Globalization Bliss or Bane


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Globalization : Bliss or Bane?

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Globalization Bliss or Bane

  2. 2. GLOBALIZATION Though it is difficult to provide a thoroughly foolproof definition, the concept can be roughly defined as : ● the cross-border integration of business , ● or as Gary Dessler puts it “the tendency of firms to extend their sales, ownership, and/or manufacturing to new markets abroad”. ● For an in-depth approach, globalization might as well be depicted as  : “  an integration of economy, finance, trade, and communications from a worldwide perspective, in order to establish a successful economy on a global basis.” 2
  3. 3. GLOBALIZATION Thus globalization is often seen through the sole economic lens, as having given rise to some kind of ● “global marketplace” or “single world market”. Indeed, its yet preponderant economic dimension results from the economic interdependence of countries , through ● the free circulation of goods, services, ● the transfer of technology ● and flow of capital, across and beyond international borders. 3
  4. 4. GLOBALIZATION But more than this, the “big picture” is the genesis of a “global village” , the nest of nexus, enabled by pervasive social and cultural interactions and IT speedways. 4
  5. 5. PUSH & PULL FACTORS Global economic integration finds spontaneous roots in history and was more contemporaneously facilitated by the actions of supranational organizations such as : ✔ the International Monetary Fund (IMF), and ✔ the World Trade Organization, whose three main areas spread from goods (GATT), to services (GATS), and intellectual property (TRIPS). 5
  6. 6. PUSH & PULL FACTORS ● ● Free trade areas (agreements reducing tariffs and barriers among trading partners) have come to birth, and “further encourage international trade”.Well-known examples are the European Union (EU), and NAFTA, the North American Free Trade Agreement, settling free trade between Canada, Mexico, and the United States, by removing crossborder taxes or tariffs. Likewise, other trading blocks have taken rise, such as ASEAN in Asia, CAFTA in Central, and MERCOSUR in Latin America, and even an African Union comprising 53 countries. 6
  7. 7. PUSH & PULL FACTORS ● ● All these initiatives set an example in their own way, and through a first-stage regional integration, thus naturally result into the brick-by-brick construction of further global economic integration. The efforts to reduce trade and investment barriers around the globe benefit global economic integration, raise incomes, generate jobs (in concerned countries), and stimulate economic growth. 7
  8. 8. PUSH & PULL FACTORS ● ● ● ● Companies also expand abroad for reasons like sales expansion, since international trade and globalization mean enlarged markets, and potentially the opportunity to reach millions of consumers abroad. They sometimes take advantage of partnership possibilities, to set a foot on difficult markets (eg jointventures in China). Struggling their way to some precious or unfathomed ressources ( oil, gas, rare and precious ores or metals...) also prompts companies to settle abroad in some way or another. Manufacturers and service retailers also seek an access to lower labor costs, thus maximizing profit margins and increasing overall benefits. 8
  9. 9. KEY INDICATORS GDP : Gross Domestic Product Key indicators of globalization measurement are GDP and FDI. ● ● ● Although MNCs are often prompt to publish the figures of global sales, economists consider Gross Domestic Product (GDP) as a relevant indicator of the performance of an economy in that matter. GDP is 'the monetary value of all the goods and services produced'*. A monthly issue of GDP enables the ordinated comparison of top economic performers among countries, and the evaluation of good and bad trends. *Oxford Dictionary of Business and Management 9
  10. 10. KEY INDICATORS FDI : Foreign Direct Investment ● ● ● The second indicator cherished by global economists is FDI, Foreign Direct Investment. The indicator envolves every expense from another nation's corporation in building up, buying , or somehow investing to acquire lasting interest within a precise foreign economy. FDI intentions are crucial to determine the economic attractiveness of this or that national economy in any region of the globe.For any country to sustain constant growth, it is important to attract FDI. As investments from a foreign country on one's national soil generally result in creating or preserving employment, governments eager to attract FDI sometimes develop specific programs, or infrastructures, or even curb law impediments to smooth the way for foreign investors. 10
