Contemporary Issues in Management

Executive Summary

The world has been changing significantly for a long time. This has caused a debate regarding the nature as well as historical importance of these changes. This is what is meant by globalization. Globalization has come up as a powerful as well as a controversial concept of this age. The world has seen a major process of increasing connectivity and interdependence of the markets and businesses (Budd, 2007). This is a process that has been spreading dramatically for the past two decades. This is because of the technological developments that have made it possible and easier for people to travel, communicate and operate globally. Development in telecommunication infrastructures and increase in the use of the internet are the major driving forces behind globalization. While there changes have been evident there is a ranging debate regarding globalization. At the center of the debate regarding the change, is the extent, form and results of globalization in the modern world. Globalization has led to increased advancement of Foreign Direct Investment (FDI) from one nation to the next (Ray, 2007). Globalization has allowed increased competition in a free market because it has made the agents of production more effective and efficient. It is seen as an opportunity for prosperity and economic development of nations all over the world. However, globalization also has negative effects. The process of globalization has been known to cause massive joblessness in the industrialized and developed nations as multinational organizations realize that they can get cheaper labor and raw materials for their companies in other regions of the world, particularly the underdeveloped and developing regions. It has also led to increased immigration and insecurity across the world.

Introduction

Globalization is a term used to refer to the increasing interconnectedness between countries.Globalization is normally viewed as being caused by interplay of economic, socio-cultural, technological, political, and biological forces (Clark, 1998). It is historically viewed as a process that emanated from the need to share and explore. Technological development has led to the ease in transfer of information, products and services to other parts of the world. This has also led to the need to explore other parts of the world for economic benefits. With the development in the internet, information on resources and products is spread very fast, with ease and less expensively. There is also the aspect of the need to exploit primary products in the developing and poor nations by the developed nations. This has led to not only the import and export of products, but also the development of multinational companies. This essay seeks to identify and analyze reasons why the process of globalization has a controversial issue around the world.

As the barriers are removed, nations, organizations and business firms become dependent on each other. The three main indicators of globalization are where goods and services are being traded between nations, flow of capital between countries and an eased movement of people across borders (Giddens, 1990). These indicators also form some of the most important issues about globalization that must be addressed. International trade greatly determines the results of globalization. In other words, what is being traded will determine whether globalization is useful to the parties involved, or pone of the states is being exploited by another or neither of the two states benefits from each other. If international trade is such that there is no mutual benefit then it should be discouraged while aspects that ensure there is mutual benefit are encouraged.

Finances form the basics of every community as it is through them that institutions are funded, governments deliver services to their citizens and individuals get sources of livelihood (Steger, 2002). There are three major forms in which finances flow from country to another in the process of enhancing globalization. These are through foreign indirect invest, foreign direct investment and through Greenfield and Brownfield investment. In foreign indirect investments, capitals flows to another country when money is used in buying financial assets that are within that country. Foreign indirect investment focuses mostly on enhancing an integrated financial market across the globe. Foreign direct investment takes place when an organization invests in another country with the aim of increasing its production. There is mutual benefit in that the organization will increase its production at lower costs of production while the country in which the organization has moved to benefits through economic growth, provision of jobs to its citizens and bettered living conditions through earning better wages (Budd, 2007). Even though research studies have shown that developed countries often benefit much through foreign direct investment than host countries do.

Greenfield and Brownfield investment is the last mode in which capital flows from state to another state. Multinational corporations (MNCs) seeking to expand their production processes to other countries often do it either through Greenfield or through Brownfield (Held & McGrew, 2007). Greenfield refers to where the MNC establishes a production facility which is completely new in the host country while Brownfield refers to where the MNC merges with a locally existing firm to increase its production capacity or to completely take control of the existing firms. The flow of money through interstate borders has been growing rapidly and mostly through migrants remitting money to their friends and relatives living in their home countries.

Controversy

On one side of the debate supporters of globalization have argued that the world has been basically changed by globalization for the better (Held & McGrew, 2007). The supporters of globalization have also argued that it opens up opportunities for everyone to operate in a free market. This is because it has made the agents of production more effective and efficient. On the other side, there are opponents who argue that the claim of the positive changes due to globalization is exaggerated. They have claimed that the power of national governments, geopolitics and nationalism are still the defining elements of this age. This is a claim that is based on the argument that nothing much has changed. Some opponents have completely denied the argument that the world has entered an entirely new era. The opponents have also argued that globalization is a negative phenomenon for it has made it hard for some groups to participate in the international business because of the increased pressure caused by competition. Therefore there is a controversy regarding whether globalization is a positive concept in describing the current events. Whether globalization is a positive or negative development remains unclear.

Positive effects

There are many benefits that emanate from the process of globalization. The very first benefit of globalization is in the increased advancement of Foreign Direct Investment (FDI) from one nation to the next (Intriligator, 2003). The increased levels of foreign investment that are triggered by the process of globalization are important for a number of reasons; firstly they encourage the transfer of technology from one nation to another. Secondly, it is very instrumental in the reformation of industries; competition has always been known to encourage commercial enterprises to up their game and provide the consumers with better quality goods and services. In addition to this globalization supports increased international trade and an increased efficiency in the utilization of available resources in the process of production and manufacture of finished goods. The increased rates of trading activities amongst the nations of the world in the international arena have with time led to the collapse of any trade barriers that existed previously (David, 1998). This implies the Free Trade Policy in which the levies, duties, subsidies and quotas that were previously imposed on nations and their trading activities by others have been eliminated.

