Studies In Favor Of Globalization Commerce Essay

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Many years ago, many studies in favor of globalization have been committed due to its effects on business management. Nowadays, the influence of globalization is increasing. Globalization has affects on many areas. In this paper, I will focus on three areas which is labour market, human resource management, and service. Globalization influences the labour market somehow and somewhere. According to Gallin (2000), the emergence and development of a global labour market is "the most important social consequence of globalization." Moreover, globalization also affects human resource management. Adler and Ghader (1990) believe that international HRM has a close relation with the fact that a company enters into the international market (exports, representation, joint venture, whole-owned company). Globalization has not only positive effects but also negative effects on service. On the positive side, globalization forces down the price of services in high cost locales, increases output and improves service quality. On the negative side, there is the dislocation from increased competition as uncompetitive firms lose market share and their employees are laid off ( Hufbauer and Warren, 1999).

Though this paper, I will provide data to exam how globalization affect the labour market, human resource management, and service. Identifying what are the positive effects and negative effects. Finding out what challenges we are facing and what strategic should we use.


My study is about what is the impact of globalization between leadership and business performance. The globalization will bring some impact and influence the leader when the leader is managing or leading the organization. Therefore those impacts will affect the business performance will be better or worse. First, globalization always makes the organization's management performance become better if the management manage the organization in the right way. Many organizations choose to globalization must have their reasons and those reasons are more advantages then disadvantages. So, it means that the globalization always will influence the management performance. Second, the leadership is also a key that will affect the management performance too. The leadership is leading the organization and it is a factor that decides the organization will be managed better or not. Third, the effect of the globalization will be moderated by leader and it will result in management performance. It is because the leader will overcome all the problem that brought by globalization and it also the responsibility of the leader.


Introductions to Globalization

Nowadays, many of firms choose to globalization because by globalization they can expand their business and earn more profit. At first, what is globalization? Globalization is a multi-dimensional and multi-directional process especially in work organization, ecology, communications technology, culture and all implicated in the transformation of sovereign nations by global actors with varying levels of power, identities, networks and orientations (Beck, 2000).Globalization is the engine that is currently pushing many industries and organization to go global so as to achieve competitive advantages. (Philip R., 2002) Besides that, Food and Agriculture Organisation (2003) also define that globalization is "ongoing process of rapid global economic integration facilitated by lower transaction costs and lower barriers to movement in capital and goods".

Globalisation is essentially an outcome of the build up of enormous pressure on the part of the corporations and banks and their international agencies to get rid of these barriers so that they can gain better access to the many fields of activity previously blocked to them. It is likely that globalisation is clearing the way to another boom in the next few years, because it is getting rid of much of the regulation previously restricting corporate access to profitable business opportunities. If so the possibility that limits issues will be attended to will remain low for some time (Ted Trainer, 1993).

Globalisation as a model of fully integrated international markets was defined by Henderson (1999) as those meeting two conditions: (1) free movement of goods, services, labour and capital: thus a single market of inputs and outputs; and (2) full national treatment for foreign investors i.e. there are no foreigners.

Challenges of Globalization

Globalization of Western countries can cause more problems and crisis for the developing countries, if these countries are not able to compete or cooperate with developed countries. The existing economic blocs in Europe and USA, Asia etc... create a more unbalanced economic situation which may increase the tension between the south and the north. These blocs would have an extremely prominent and powerful position as guides and advisers in Arab countries (Mosad Zineldin, 2002)

A customer connection is also one of the challengers in globalization. In the globalization, managers will have to very good in the full array of customer connections owned and managed by the firm. There activities are including sales, service, solutions, branding, and other areas that touching customers. Due to the globalization, there will be more customer connections. This is because globalization leads to a wide area growth in income and redistribution in emerging economies (Slywotzky A, Baumgartner P, Alberts L & Moukanas H, 2006).

The Advantages and Disadvantages of Globalization

Apart from the challenges of globalization, globalization itself also brings some advantages and disadvantages. Globalization will tend to make strong business designs stronger (through global sourcing, selling, and science). It will make weak business designs weaker (through more competition, reduced differentiation, and a greater disconnect from customers). And it will create more no-profit zones for companies and even entire industries (Slywotzky A, Baumgartner P, Alberts L & Moukanas H, 2006).

There are three primary factors that affected the process of economic globalization and they are likely to continue driving it in the future.

Improvements in the technology of transportation and communication have reduced the costs of transporting goods, services, and factors of production and of communicating cost-effectively useful knowledge and technology.