  11. 11. TRENDS ● ● ● ● As genarally put, “the map is not the territory” , and global strategic planning does not systematically turn to fruitful investments. The aftermaths of the global economic crisis have resulted in somewhat slowing the pace of cross-border integration. The BRICs (Brazil, Russia, India, and China) are still 'the powerhouses of the world economy'*, but companies need to seek additional engines of growth. The “Big Bets” of the past decade, though still reliable options, are followed up by 'non-BRIC rapid-growth markets (such as Mexico, Turkey, South Africa, Vietnam), emerging as attractive locations for global business'* *Looking Beyond the Obvious:Globalization and new opportunities for growth -Ernst & Young 2012 report. 11
  12. 12. BLISS OR BLANE The Pros and Cons of Globalization ● ● Most evidently the global trend is often seen as a mere way of outsourcing services and offshoring manufacturing jobs to developing countries where labor costs and social standards are lower, thus generating more profits for companies, and more unemployment in the parent company's national economy. It is generally admitted that the loss of jobs empoverishes the domestic labor market, while boosting the living standards and general economic growth of the foreign country. 12
  13. 13. BLISS OR BLANE The Pros and Cons of Globalization ● ● ● ● Globalization thus has an impact on the human capital on either side. The national markets have to adapt and show economic resilience through restructuration and different specialization (e.g. high-skilled jobs), until MNCs sometimes re-shore their activities (due to quality, transport, or energy issues). Beside opening new markets with enhanced purchasing power in the developing world, globalization also enables the transfer of technologies and quality improvements. The subsequent cultural intermingling sometimes entails a certain fear of identity blur or loss (e.g. famous Americanization reproach). For companies too, globalization has a bargain effect, as well as threatening face. 13
  14. 14. RISKY BUSINESS The Threatening Face of Globalization ● ● In the field of globalization, a company's SWOT analysis can reveal several risks corporate decision makers have to be cognizant of, in order to aptly adapt their operating policies. Given international circumstances, terrorism appears the most obvious threat, and companies take protective measures and subscribe kidnapping and ransom insurance as 'even stationing employees in assumedly safe countries is no guarantee there won't be problems'* *Human Ressource Management- 13th Edition- Gary Dessler. 14
  15. 15. RISKY BUSINESS The Threatening Face of Globalization ● ● Risk in the technological environment envolves opportunistic cyber attacks, and now APT (Advanced Persistent Threat)* aimed at causing damage or economic spying at corporate level. Risk also lies in counterfeiting and piracy, which 'erode the returns on innovation and slow economic growth'**.On the other hand, technological transfer and appropriation are also at stake when operating in poorly trained countries. * Countering Cyber Attacks -Ernst & Young Insights on Ggovernance, Risk and Compliance , March 2011. **The Impact of Intellectual Property Theft on the Economy- 2012 Report By The U.S. Congress Joint Economic Committee Chairman’s Staff Senator Bob Casey, Chairman 15
  16. 16. RISKY BUSINESS The Threatening Face of Globalization ● ● Economic threats depend on how 'hands off' governments tend to be, or sometimes political twists resulting in expropriation and nationalization. Labor Law systems and Labor Union aspects must be mastered by companies if they want to manage globally, and MNCs should secure the process by maximum contractualization, and the application of global policies on 'discrimination, harassment, bribery, and Sarbanes-Oxley'*. *Human Ressource Management- 13th Edition- Gary Dessler. 16
  17. 17. Globalization can thus be considered as a bunch of opportunities, provided some tricky issues are successfully addressed. 17
  18. 18. BIBLIOGRAPHY ● ● ● ● ● ● Human Ressource Management- 13th Edition- Gary Dessler. Looking Beyond the Obvious:Globalization and new opportunities for growth -Ernst & Young 2012 report. Countering Cyber Attacks -Ernst & Young Insights on Ggovernance, Risk and Compliance , March 2011. The Impact of Intellectual Property Theft on the Economy- 2012 Report By The U.S. Congress Joint Economic Committee Chairman’s Staff Senator Bob Casey, Chairman Oxford Dictionary of Business and Management 12/12/2013 18