they find any change in economy, they changed their strategy based on the future. The main reason to change strategies was to avoid possible trade restrictions and exchange rate fluctuations. BMW as well as other companies operating globally follows the strategies given below:
It benefits in the economies of scale if the company is able to produce large quantities using more or less the same techniques of production.
It preserves the image of the home country which houses the global corporation since it helps in handling and stocking the product, speeding up delivery systems.
It helps in saving the managerial time and effort to take decisions about the manufacture of different products.
It helps in faster accumulation of the learning experience with learning-by-doing approach.
Section 2: The impact of external factors on organisations
2.1: The performance of a national economy impacts on the activities of business organisations:
National economy has various factors. If BMW wants to start business in any country, it needs to focus on all those factors. Some of them are discussed below which have impact on the activities of business organisations.
Consumer purchase power:
This measurement tells that how many consumers can buy or spend from their income to buy cars. If purchasing power will be more, the consumer will spend more and ultimately organisations will make profit.
Economic condition of the country:
BMW needs to focus on the economic condition of the chosen country whether it is in boom or recession. Economic conditions include inflation rate, exchange rate, interest rate, tax and unemployment.
Political situation of the country:
It is important for BMW to know about the political stability of their targeted country. Otherwise it would not be able to work on set rules and regulations. Rules and laws will be changing with the change in the government.
Entrance cost of the country:
BMW has to consider about the entrance cost of the particular country. It should know about all the tariffs and custom duties imposed by the government to save national economy.
2.2: Measures taken by governments to influence the activities of business organisations:
Governments control the business activities is many ways both direct and indirect. Following are the ways by which BMW will be controlled:
Controlling what to produce:
In order to safeguard the interest of the community government may ban or limit the production of certain goods and services. For example, some countries will allow only those vehicles which are not harmful for the atmosphere and users.
Employees Protection legislations:
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Government may pass laws to protect the interest of employees such as laws against unfair discrimination at work and for applying jobs on the basis of race, religion, sex, age, or colour.
Legislations for health and safety at work is for employees from harming by machinery, should be provided with proper safety equipment and clothing, a reasonable workforce temperature, proper hygienic conditions, washing facilities and adequate breaks between shifts.
Business cannot dismiss the workers because they have joined a trade union or being pregnant. There should be proper warning before dismissing a worker otherwise it will be treated as unfair dismissal.
Consumer Protection legislations:
Most of the countries have consumer protection laws aimed at making sure that businesses act fairly towards their consumers. For example, for BMW all the laws are given below:
Product safety is the basis for our comprehensive product responsibility.
We compete for customers by letting our products and services do the talking.
The quality of our sales organization contributes just as much to our success as does the fascination with our products and services.
The BMW's international operations are subject to foreign trade, tax and customs legislation.
Financial services and insurance -generating trust by providing advice on what customers really need.
In the recent years government across the globe have passed legislations to control business activities from harming the environment. This includes setting limits to the pollution, making it mandatory for businesses to treat their wastes etc.
Section 3: The impact of global factors on business organisations
3.1: Implications of global integration on business organisations:
The process by which a company combines different activities around the world to operate using the same method is called global integration. Global integration can involve the processes of product standardization and technology development.
Since integration involves actions and responses not only from the company headquarters but also the subsidiaries.
Global integration leads to perception of fairness of the structural and strategic aspects of the integration process.
Global integration is managing the organizational structure. Since the multinational firm operates in different local business contexts, the management of the organizational structure involves multidirectional product, capital and knowledge flow.
Global integration covers the manner of reporting relationship involving the integration initiative. The type of reporting relationship can be centralized or formalized or socialized that result to different forms of coordination.
3.2: Effect of international trade on domestic products and services:
International trade is the exchange of capital, goods, and services across international borders or territories.
Non-economists and the wide public expect the costs associated with globalization to outweigh the benefits, especially in the short-run. Less wealthy countries from those among the industrialized nations may not have the same highly-accentuated beneficial effect from globalization as more wealthy countries. Although free trade increases opportunities for international trade, it also increases the risk of failure for smaller companies that cannot compete globally. High-skilled workers have claimed an increasing share of available income, while low-skilled workers have seen an absolute decline in real wages. How and why this disparity has arisen is a matter of an on-going debate among policymakers and economists. Two competing theories have emerged to explain this phenomenon, one focusing on international trade and labour market globalization as the driving force behind the devaluation of low-skill jobs, and the other focusing on the role of technological change as a catalyst for the escalation of high-skill wages.