The tastes of individuals and societies have generally, but not universally, favoured taking advantage of the opportunities provided by declining costs of transportation and communication through increasing economic integration.

Public policies have significantly influenced the character and pace of economic integration, although not always in the direction of increasing economic integration.

Globalization is generally defined as the "denationalization of clusters of political, economic, and social activities" that destabilize the ability of the sovereign State to control activities on its territory, due to the rising need to find so lutions for universal problems, like the pollution of the environment, on an international level. Globalization is a complex, forceful legal and social process that take place within an integrated whole without regard to geographical boundaries. Globalisation thus differs from international activities, which arise between and among States, and it differs from multinational activities that occur in more than one nation-State. This does not mean that countries are not involved in the socio legal dynamics that those trans boundary process trigger. In a sense, the movements triggered by global processes promote greater economic interdependence among countries. Globalization can be traced back to the depression preceding World War II and globalization at that time included spreading of the capitalist economic system as a means of getting access to extended markets. The first step was to create sufficient export surplus to maintain full employment in the capitalist world and secondly establishing a globalized economy where the planet would be united in peace and wealth. The idea of interdependence among quite separate and distinct countries is a very important part of talks on globalization and a significant side of today's global political economy. Globalization, however, is generally used descriptively but with the clear implication that since no force can change it, all had better get on board. Globalization, boosted by the acceptance of market oriented economic policies in developing countries and transition economies, is being ac companied by extensive financial volatility characterized by currency crisis of high frequency and intensity, upsetting large developing and transition economies. Is globalization a further step of capitalism and its new form worldwide? Globalization affects economies include expanded trade in merchandise and services, product and technology licensing, greater international portfolio investment, and FDI. <law and finance>

Globalization and Leadership

A managers and executive with good global skill will know about the important if following six statements. They must have confident to manage the cultural differences and expand the skills that to meet the global environment:

Group identity is the typical culture of Japan. Foreigners always draw a wrong conclusion upon the Japanese appearances due to the unconscious cultural process which is creating ambiguity.

When first meeting in Saudi Arabia, people usually does not conduct business, on the contrary spend sometimes to get familiar and building the trust.

In case of recruitment and selection, Asian managers usually will prefer interview and choose their trusted friends or family while Western managers will prefer employ people more impersonal.

In Indonesia, it is acceptable if shaking hand with the opposite sex, but it is not acceptable if taking food or giving a gift to other by using left hand. In some of the cultures, they are avoiding handshakes and some of them prefer bow.

In Los Angeles, cultural sensitivity has the greatest influence decide a product or service whether is success or failure. It was because it had a diverse multicultural and multilingual population. The second largest foreign-language group is Spanish and the third is Korean.

The Business Council for International Understanding estimates that international personnel who go abroad without cross-cultural preparation have a failure rate much higher than those who had the benefit of such training.

(European leadership in Globalization, Philip R. Harris and Robert T. Moran, 1996)

In the book, The Global Challenge: Building the New Worldwide Enterprise, Moran and Riesenberger identify and describe 12 environmental forces impacting on organizations and influencing change.

The proactive environmental forces are:

(1) Global sourcing - organizations are seeking non-domestic sources of raw materials because of cost and quality.

(2) New and evolving markets are providing new opportunities for growing business.

(3) Economies of scale - today's marketplace requires new approaches resulting in competitive advantages in price and quality.

(4) Movement towards homogeneous demand - globalization is resulting in similar products being required worldwide.

(5) Lowered transport costs - the global transport costs of many products have fallen significantly since the 1960s.

(6) Government tariffs and taxes - the protectionist tendencies of many governments is declining as evidenced by the North America Free Trade Agreement (NAFTA) and the European Union (EU).

(7) Telecommunications - falling prices as a result of privatization and new technologies are impacting on globalization.

(8) Homogeneous technical standards - the International Organization for Standardization (ISO) has been successful in developing global standards known as ISO 9000.

The reactive forces are:

(9) Competition for non-domestic organizations - new competitive threats are experienced by organizations regularly.

(10) Risk of volatile exchange rates - the constant fluctuation of exchange rates in many countries impacts on profits.

(11) Customers are becoming more global consumers - globalization is impacting on customers in ways that "local content" in subsidiary produced goods is increasing.

(12) Global technological change - technological improvements coming from many areas of the world are requiring organizations to adjust their strategies to survive.

