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Globalization in Malaysia: Advantages and Disadvantages

Paper Type: Free Essay Subject: Economics
Wordcount: 3644 words Published: 11th Jul 2017

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The term globalisation has many understanding from different people. Hill, (2005) as cited in Stuart, et al (2010), mentioned it refers most countries would shift toward a more integrated and interdependent world economy by the merging of historically and separated national markets into one huge global market place. Gavin C(2009)stated that it had replace those economic expressions such as’internationalization’ and ‘transnationalism’. Sadegh B.,et al,(2006) citied as Cheng (2000), mentioned that nowadays of people have great opportunity to learn from other countries. The globalisation could be superior grow that main driver key is there exiting many of preferences and the need of consumers from the worldwide (Pierre,D., 2006).Catherine ,D(2005) agreed that it could be reach an unexpected phenomena with high technology , advance communication and free trade market. 124

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The impact of globalization has bring success of business to new level, where many countries have been go through it(EconomyWatch.,nd). In research based on Economy Watch team that found the globalization has bring forward on each industry and meanwhile it has destroy some of industry where its cannot survival though the impact of globalization. Their research have shown the financial industry could gain more benefit after the emergence of financial markets on global rather than local market, and be more efficient entrance the finance facility at other countries. With the free trade principle exercises on worldwide, it has result in boost up the finance flow. Economy of country will also increase whereas gain more business trade and investment from foreign investments, which has mentioned by Adam Smith,?? as cited in Ferraro (1998). 132

What are advantages and disadvantages of globalization?

In generally , globalization has give advantage to company such as opportunity of develop new market for consumers have more variance choose the best quality product. It also provides educated understanding between different nationalities(bangkoklogistics,n.d.). Besides, companies can outsourcing their part of project that reduce time, uncertain factors and fail product. They can find more profit base on manufacturing rather than charge high price on consumer. Thus, they offer reasonably price for attach different type of consumer with good quality. Government has encouraging MNE invest directly on country that reduces unemployment by new investment and industrial ventures.(bangkoklogistics,n.d.)

Disadvantages of globalisation

Generally, for domestic supplies have to compete with international suppliers that lose the competitive advantage even fight with price. Thus, there would a lot of stress and threat of new type of colonization comes with much power and money from foreign player. Meanwhile, with the outsourcing concept, there would be increase jobless that is working middle class in developed country such as U.S(bangkoklogistics,n.d.).

Among many companies have success in financial industrial though globalization, one of company can be more precise explain how reaction on impact of globalization and create new solution at nowadays which is Hong Kong and Shangai Banking Corporate holding plc(HSBC holding plc)

The case study

  • Justify why HSBC is MNE before history.

Hong Kong and Shangai Bank Cooperate is one of examples success go though globalisation’s effect in financial industry. Thomas Sutherland was founder the HSBC while he was working in the Peninsular and Oriental Steam Navigation Company[history]. He found that financial service management has huge demand in Hong Kong and China so that he and his group opened bank and established the HSBC in March 1865 at Hong Kong and Shangai. Chuan Li (n.d) stated that the World Bank operates the finance on worldwide but their goods, services were not satisfied, and inefficiency to local market need. Whereas, the World Bank unable afforded heavy debt and lead to a harsh economic imbalances. [111]

By this lesson, Thomas had adopted the joint venture concept to operate business at different location(annual report). Thus, HSBC can reduce the uncertain from internal and begin a good relationship at local citizen and government. [35]

  • Management of HSBC

HSBC used the ethnocentric approach that easy communication between parent and subsidiary company at early stage. After subsidiary company has stability, then management structured can applied the polycentric method that efficiently and at short term to fit in the cultural and political of that country. With these approaches, HSBC has good start the step in their vision, which is the world local bank. It reminds people who want due to finance related with international and local that HSBC will be their first optional. Besides, HSBC also purchased those companies who specify area on financial field that can reduce costing, and decrease the uncertain risks.

