Globalization influences the international business to a greater extent. Globalization is used in a context such as processes, perspective and more so in outcomes. It is expressed in various dimensions e.g. from political, economical and socio cultural points of view. (Gultang, 1997).
The study of globalization and internationalization examines its ubiquitous nature basing on the economical point of view. Globalization has a different meaning when the expression is made in conjunction with higher education where globalization concerns with the convergence of the educational systems which is directed catering for the needs of world knowledge (Smith, 2000).
Definition of globalization
Globalization has been defined in various ways by different economists. In economic terms, it refers to the progression of incorporating different isolated national markets of capital, labor and commodities into a single world market in which different investors across the globe can exchange ideas. It is vital for quick flow of information. It also refers to the integration of diverse countries and economies in which global pressures have a major impact on the international business operations (Mike, 1998).
With the introduction of globalization, international business is becoming increasingly popular. Organizations which operate across borders are more successful and have larger market share. Organizations that operate in the national markets must have strategies that can encounter challenges that can arise due to diversity in culture and languages
The integration of diverse countries and economies can occur through acquisition, joint ventures, contractors, partner led growth.
Businesses can sometimes decide to start their business services in the international market while others can decide to acquire already existing business premises or enterprises. This might be due to a lot of capital that is needed to establish new business. There are problems associated with acquisition such as mismatch of culture
Small firms which cannot establish on their own in the foreign market might explore joint ventures with other small firms which may either be of the same capacity or more superior than them. The firms with similar interests and needs may form a partnership with foreign firms to raise substantial capital to gain a competitive advantage. The partnerships firms are also faced with a lot of challenges such as risks of divergent corporate cultures (Geoffrey, 1997).
Lack of security in most nations has posed a lot of challenges to firms that have the intention of investing in the international markets. Security concerns in most parts of Africa and the Middle East have made it difficult for most international firms to invest in these countries. The international firms prefer hiring a contractor who resides in the foreign country to stuff projects with staff from the same country (Geoffrey, 1997).
In this form, partnering firms opened up offices in new geographical places. They then hire the native staff whereas the outside partners retain the new offices till the local firms become the partners and are in position to operate the offices on their own. This model has a limitation in that it takes a longer time to implement (Emmeriji, 2003).
Globalisation and Its Many Forms
The integration of different isolated national markets takes variety of forms as it tries to distinguish it from phenomenon or outcome. Some economist postulated that globalisation is relativistic in nature as it takes variety of forms. Its history has also depicted features that are related to mythical stories as current global economy is considered.
European Union which is a form of regionalisation of global zones has the features of globalisation such as integration and harmonization of diverse regions. Strategies have been put forward by many nations to eradicate dissent in the international business operations while promoting consensus. This indicates that economic and like minded leaders can respond positively to matters concerning nation-state autonomy. Leaders should be positive towards operation of international business and loosen their policies and regulations for the mutual benefit of diverse nations who have integrate to do business together. The regional global zone, EU has attracted other international organizations found in the Central and Eastern Europe. The impositions that EU has had on members’ qualification are another pressure on the global business operations.
Some scholars e.g. Cerny has different perspective on globalisation. They view free trade and economic rationalism as the basis for globalisation and that evolutionary advancement in the economic sector aids globalisation. The economy of nations is the basis of efficient globalisation across the globe. Globalisation has been further viewed at face value hence perceived as failing to measure up to the aggregate of logical communal power and applied economics. It is criticized to negating the activities and efforts of undeveloped countries which are currently facing high rate of inflation and rising unemployment. The multilateral agencies are in the front in designing international regulations that are governing international business operations. Some of the major agencies which greatly influence the international business operations and globalisations are World Bank, International Monetary Fund and World Trade Organization (Casson, 1998).
These organizations are designed to protect the economies of nation states and other inter-governmental regions. These agencies have stipulated regulations and leaders whose responsibility resembles that of head of most nation states. The institutionalization of international regulations is quite paramount and that most nations should comply with these in order to enhance efficient globalization (Casson, 1998).
