Every business has been instituted with the idea of earning profit. Once started , the business gets rolling, next objective is to earn more & more profit. But after sometime the business starts hitting saturation point and the Profit no longer grows. This is the time when company start looking for new products or new markets for there business to grow. The company decides to setup new its manufacturing plant in a foreign land and this is what sow the seeds of Globalization. Globalization is a phenomenon. It can be defined as the functioning of a business or any part of it in more than one environments which are different from each other either politically or economically or socially or geographically. In lay man terms it is existence of business or its part in a country which is not the native country of the business. Setting up business across the political boundaries of a country is also called globalization. When globalization began, it was more to do with trading items produced in the native country to other countries which didn’t had the resources to produce them or were not as skilled as others. Thus, the products started crossing boundaries and reaching people which were far far away from the place of there production. Trading rather Exporting of products got the boost with the progress in the transportation technique by human. Automobile Engines enhanced the speed of human traveling across land masses and thus increased the extent of globalization. Industrial Revolution helped in the mass production of high quality finished goods which were more durable than hand made goods and had a longer life too. This was a brief history of Globalization uptil 1960s and 1970s.
During the cold war era, the world got divided into two camps. The socialists and the capitalists. Each Camp was willing to give special economic and monetary benefits to the countries that were willing to join them. Things like import/export subsidies, economic sanctions, political & military support were the two tools which were employed by the two camps to attract neutral countries towards them.
Impact of Globalizations on Businesses :
Globalizations in today’s world has a slightly different meaning. Globalizations today means unifying the entire world(or at least where ever it is possible) and identifying it as a single economic zone where you can trade. Companies no longer think in terms of political boundaries. All they adhere to are economic boundaries and borders. Infact the economic borders across the world are getting permeable and corporate are trying to use political channels to make it legal. Globalizing the world economy is what Globalization means today. In a conservative terms, spreading the globalization beyond the continents and oceans so that companies can over sell there product. This definition may not appeal to those who are pro-globalization but it is true. In the core, it is a means of selling the same product to a new market which are so far untouched and have a huge potential for there growth. Globalization from a service sector perspective is primarily reasoned for the fact that localizing all your skills/assets to a single geographic/economic/political area is a huge risk that too when the same work can be done at another area and that too at a lower rate. This is analogous to the reason why outsourcing increased so rapidly in the West. But no matter anyone says, the rule of the thumb in today’s dynamics is “Globalize or extinct” . You can survive without globalization but not for long .
Positive Impact of Globalization on Business
The following are the advantages that globalization has given to business and business houses:
1) Virgin Markets: The most important advantage that globalization offered to businesses was it introduced them to new markets. Markets which were virgin . Markets which were not as mature as there native markets and thus provided them with ample amount of time and experience to establish them in these markets. As the market were not mature, there wasn’t the need to introduce the latest of there products here. For ex., when Indian economy opened, several car manufacturers came in to establish there plants in India. But they didn’t introduced there latest models at the same time. They first introduced there older models in the market to get the feel of the market and at the same time establish them here rather make the consumers accustomed to them.
2) Diversification of Risk: The companies found in globalization a blessing in disguise. They were able to open up new offices/installations/plants in area which had a strategic significance in terms of geographic location, availability of skilled labour , lower interest rates, socio-economic-politico condition prevailing, cost of establishment thereby spreading there risk. Now a labour disturbance in a plant can be capitalized by production in another plant in a different part of the world.
3) Exorbitant Growth: Globalization helped companies to launch same product in different markets simultaneously. What it means is that now companies can now expect to get higher returns in shorter span of time that it used to be earlier.
4)Temporary economic prosperity : For some sections of under developed and developing countries.
Negative Impact of globalization on business
There have a been a few negativities associated with the globalization as well.
1) Layoffs : Globalization exposed companies to cheaper markets and also to places where the same work can be done at quarter of the price or even less. This resulted in the people getting removed from there jobs and there jobs coming out there country. It also resulted in moving out of intellectual wealth of a country outside its political boundaries. There has also been an increase in the gap between the rich and the poor. Though globalization has helped middle class to fill up the gap between the rich and the poor, the disparity may result in social unrest in days to come. It will not be surprising if some of the developed nations witness a social backlash due to the economic conditions created due to outsourcing.
2) Corruption: Companies are trying to find the shortcuts to enter into new markets and are ready to bribe any official that can help them do so. The motive, reduce the lead time and get the early bird advantage for entering into a new market. Also, the divide between the Have’s and the Have Not’s is diminishing. Society is moving towards a lavish and luxurious lifestyle. People want to get more money so that it can be spend on these items and hence are looking for faster ways to getting rich.
3) Monopolizing the market: With the consolidation of markets, you can find same brand of products across the globe. Ex. Ariel washing detergent can be bought at any store from Europe to America to Asia to Australia to Africa. This results in monopoly being established by one or two players. With time, these players eat up smaller challenges and become the only source of product which is a dangerous situation to get into.
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