Nowadays of HSBC is one of the biggest banking and Service Company in worldwide and headquarter allocated at London. To reflect their vision, it has not ignored power of international network which has “8,000 properties in 88 countries and territories have include Europe; Hong Kong; Rest of Asia-Pacific; the Middle East; North America and Latin America.”(annual report 2009)[116] “With listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by over 220,000 shareholders in 121 countries and territories.” According to annual report 2009, HSBC has good maintained performance and well management convinced to shareholders during downturn periods. Because all shares are trading on the “New York Stock Exchange in the form of American Depositary Shares”(annual report2009).142

  • Production

To fulfill consumers common need and differential preference, HSBC offer a wide range of production and diverse into four categories such as “Personal Financial Services (including consumer finance), Commercial Banking, Global Banking and Markets, and Private Banking.”

Need shown how effect to world.Categories

Personal financial services

Commercial banking

Global banking and markets

Private banking

*I will focus these three ,suit title need clear easily gopal.

Impact of globalisation to HSBC [summary]

Lead Emerging market ,

HSBC has gain excellent of results through emerging markets on past few years. HSBC has good aim on those potential countries, which would boost up the economic, after change the political and other direct factors. The brand of HSBC was not being easily for entered at foreign market because education of consumers was so weak at early century. HSBC have to send a respective for understanding on real situation and reaction on it. Thus, HSBC provided training at local citizen to build up local teams that enable reduce conflicts and create more jobs which is will accepted by their government. With a good relationship of government, HSBC has confidence gained good result and do further plan in future.

  • Internet age

Arrive on Internet Age, HSBC has adopted IT concept, which applied on their branches. Consumers were not willing accepted the changed at begin period because the network services have not mature yet and unconvinced to consumers. For generation X, they were no confidence with unphysical of documentations and lower of education. However, generation Y has willing be learns new things and can adopt this new phenomenon. HSBC required all stuff be patetion and polite handle this type of consumers.

  • Financial crises

HSBC has well management and be aware of worse on US shares before financial crises. Subsiders of HSBC companies have not totally full influence from financial crises especially Malaysia, and other Asian countries. Top management of HSBC believed that not all eggs should put in one basket. They have enough resource to support those other countries, which has be damaged during downturn. They also willing lend their hand to help on those companies had worst impact with limited resource.

Reason why did they success on these issues?

Solution those arise from Lead emerging market issues

Problems: time scales, burden cost, risk on purchased company, failure response from consumers, will production enable suit to consumer need ,WTO issues,

Globalization and market ?the forces of globalization would establish global market for standardised product purchased in huge volumes by consumers worldwide [ot] .while global market do indeed exist for some standardized product but where little product differentiation is feasible or wanted by users, with other product and services varying international tastes and preference mean that product differentiations vital to appeal to local markets.

HSBC research team found that success in emerging market has need good timing and more information collection to make precise decision. With new tools of communication, HSBC can easily communicate to other location in efficiency that reduced costing on research, failure response based on customers. To avoid conflicts and risk, they had designed production in wide range that from common characters for general need of consumers until local differential preference. Free trade, less regulation international ,

Solution those from Internet Age

Problem : instability network services, afraid on new technology (ATM), perception of consumer ,

Globalisation and production ? however it may not only be the cost based advantages of alternative production location which might lead to such outsourcing but possibly less tangible factor ,

HSBC believed the internet banking will became world trend by following improved the stability network services and evolution of technological. They has outsourcing the machine of auto transfer money where can launch on public in early that it will be competitive advantages. This new pattern of business transaction will increase perception of consumers toward HSBC in developed countries, but it seems need more time for developing countries’ citizen to adopted the change.

Solution those from financial crises:

Problem: confidence consumer toward HSBC , dropped expenditure suddenly, cash inefficient,

Globalization and the role of the nation state? Loss of competence

The impacts of financial crises have serious damaged on economic, government policy taken action for decrease influence on people. Thus, finance industrial suddenly shortage of capital, cash inefficient and withdrawn out huge amount of cash by customers. Fortunately, HSBC has well prepaid enough resource to handle this situation and still borrow out money as usual that it can proofing HSBC has capability go through this recession .



