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  1. 1. CAPE 2007 U1/P2/#1 GLOBALISATIONThe concept of globalization has been one of the most current topics in the Business World. a) Define globalization. [3 marks] b) Discuss THREE positive and TWO negative impacts of globalization on Caribbean business organizations. [22 marks] Globalization refers to the free movement of labour, capital and goods around the world. It isthe term used to describe the growing integration of the world’s economy.B. Globalization refers to the free movement of labour, capital and goods around the world.It is the term used to describe the growing integration of the world’s economy. The impact ofglobalization on Caribbean business organisations can be both positive and negative. One of the positive impacts of globalization on Caribbean business organisations isimproved technologies. As a result of globalization, businesses will now have access to theimproved technologies being developed elsewhere. For example, the most advanced technologyavailable in Silicon Valley would be available to local firms in Trinidad. Such examples can becomplex management information systems and production set ups for businesses. This can go along way in improving productivity in the business organisation. Improvements in technologywould lead to improvements in quality and this is beneficial to the firm as consumers nowadaysare far more quality conscious and are willing to pay higher prices for a higher quality product.By extension, this will increase profit margins for businesses in the Caribbean and can lead toexpansion of the business. Improved technology is beneficial since it gives firms the competitiveedge in the global environment. Secondly, globalization can also be positive to Caribbean business organisations becauseof the enormous market opportunity that stems from it. Evidence of the integration of theworld’s economy can perhaps best be seen in businesses that design, market and trade theirproducts to a world market such as House of Angostura in Trinidad and Tobago. House ofAngostura is probably best known for their famous Angostura Bitters which is sold in manycountries throughout the world. Consumers in different countries recognize the product easilyand have similar tastes for the product. House of angostura is able to market their productworldwide and because of this, they are able to operate distillers in the United States of America,Canada, The Bahamas as well as in Suriname. The world now becomes the market and a widermarket provides opportunities for many Caribbean firms to grow. This is beneficial to thesefirms since they now have a larger market to sell their products which can increase sales andprofits for the business. Thirdly, globalization can positively impact Caribbean business organisations by makingavailable to them cheaper supplies of raw materials and products. This can now be possiblethrough the use of the internet. The internet brings closer to these local businesses, cheaperhigher quality raw materials, intermediate products and final products. A classic example is seenin the Asian economies where goods are sold at extremely low prices. This can be beneficial
  2. 2. CAPE 2007 U1/P2/#1 GLOBALISATIONsince it reduces their cost of production and this can be passed on to customer through lowerprices. This would lead to an increase in profit margins which ultimately can be used to dofurther research and development which can sharpen their competitive edge in the globalmarkets. Conversely, globalization can also have negative impacts on Caribbean businessorganisations. One such impact is the greater competition among firms. With the removal oftrade barriers and the free movement of labour, goods and finance across international borders, itprovides customers with a wider variety of choice. This is an advantage to the customer but amajor blow to business organisations. This is felt more severely by infant industries since theyare forced to lower their prices to compete with cheaper products being imported. Reducedprices will cause a loss in revenue and since these firms are new, they will be unable to absorbsuch significant losses and may even lead to such firms being driven out of the industry. Inaddition, higher standards may have to be met such as ISO 9000 and such can be rather costly tothese firms. A second negative impact of globalization of globalization on Caribbean businessorganisations is the technological divide that can be as a result. In this modern world,technology is rapidly improving in nature and many local firms may be unable to keep up to pacewith the shifting frontier of technology and remain competitive. At the same time, it may be verydifficult for such firms to keep costs down and this can make them lose their competitive edgeover competitors and this can result in reduced profit margins. This problem is even morecommon in the Caribbean where there are a high number of small businesses operating. In retrospect, globalization can have both positive and negative impacts on Caribbeanbusinesses. Even though the local businesses may adversely be affected by globalization, thebenefits gained can surpass potential drawbacks. Lee Yum Nablab