How do companies foster and create effective global managers? What is a global manager? Many companies establishing worldwide operations are pondering these questions, plus many others and finding that the human resource element is more limiting at times than the capital investment in globalizing. Bartlett and Ghoshal state[11]:

Clearly, there is no single model for the global manager. Neither the old-line international specialist nor the more recent global generalist can cope with the complexities of cross-border strategies. Indeed, the dynamism of today's marketplace calls for managers with diverse skills. Responsibility for worldwide operations belongs to senior business, country, and functional executives who focus on the intense interchanges and subtle negotiations required. In contrast, those in middle management and front-line jobs need well-defined responsibilities, a clear understanding of their organization's transnational mission, and a sense of accountability.

Percy Barnevik, president and CEO of Asea Brown Boveri (ABB), responded when asked if there is such a thing as a global manager[12]:

Global managers are made, not born. This is not a natural process. We are herd animals. We like people who are like us. But there are many things you can do. Obviously, you rotate people around the world. There is no substitute for line experience in three or four countries to create a global perspective. You also encourage people to work in mixed nationality teams. You force them to create personal alliances across borders, which means that sometimes you interfere in hiring decisions. You also have to acknowledge cultural differences without becoming paralyzed by them.

We've done some surveys, as have lots of other companies, and we find interesting differences in perception. For example, a Swede may think a Swiss is not completely frank and open, that he doesn't know exactly where he stands. That is a cultural phenomenon. Swiss culture shuns disagreement. A Swiss might say, "Let's come back to that point later, let me review it with my colleagues." A Swede would prefer to confront the issue directly. How do we undo hundreds of years of upbringing and education? We don't, and we shouldn't try to. But we do need to broaden understanding.

(European leadership in Globalization, Philip R. Harris and Robert T. Moran, 1996)

3.0 Globalization and human resource management

Human resource management and globalization means that there is need for more 'flexible organizations' and employees. Globalization has led to global separation of labor. So far, the globalization had a big effect on human resource management. As a result, international human resource management occurred. Besides, globalization had not only brought the challenges but also the opportunities to human resource management especially the HR leaders.

3.1 International Human resource management

Many years ago, Fayerweather (1960) and Bormann (1968) wrote about the difficulties of expatriates in different cultures. It was very important for the globalization of companies who is involve in foreign trade, investment and marketing aspects. Until now the most influential theory of international human resource management was published by Perlmutter in 1969. He states that the IHRM practice of various multinational companies is largely depending on how their local human resource management practice (ethnocentric) is followed abroad, or how they adapt to the local (polycentric), regional (regiocentric) and global (geocentric) conditions.

In the earlier state of IHRM studies, Laurent (1986) was states that: "If HRM is in its infancy, then IHRM is still a newborn baby."

In 1980's, Dowling (1986), Morgan (1986), Ackermann (1991) and Domsch-Lichtenberg (1991) were clearly expressed the need for an independent international human resource management.

In their latest book the authors Dowling-Welch (2004) state that the model of IHRM can be described along three dimensions. First was the broader category of the typical activities of HRM (recruitment, expatriation and further employment). Second was those larger categories of countries, where the IHRM activities are carried out (parent country, target and host country, other countries). For the last one was country categories and origins of larger groups of employees (parent, target or host, third country nationals).

Adler and Ghaner were believe that if a company enters into the international market (exports, representation, joint venture, whole-owned company), the company will has a close relation with the international human resource management. Besides that, international human resource management can contribute to the development of international companies with the development of competencies (Taylor et al, 1996 & Lado-Wilson, 1994).Moreover, broadly defined IHRM is the process of procuring, allocating, and effectively utilizing human resources in a multinational corporation.

In addition, Dowling argues that the complexity of international HR can be attributed to six factors:

More HR activities.

The need for a broader perspective.

More involvement in employees' personal lives.

Changes in emphasis as the workforce mix of expatriates and locals varies.

Risk exposure.

Broader external influences

3.2 Human resource management challenges and strategies

Globalizations makes culture "an increasingly strategic issue that has to be faced and properly managed" (Granell, 2000, p. 90). However, what are the strategies that HRM used? HR strategies are then designed to elicit desired behavioral repertoires.

Within this competitive organizational context, human resource management practices have gained increased significance. More specifically, HR has been linked to increased productivity (Ichniowski et al., 1997; Fox et al., 1999), good customer service (Fox et al., 1999), greater profitability (Delery and Doty, 1996; Fox et al., 1999) and overall organizational survival (Welbourne and Andrews, 1995). To achieve such link, management must not only face current issues of human resource management but also deal with future challenges related to human resource management effectively.