1: 0 = very high, 10 = very low

Source: The IMD World Competitiveness Yearbook, 2010, Switzerland, www.imd.ch/wcy.

According to Business in Sydeny and NSW (2010), third ranked fallen on Australia that shown has a lower risk and uncertain on political. Thus, mostly investors invest on Australia where safe and stable political framework is.

United Kingdom:

United Kingdom has very little on political risk because of the efficiency on the Westminster system whereby adopted by Australia government (Business in Sydeny and NSW, 2010). During recession, the government of UK has applied some incentive solution even though changed loosening fiscal policy to tightening fiscal policy that grape those attention of public finances (AMB Country Risk Report, 2010c).


Malaysia ranked on 13th that has moderate of political risk (Business in Sydeny and NSW, 2010). Malaysia has three major groups of people likes Malay, Chinese and India who are living in peaceful and understanding on each culture(Malaysia truly Asia,2009) .They also working together handle problems that avoid happen serious conflict against on May 1969.

The national front consists of UMNO is the Malaysia government which included others races parties as MCA (Malaysian Chinese Association) and MIC (Malaysian Indian Congress) are collaborating for peaceful civilization(Malaysia truly Asia,2009). However, according to AMB research (2010b), found that the government is slowly applying inventiveness which citizen enable accept public contract in more transparency, less subsidies and involvement from government. Besides, government also has encouraging foreign invest in economic sectors (Malaysia truly Asia, 2009). Thus, Malaysian can be achieving the dream of being develop country on 2020.

Tax policy : company has paid 28% of tax per yearly

Well structure protection employees under Employment Act 1995( stable and good frame structure and can complain labor office http://www.pesaraonline.net/eatutorial.htm)

Industrial Relations Act 1967 (major manufacturing law) http://www.pesaraonline.net/ir-guides.htm

Trade unions act 1959 (major shareholder and director law) http://www.pesaraonline.net/tua-guide.htm


China has a high risk of political even ranked after United Kingdom, because it has strongly stability of government and social based on summary A.M.Best Company(2010a).In report mentioned that government look for balance toward communist central with the capitalist- style economic center where can cooperate East industrial. China is a large and huge of population, but considers as developing country with terms of GDP (gross domestic product), infrastructure, and others (A.M.Best Company, 2010a). If advance of industrial keep on expand, it will increase unemployment rate that become useless toward GDP. The government has majority power to control it that avoid happen.


According table 1.a[ GDP, GDP growth, inflation ] the growth of GDP has stable increase because consumer spending more actively on these few years . Then, average of inflation is moderate. The GDP has boost up over than 200 billion which means average of business were doing well. The government has increased inflation rates during high peak of GDP, but it has decrease rate during turn down that increased consumer spending.

Industrial sectors, [agriculture, industry, services ] Industrial sector has growth up after but it seems slow down before year 2008.the emerging market has bring benefit to industrial such as lower labour cost ,but them faced many competitors form worldwide.

Exprorts and important of good and serives [the exporting percentage has lower than import percentage that business loss some absolute advantages,

Gross capital ,revenue , cash surplus or deficit ] the gross capital allocated average 17% and 18%. The revenue percentage of GDP has reach more than 35%

Economic Risk: Very Low

• The United Kingdom (UK) has the second largest economy in Europe behind Germany. Service industries represent three quarters of economic production, particularly financial services

and real estate activities. London is a global financial center and businesses there account for nearly half of the country’s financial services industry.

• While positive economic growth has resumed in 2010, the Bank of England is unlikely to raise interest rates until late 2011 at the earliest.

United Kingdom has very low in economic risk by report ABM. One of biggest industrial that service can diverse into production, finance services and real se

Financial System Risk: Very Low

• The Financial Services Authority (FSA) regulates the UK financial services industries, including insurance.

• The UK is widely seen as a major center for international insurance and reinsurance and is home to the London Market, a wholesale market that writes risk around the world. Lloyd’s of London accounts for over half of the business on the London Market.