Globalization is also advantageous due to the fact that it increases harmonious associations between nations on the international arena (Legrain, 2003). When nations are engaged in mutual trade, they tend to increase the levels of collaboration and cooperation between them and consequently reduce the probabilities for the advent of conflicts or wars between nations. This implies that with globalization many nations that were previously engaged in bitter confrontations have established new peaceful associations based on trading activities. Globalization has also increased the rates in which people all over the world connect with each other; the opening of territorial boundaries implies that workers looking for greener economic pastures can freely migrate to other nations in search for employment. Globalization tends to positively affect tourism; nations that have a great number of natural resources and wildlife improve their financial systems through the tourism industry.

Globalization has allowed increased competition in a free market because it has made the agents of production more effective and efficient. Globalization is seen as an opportunity for prosperity and economic development of nations all over the world. This is because even the developing nations are becoming part of the international opportunities and capital flows (Intriligator, 2003). Survival in this international market necessities increased levels of production making nations even in the developing world more productive. This has led to an increase in the use of technology for production of more superior products (Meinhard & Niklas, May 2012). Globalization has also enabled access to different products some of which are not produced at a territorial level. This has helped both consumers and industries in accessing both consumer goods and industrial products. With the increase in globalization, international borrowing of capital has been made possible.

Negative effects

In spite of all the benefits that have been described as being brought about by the process of globalization, there are also some negative effects. The process of globalization has been known to cause massive joblessness in the industrialized and developed nations. This usually occurs when multinational organizations realize that they can get cheaper labor and raw materials for their industries and companies in other regions of the world, particularly the underdeveloped and developing regions (Sen, 2002). As a consequence, the commercial organizations shut down their businesses in the developed nations with the intentions of investing outside the nation. This leads to the laying off of many workers that were previously working for the multinationals. The emergence of investors from foreign nations in any country is also another disadvantageous aspect of the globalization process since it removes the safeguard of domestic producers and makes them susceptible to rivalry and competition from foreign investors. It is due to such aftermaths of globalization that in the year 2005, the relevant agencies in the European Union and the United States of America impressed limitations on the importation of low cost textiles from China into their territories (Ray, 2007).

Globalization is also enhanced by the free flow of resources including human resource. If not well addressed, globalization can lead to massive migration both legal and illegal. Migration from one state to another has numerous effects such as increasing pressure on social amenities and especially the healthcare sector, increasing social crimes among others (Robertson & Khondker, 1998). Even though most nations have worked hard to liberalize their markets, the same has not been depicted in the flow of human labor as most still have laws that do not encourage migration. Even though the laws are still tough on migration it has continued to exist and mostly between the developing and developed countries. One of the reasons why migration should be addressed while dealing with globalization is because different countries have different definitions of migrants such that people who might not be considered as migrants in one country might be in another.

Another challenge of globalization that has caused a lot of concern in the modern day is the propensity of commercial organizations to degrade and pollute the ecosystem (Intriligator, 2003). Globalization is perceived as having contributed significantly to the increased number of environmental challenges in the 21st century world. As industries are being developed and being moved to other parts of the world, especially the developing nations, environmental degradation has been experienced. This is especially the case with the industries that are being developed in developing nations such as Nigeria that are causing pollution and exploitation of natural resources (Bethan & Arabella, 2005). It is for this reason that nations have come up with very stringent regulations and laws on the safeguarding of the environment. Globalization allows multinational commercial organizations to shift their trading activities from nations that have very stringent environmental laws to those whose laws and regulations regarding the environment are less strict. This in turn leads to an increased rate of environmental degradation. The most affected nations are those in the third world.

Globalization has been perceived as benefiting the industrialized and developed nations at the expense of the poor nations in developing and underdeveloped regions particularly in Africa (Clark, 1998). The nations in the industrialized world tend to be more advanced in terms of their technology and levels of education in comparison to those in developing nations. This places them in a position to benefit more from globalization than the poorer nations of the world. Globalization also has a propensity to cause nations to rely on a limited range of products, a factor that increases the vulnerability of their financial systems to external events. This happens when nations in the global arena incline towards the production of commercial products and services that they are competent and proficient in. Further more, globalization has been known to be the advent of the collapse of several financial systems in the world as was witnessed in the last three decades of the 20th century in nations such as Thailand, Brazil, Indonesia and Mexico (Giddens, 1990). These nations acquired huge amounts of money from investors who were interested in the establishment of commercial enterprises within their borders; the consistent failure of the business enterprises led to the withdrawal of the investors, a fact that had negative impacts on these nations.

There are also increased cases of conflicts and terrorism due to the aspect of globalization. Technological advancements allow people to exchange information easily. Terrorists have taken advantage of this new development to coordinate attacks in various parts of the world (Harvey, 1989). A good example to illustrate this is the attacks on the United States on September 11, 2001. This is evidence that people are not at ease because of the forces of globalization and modernity. This is because the preparation and attacks themselves were facilitated by the globalization process. Increased insecurity has become a major challenge for both countries and business organizations across the world.

Conclusion

Globalization has both negative and positive effects to states and organizations. The main determinant on whether or not a particular nation will benefit from globalization is whether that nation is adequately prepared for globalization. Rather that concentrate on the tipping of the globalization process to their own advantage, the nations of the world have more to gain if they engage in collaborative efforts with others in the international arena (Appadurai, 1990). This way, a country is able to benefit from the strengths of another and all the nations involved can come up with mutual solutions for shared problems. Globalization has also led to increased insecurity in many parts of the world. Business organizations are greatly affected by changes in their areas of operation. There is an increase in competition across the world due to globalization. Several multinational companies have expanded their operations to different parts of the world due to the increased interconnectivity among nations. Companies are therefore forced to improve the quality of products and services to enhance customer satisfaction and gain a competitive advantage. However, this creates a great challenge for organizations as it can be costly and challenging. Bigger multinational companies can take advantage of their resources to outdo smaller domestic companies.

Bibliography

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