Until a few decades back, hardly anyone focused on globalization issues in business. Globalization got with it a lot of good news; no one really seemed bothered by the bad, which slowly got bigger. Gradually, pros and cons were discussed, and this gave rise to a few grave globalization issues. Let’s read a bit more about these.
Globalization is the diminution or elimination of state-enforced restrictions on exchanges across borders, and the increasingly integrated and complex global system of production and exchange that has emerged as a result. ~ Tom G. Palmer, Cato Institute
Earlier, most businessmen focused on making their businesses reach every corner of the country. Running the show on a national level was considered an achievement only a few could be entitled to. Slowly, things changed. Businessmen started contemplating about the bigger approach. They started traveling around the world in search of better prospects. When expense of labor posed a problem, people were hired from cheaper markets. With all this came globalization, and later, all the issues in various business. Let’s understand all these issues, positive and negative alike, in the following segments.
What is Globalization?
Globalization is nothing but the functioning of a business on a global level. When you practice business from a place different than your local market, you globalize your business. Usually, there are certain barriers when it comes to functioning of a business on an international platform. These barriers may be political, financial, or even geographical. When a business overcomes such barriers, it is called a global business. Of course, these businesses are profit-oriented and have a completely functional base apart from the one in their local market.
Issues of Globalization in Businesses
Shift in Employment
Though a global business creates employment, it does not do so necessarily in the local market. With recession hitting countries, this is one of the most discussed globalization issues in businesses today. This might affect the business from the social perspective, where it also has a responsibility towards the society it functions from. When you hire people from another country to work for you, you create employment in that country and not in yours.
Recessions and Depressions
This is perhaps one of the most negative effects of globalization on businesses, as compared to any other. Before globalization came into the picture, companies were affected by financial situations pertaining to their own country only. Let’s take this one example to understand the concept better. A business called ‘A’ functions from the United States, and has sister companies in India and Australia called ‘B’ and ‘C’ respectively. There are 50 more companies like A. If recession affects the United States, it will automatically affect India and Australia as well. This means that due to globalization, the dependability of one country on another has increased to a greater extent than before.
One of the most common complaints against globalized businesses is that it leads to unfair payment of wages and salaries. Skilled labor is paid differently in different countries by the same company. Thus, we can say that employees are paid as per their market worth and not as per what they actually deserve. This, in the long run, leads to strikes, less employee retention, and problems with the unions.
While we discuss the negative effects of globalization, it is also important to look at the positives.
Increase of Market
One of the best advantages of globalization is that it increases your prospects and your opportunities. When you look at the entire world as your customer, you suddenly increase your profit margin by many folds. Similarly, a bigger market also means better competition. Thus, prices of goods and services will be open for negotiation, and you can choose what is most profitable for you. The best example of this is labor. If you can’t afford the labor in one place, you can look at cheaper markets. Similarly, a bigger market offers many other benefits, such as more tie-ups, mergers, acquisitions, etc.
Investment in more markets is another globalization issue in business, but a positive one. Though this may seem positive at face value, it devoids the local market of certain opportunities. This gives countries with potential a chance to develop faster. The standard of living improves for many, and poverty reduces considerably. In the larger picture, every country will gain something from another. This ensures that currencies are not hiked to an extent that they remain out of purchasing capacity. This in turn ensures that there is more stability in global financial relations.
Development in technology is a great boon for every country. Technological advances made in one corner of the world, can be shared elsewhere through globalization. Better the technology, better the output; the better the output, better the profit. As soon as a business goes global, it becomes aware of different technologies all around the world.
Globalization issues in businesses also include the effects on environment due to their expansion. The governments give permission for more MNCs to be set up, as this increases the investment in the country. In this process, forests and agricultural lands are destroyed. Globalization, if done in the right way, is most profitable for any kind of business. Though all these globalization issues will continue to exist, will proper planning, the negative effects can be curbed to some extent.