Financial System Risk: Low

• The insurance industry in Malaysia is regulated by the central bank, Bank Negara Malaysia.

• The Malaysian government continues to support the takaful and retakaful sectors as part of its strategy to make the country a global hub for Islamic financial services

Source: IMF and A.M. Best


Economic Risk: Moderate

• At independence, in the 1960s, the Malaysian economy depended upon rubber and tin. Since then, the economy has transformed to become a regional manufacturing center, services provider and offshore financial center.

• The government encourages foreign investment but maintains approval rights for individual investments, often opting to restrict foreign equity or encouraging the transfer of technology from foreign firms.


Economic Risk: Low

• China, the world’s most populous country, is home to the world’s third largest economy.

• Rapid growth rates are driven by a strong export sector, state expenditures, construction and infrastructure development.

• The government was able to respond to global economic downturn by launching stimulus programs, which brought a strong recovery in 2010.

• Expansionary policies have resulted in massive increases in bank lending, stimulating the economy but bringing rise to fears of increases in non-performing loans.

Financial System Risk: Moderate

• The insurance industry is regulated by the Chinese Insurance Regulatory Commission (CIRC).

• China is partially liberalizing its financial sector, which is a long and drawn out process but essential for the long-term sustainability of the economy.

• The Insurance Law was amended in 2009 to enhance regulation in core areas such as the strength of the supervisory authority and solvency and investment guidelines.


Regional Summary: Western Europe

• Western Europe is a highly developed and affluent region. The European Union (EU) is an economic and political union of 27 countries that accounts for 30% of world gross domestic product (GDP). The EU is facilitating a single European market with standardized regulatory systems and free movement of people, goods, services and capital.

• The euro-zone is made up of the 16 EU members that have adopted the euro as their currency.

• Most, if not all, of Western Europe has been experiencing a severe economic slowdown and several countries remain in recession. While the European Central Bank has cut interest rates to

spur demand, economic growth in the region has been generally modest.


Regional Summary: Southeast Asia

• Southeast Asia is a critical part of the world trading system and while the region’s economies remain somewhat dependent on agriculture, manufacturing and services have been the engine for growth.

• The region has been remarkably resilient to the global economic slowdown.

While regionally growth slowed as the economies of their large trading partners (notably the U.S. and Europe) went through recession, the slowdown was in most cases moderate and the recovery in 2010 has been very strong.


Regional Summary: Eastern Asia

• Eastern Asia is home to some of the world’s largest and most advanced economies. China and Japan are both in the world’s top five countries measured by gross domestic product (GDP).

• In the aftermath of the Southeast Asian financial crisis in the late 1990s, much of the region underwent a restructuring of traditional economic and financial practices to match international best practices in regulation.

• The region as a whole weathered the global financial crisis well, with local demand – powered by government stimulus – helping to maintain positive economic growth.



Business in Sydeny and NSW ,2010. Political stability. [Online]Available at : [Accessed 14 November 2010].

A.M.Best Company, 2010a. AMB Country Risk Report, China. [Online] (Updated 29 October 2010) Available at : [Accessed 16 November 2010].

A.M.Best Company, 2010b. AMB Country Risk Report, Malaysia. [Online] (Updated 29 October 2010)Available at :[Accessed 18 November 2010].

A.M.Best Company, 2010c. AMB Country Risk Report, United Kingdom. [Online] (Updated 29 October 2010) Available at :

[Accessed 16 November 2010].

Malaysia Truly Asia ,2009. Political stability. [Online] Available at:[Accessed 15 October 2010].

Conclusions & Recommendations

Summarise your findings from parts 1,2 and 3. Outline a future strategy that would face up to your most important findings.

Part 1 Background Marks 20%, 600 words

Part 2 Theoretical framework Marks 20%, 600-800 words

Part 3 Analysis – application of theory to evidence Marks 30%, 900-1100 words

Part 4 Conclusions & Recommendations Marks 20%, 600 words

Part 5 Referencing , Bibliography , Presentation Marks 10%, not in word count



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