Globalisation and Its Dimensions
Theories which have been put forward clearly indicate that international politics and its effects on the international business carry certain features that are same as that of postmodernity.. Some researchers stated that computer networks, sociational opposition and modes of citizenship are some of the contemporary networks that have had a lot of impact on the process of globalisation. Some researchers stated that computer networks, sociational opposition and modes of citizenship are some of the contemporary networks that have had a lot of impact on the process of globalisation. Some of scholars have also postulated that there exist a link between the economic dimension of globalisation and capitalism and development. It is summed up that culture dogma of consumerism dominates the economic undertakings; global development can be achieved effectively (Barber, 2000).
Social democracy is far much better than capitalism if efficient globalisation is to be achieved. Intrinsic nature of human agency and the norms they have adopted over time has to modified if globalisation is to be efficient in the national markets and this calls for constant changes in the policies that are used in day to day business and that stakeholders should at all times accept the change of identities.. Some of the early analysts such as Thurow suggested that capitalism cannot implode in the same manner as communism but that success and prosperity of global business depend on a shift from consumption to builders’ ideology (Barber, 2000).
Cultural perspective of globalization is contrary to the views of some analyst. Globalisation is greatly affected adversely by modernization and the inability of most nations to adopt the culture and economical style of the Western countries. This forces most multilateral organizations to adopt protectionist strategies due to the forces of fragmentation (Peter, 2001).
The intellectual difference, then, of forces such as globalisation and disintegration make it difficult for much of the world to incorporate into a particular, homogenized world. In most cases, such resistance is healthy and encouraged.
Benefits of Globalisation
Many economists have argued that globalisation has positive impact to economy and especially to international business investors. The major positive impact of globalisation is that it has lead to liberalization of international trade. Expansion of FDI has also been enhanced and cross border financial flow has been made possible. The fact that there is enhanced flow of ideas across border has leads to intense competition in the international markets. The combined efforts of different countries in the national markets have resulted in good relations among diverse cultures. These in turn lead to greater competition. Policy decisions concerning diversified cultures have also been achieved through globalisation and this has enhanced reduction in national barriers that may hinder international economic transactions. Cost is the major concern of all business organization. Globalisation is effective in the sense that flow of information has been made possible hence cost of moving information has been vastly reduced. Flow of goods and capital across the glop has reduced dramatically. This has ease transactions in the national markets (Gultang, 1997).
Cost reduction is the main benefit that companies derived from participating in shared efforts. Companies also benefit from more efficient compliance efforts that aid in the efficiency of the company which in turn increases the revenue. The efficient compliance of efforts has enables most companies to incur less costs in production due to reduced head count. Globalisation has also lead to improved quality controls in the organizations (Peter, 2001).
Issues and challenges of globalisation
Globalisation as a process is sometime hectic to implement due to challenges that firms face. These challenges are discussed below.
Difficulty in aligning the culture
The major problem faced by many firms as they globalize is the difficulty in maintaining the original corporate culture. Maintenance of the cultural identity in the global markets is quite difficult. Firms which are globalizing through joint ventures and partnership led firms are forced to adopt the culture of the native and cultures of the diverse people where their clients operate (Finnermore, 2000).
Unreliability of qualified staff
Firms face a great challenge when expanding internationally due to difficulties in acquiring the qualified native staff that can carry on the operations of the company efficiently. Native who are well conversant with the geographical patterns of the native land are suitable but they are not effective because they lack appropriate skills or consulting experiences (Cerny, 2001).
Limited transferability of management networks
International firms are faced with the problem of uncertainty on the extensibility of their business strategies and management networks. They are also faced with the problem of inability to solve problems that concerns project in the new areas (Barber & Jihad, 2000).
Impact of globalisation on economic performance and international business
Globalisation has a lot of impact on the economic performance in countries which are participating in the international business. Living standards of the people is affected directly due to changes that occur in economic performance in the region. Some of the impacts of globalization are:
- There is increased competition, new technologies, intensive innovation which accompanies changes in technology and specialization in efficient industries.
- The economic growth which had stagnated especially in most undeveloped countries gets to a point of economic transition.