3.3: Impacts of the global economy on businesses:
The recession has served as a reminder that poverty in the UK is, at least in part, shaped by global economic integration. One such aspect of the recent recession has been the effect on time: for people struggling part-time jobs with care of dependants and coping with higher food or transport costs. A second aspect has been the rising cost of living and the struggle to eat nutritiously, with potentially significant, longer-term impacts on health. More generally, income based measures of poverty due to rising job insecurity and volatility: these include stress, time poverty and risk aversion. All these factors have adverse effect on business activities. Example is given below:
Nature of impact
Source of impact
Parker Pen factory,
In operation (under
different owners) since
At its peak, employed
Closed in mid-2009,
with estimated loss of
Profits of parent
hit by downturn and
Volatility in 2008-9.
The Newhaven factory
was one of 20 units
worldwide closed to
Reduce manufacturing costs.
3.4: ICT facilitating globalisation:
A major driver of globalisation is technological progress. The rise and commercialisation of the Internet and the maturing of information and communication technologies (ICT) are making organisations' business environments increasingly more international, and as a consequence also their communication and business processes (Bicak 2005: 5). ICT encompass the full range of the production, distribution, and consumption of information, across all media from radio and television to satellites and the Internet. The information revolution facilitated the shift from analogue to digital technologies; convergence merges computers, telecommunication, television, and the Internet into a single multimedia environment (Wilson III 1998: 6). The radical development of ICT is an essential factor for the continuing globalisation of organisations' political, social, and economical environments. The most significant factor is the continuous development of the Internet and the WWW as the fundamental infrastructure for e-commerce (Ibid. 7). The Internet has become known as the "global network of networks" or "global information infrastructure" (Hauben/Hauben 1995).
Section 4: A review of the current issues impacting on business activities
4.1: Global environment:
Although the UK has slipped from a ranking several years ago of 2 to 7th place for the newly released EIU rankings for 2006-2010, the country remains one of the world's most open destinations to foreign investors.
"The attractiveness of the UK's business environment is threatened by sizeable macroeconomic imbalances, an increasingly complex and burdensome tax system, weak productivity, and a sub-standard transport infrastructure," said Philip Whyte, the EIU's Senior Economist for Western Europe,
And the UK will struggle to close its productivity gap not only with the US, but also European countries such as France, reports the EIU, which pins the UK's short-fall to skills deficiencies, both at managerial and lower levels, tight planning restrictions, which inhibit competition, and the country's comparatively low spending on research and development (R&D).
4.2: Strategies to address issues affecting business activities:
The different issues which can affect the business in UK can be broadly categorized as external factors.
The EXTERNAL FACTORS include all those factors which exist outside the firm and can adversely affect it. These external forces can further be categorized as MICRO ENVIRONMENT and MACRO ENVIRONMENT.
MICRO ENVIRONMENT includes the following factors.
1. SUPPLIERS: Suppliers are those people who are responsible for supplying necessary raw material to the organization. If material is not good it can affect the final product and ultimately the brand.
2. COMPETITORS: Competitors can be called the close rivals and every company has to keep a close look in the market and formulate its policies and strategies to face the competition. Strong competition can give a tough time to all the competitors.
MACRO ENVIRONMENT includes the following factors.
POLITICAL FACTORS: The political factors are related to the management of public affairs and their impact on the business. It is important to have a political stability to maintain stability in the trade.
ECONOMIC FACTORS: Economic factors include economic conditions and economic policies that form the economic environment. These include growth rate, inflation, and restrictive trade practices etc. which have a considerable impact on the business.
SOCIAL FACTORS: Social factors include the preferences and priorities of customers like the buying and consumption pattern, beliefs of people their purchasing power, educational background etc.
TECHNOLOGICAL FACTORS: Latest technology helps in improving the marketability of the product plus makes it more consumers friendly. Therefore, it is important for a business to keep a pace with the changing technologies in order to survive in the long run.
As globalisation has progressed, living conditions have improved significantly in virtually all countries. However, the strongest gains have been made by the advanced countries and only some of the developing countries. The main drivers of globalization are identified as competition, reduction in regulatory barriers, improvements in technology, saturated domestic markets, the desire to cut costs, and the growth of global customers. There still remain important barriers to the process including regulation, technology, and cultural and geographic distance. Globalization presents both opportunities and threats to business. On the one hand it presents access to new and bigger markets and to different and cheaper sources of raw materials, components, and labour. On the other the environment is more complex and less stable.