Functions of global HR such as operations, sales, and marketing have generally made great progress in adapting to the global marketplace. However, the HR function has typically lagged behind in developing policies and structures that support globalization. Creating a truly global HR function can be quite challenging when dealing with numerous international locations. The HR function faces in the globalization process. The top challenges facing the HR function duringthe globalization process include:

Coordinating activities in many different locations.

Understanding the continual change of the globally competitive environment.

Building a global awareness in all HR departments/divisions.

Creating a multicultural HR team.

However, as a HR manager, the most challenge thing is to face the challenges of workplace diversity, how to motivate employees through gain-sharing and executive information system through proper planning, organizing, leading and controlling their human resources. Two futures studies of trends shaping the world and the workforce confirm the above and more. Among growing trends cited by Coates et al. (1991) are:

increasing diversity in the workforce within the USA - more older workers, more Hispanics and high-achieving Asians, more black and women educational and professional advancement;

new focus on workers as an asset and greater investment in training and education of personnel;

requirements of the emerging global society are diverging from the knowledge base of the US population - more knowledge and education is demanded than is being provided in this country.

The implications of these observations are the HR leaders must not only retrain personnel to cope with such new realities, but they must lead in the transformation of organizational culture, an issue we have analyzed previously (Harris and Moran, 1993, ch. 6).

Harris (2000) pointed out that the HR leader who transforms organizational culture in the direction of globalization, empowerment, and orchestration of technology helps the corporation, agency, or association to function in a twenty-first century work environment. His or her human resource development programs are centered on concepts, the intellectual hooks around which ideas and data are organized. The GEO Group offers the following suggestions: With globalization, with empowerment and with orchestration.

SHRM was designed to diagnose firm strategic needs and planned talent development which is required to implement a competitive strategy and achieve operational goals (Huselid et al., 1997). The world has undergone a striking change over the last few decades, the forces of globalization; technological changes have greatly changed the business environment. Organizations were required to respond in a strategic manner to the changes taking place in order to survive and progress. Strategic Human Resource Management (SHRM) involves a set of internally consistent policies and practices designed and implemented to ensure that a firm's human capital contribute to the achievement of its business objectives. Strategic human resources management is largely about integration and adaptation. Its concern is to ensure that: (1) human resources (HR) management is fully integrated with the strategy and the strategic needs of the firm; (2) HR policies cohere both across policy areas and across hierarchies; and (3) HR practices are adjusted, accepted, and used by line managers and employees as part of their everyday work. SHRM practices are macro-oriented, proactive and long term focused in nature; views human resources as assets or investments not expenses; implementation of SHRM practices bears linkage to organizational performance; and focusing on the alignment of human resources with firm strategy as a means of gaining competitive advantage (Bawa,1999).

4.0 globalization and service

4.1 Strategic challenges for the marketing of services internationally

What are the implications of increased globalization of service industries for countries around the world? Essentially the costs and benefits of globalization are a function of the increased competition brought by greater exposure to international markets. On the positive side, globalization forces down the price of services in high cost locales, increases output and improves service quality. On the negative side, there is the dislocation from increased competition as uncompetitive firms lose market share and their employees are laid off ( Hufbauer and Warren, 1999). So what should we do to overcome the barriers?

Before we overcome the barriers, we should know what the barriers of service internationally are. In this literature we just discuss two barriers.

4.1.1 Overcoming barriers to trade in services

With the increasing importance of the marketing of services internationally, a variety of problems have beset the service sector (Czinkota and Ronkainen, 2002). While the efforts and achievements resulting from the Uruguay Round and the establishment of the General Agreement on Trade in Services (GATS) in 1994 were laudable, progress, however, has been far more limited (Clark and Rajaratnam, 1999; Samiee, 1999). Whereas tariff barriers have noticeably declined, non-tariff barriers (NTBs) against services have increased. According to UNCTAD, it is estimated that 20 percent of world trade encounters NTBs, and the World Bank noted an increase of over 2,500 NTBs from 1986 to 1988 alone (Zimmerman, 1999). In the insurance (referred to as pure services) industry, for example, there are 26 barriers to trade globally that are discriminatory against foreign insurers (Zimmerman, 1999). Barriers to the international marketing of services are numerous and cumbersome, inhibiting future growth and opportunities.

A number of studies suggest that exporting is a less attractive option to gain access to foreign markets, especially for those firms that offer pure services, requiring some type of foreign direct investment to establish local presence quickly (Vandermerwe and Chadwick, 1989; Boddewyn et al., 1986; Zimmerman, 1999). Examining the insurance industry, Zimmerman (1999) classified barriers into two categories: entry restraints and operational barriers. While the former includes such restraints as local ownership requirements and labor restrictions, the latter type includes discriminatory taxation, currency controls, local investment requirements, etc.