- There is rise of global elite resulting from widening of income gaps due to inability of other countries to attract FDI]
In general, globalization and international politics affects every aspects of human living. Factors that enhance globalistion are broadly classified into four major categories. These categories are macro- economic factors, technology factors, political factors and organizational factors.
The impact of international politics on international business
The concept of international politics and globalisation is two issues that are controversial in nature when political scene is considered. Some liberalism school observed that globalisation is the same as internationalization and that social labour division in global business environment is quite imperative in most competitive environments. On the other hand pragmatism school considers globalisation will give rise to closer interdependence of universal social relationships. This leads to building up of relationship between economy and international politics. For effective international business operations to be achieved, it is compulsory that close relationships should exist between foreign affairs and domestic affairs. The diverse expressions of the relationship between economy and the international politics does not have any effect on the strategies that international investors should take to ensure smooth running of the business operations (Gultang, 1997).
Globalisation and international politics are becoming core issues as it determines international relationships that are necessary for international business operations. Different author have tried to give different interpretation of the implication of globalised international politics which have a lot of impact on the international business. Some points out that international politics and international relations bring impacts on global business operations (Barber & Jihad, 2000).
International politics have great influence on the operations of international business. The influence of any political change on international business is no less significant that the influence that are attributed to the individuals. Politics affects the operations of international business (Daniels, 1996).
International investors ought to be careful when dealing with long term assets in the global markets due to the risk of expropriation of these assets whenever there is a change in government. The impact is also felt when the existing government make a lot of changes it’s toward foreign investment. Currency has been a challenge to international business. Currency conversion is so hectic if global markets do not adopt one currency conversion method. The idea behind the inability to convert local currency into hard currency has posed a lot of challenges to international business. All these are in the hands of the government at any given time. The stance toward hard currency transfer in a nation might be influence the proper business operations (Cerny, 2001). Political changes that follows transition of government leads to shortfall in the national currency exchange. New government might introduce laws that lead to changes in currency transfer hence infringing the normal business transaction in the national markets (Corbridge, 1999).
International politics affects international business through sanctions that some other states might impose on other countries. It is in relation with this that most developed countries impose sanctions on the third countries in the international markets. Political violence that accompanies national elections affects international business operations. This depends on the site of business operations. If in case sites where international business operations are affected by internal conflicts of the country, then there are chances that the facilities are damage leading to interruption of normal business operations. This is sometime abrupt that no measures have been put in place to offset such crisis. These are very dangerous to international companies as it can lead to stoppage of business operations if substantial resources are damage during the time of violence. The place where the national markets are located should be a country of political stability to foster efficient and effective business operations. The diversity in the political structures that are presented by different countries also affects international business operations (Corbridge, 1999).
International politics can also affect international business operations by imposing sanctions on the new market entrances for new business organizations that are still venturing on new markets. The amount of capital that a company should have at hand for it to participate in the international markets hinders new entrance in the international business. Most companies are not in position to participate in international business due huge capital that should have. These lead to reduced competition in these international markets hence few companies enjoying monopoly which might leas to exploitation of consumers (Barnet, 2000).
International traders are at all time cautious on their business operations. International politics has a lot of limitations that has a far reaching influence on their operations. Doing business with international countries can lead to downfall of the operations due delays by most governments to settle bills in time. When a government is a buyer, there are a lot of inefficiencies associated with it. United Nations influence international business operations of a country i.e., it can impose an embargo on countries. This limits their ability to import goods hence markets for the global market goods are reduced. If for example a trader had exported goods to a government, but he later realized that embargo has been impose on that government, it has no option other than to cancel the export license of that trader (Corbridge, 1999).
Globalisation and international politics affects international business operations. Some of the impacts are very important and fosters the international operations while some other impacts act as an obstacle to business operations. Policies that are made by political leaders can either be positive or negative. Globalization is very useful in reshaping the economic landscape. Globalisation has contributed greatly to economic growth of some countries which have the stable economic base. There are adverse effects of globalization to countries which are still developing as inequality and unbalanced economic growth dominates the economy (Casson, 1998).
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