To overcome these barriers, managers need to devise sound strategies that include ways to negotiate with the WTO/GATS to ease and/or eliminate barriers that hinder access to markets. Those service firms that skillfully negotiate and work with a host country government can overcome barriers. Researchers also suggest management actions as a remedy to overcome hurdles (Dahringer, 1991; Zimmerman, 1999). Dahringer (1991), for example, suggested management actions such as focusing on developing superior service quality and superior management capabilities to combat barriers to market access. Furthermore, patience and perseverance are recommended when attempting to overcome NTBs (Zimmerman, 1999).

4.1.2 Standardization versus local adaptation/customization

Harvey et al. (1997, p. 43) suggest that "some very successful companies are providing services using processes that would be considered rigid by any standard". The presence of the customer in the process, the particular role of contact employees and the intangibility of services, make the task of responding to environmental changes quite different in service companies (Harvey et al., 1997). Thus, standardization is important.

According to Taylor, S. (1999), standardized outputs must be produced by standardized processes. We take standardization to refer to the situation where uniformity is achieved either through outputs (products and services) and or in the processes that produce such outputs. The AMA (Bennett, 1988, p. 86) defines standardization as: "A system of identification…[and] Grade labeling…", which it would seem refers to the categorization of products. Webster's Dictionary (1973, p. 1133) defines standardizing as "to compare with a standard…to bring into conformity with a standard - 'something established by authority, custom, or general consent as a model or example'." This last definition suggests that the term standardization can be applied to two different situations:

when a standard has been "effectively applied"; or

when a standard has been "achieved." (Medina, 1998).

Moreover, the idea of product customization was first brought to the academicians' attention by Terpstra (1981). He argued that the idea of product "appropriateness" was a legitimate one, in light of the fact that many developing economies were eventual recipients of technology and innovations from a handful of nations in the developed world. Furthermore, abject economic differences between these countries rendered product offerings from affluent markets inappropriate for developing market consumers (Terpstra, 1981). Beyond the merits of the economic disparity issue, it later became evident that marked differences in beliefs and traditions would play an important role in the acceptance of many products (Samli et al., 1993).

The term customization is discussed but not defined by Porter (1986), Onkvisit and Shaw (1987), Krubasik (1988), Jain (1989), and Yavas et al. (1993). Other similar terms that have been used include "individualism" (Kanso, 1992) and "specificity" (Onkvisit and Shaw, 1987). Neither of these terms, however, appears to be commonly present in the literature. The AMA's definition of customization is: "Tailoring the product to the special and unique needs of the customer. Each buyer is potentially a unique segment" (Bennett, 1988, p. 51). Webster (1973, p. 281) defines customize as: "to build, fit, or alter according to individual specifications".

While it is possible to market services internationally, offering a highly standardized service may be problematic. The central emphasis on branding and measurable quality specifications in comodification services raises major questions over the ongoing importance of relationships in the marketing of such services (Laing, Lewis, Foxall, Hogg, 2002). Since services are performances and inherently involve some level of the human element, they cannot be standardized in the way that goods can. The heterogeneity aspect of service is therefore subject to some variation in performance, no matter how meticulously that service is performed. Similar to inseparability, heterogeneity pertains to the issue of standard delivery of the service offering (Edgett et al., 1993). Notable characteristics of heterogeneity that make standardization less feasible include: service quality variation on dimensions such as the provider, the consumer, and time (Zeithaml et al., 1985); standardization and quality control (Berry, 1980); and the labor intensity of the service (Zeithaml et al., 1985).

Consistent with Zeithaml et al., (1985), Nicoulaud (1989) also notes that services are more prone to variation when they are more people-based than machine-based, when the perception of performance (or production process) varies from customer to customer, and when the service performance varies from the same individual from day to day (i.e. situational). As a result, services are much less "prone to standardization" as compared to tangible goods. Previous researchers warn of the need to customize some aspects of the service offerings to reflect local or regional tastes and preferences (Mathe and Perras, 1994; Gaedeke, 1973).

In addition to the above factors, government regulations in numerous service sectors make standardization difficult (Samiee, 1999). Therefore, it is probable that when internationalizing services relatively more services must need to be adapted to the host country environment. However, it may be more difficult for international service firms to standardize services to the extent that goods can be standardized and marketed globally (Samiee, 1999; McLaughlin and Fitzsimmons, 1996; Lovelock and Yip, 1996).