Advantages and disadvantages of globalization for Business Globalization is a major notion that has played a important role over the previous centuries in business processes. In different respects, globalization impacts businesses, the environment, world economies and societies. Those mostly impacted by globalization are nearly all corporations. Organizational changes are probable due to vibrant technological advances, fast competition and exchange of data. To respond to these dynamic changes companies are required to recognize the various elements of the major effects of globalization. A couple of years ago management guru peter Drucker foresaw what global firms would look like, explaining that they were going to be integrated jointly and managed through strategies not by their proprietors. Globalization can be defined as the incorporation of national economies into the world market. Integration is achieved through international direct investment, trade migration, cash flow and the advancement and spread of technology (Rick, 2013). Markets where it is prevalent and specifically widespread are financial markets such as credit and money markets, insurance markets and capital markets. Commodity markets for example gold, oil, coffee and tin. Product markets for example consumer electronics and motor vehicle. Globalization in relation to business can be described as the process allowing investment and financial markets to carry out business internationally mainly as a result of deregulation and better communications. It is obvious that the present world is strongly linked. However it is easy to loose focus just how rapid and systematically globalization is occurring and how much business organizations are being run. Drucker observed that globalization is not an economic but a psychological phenomenon. He noted that all of the advanced western principles and approaches are taken as the norm by many nations. The view took shape for Drucker in 2001 when an old student from Taiwan working in china paid him a visit. Drucker questioned him, “What is the most significant thing about the last three to five years that has occurred in China?” the former student paused for a while and answered that the Chinese at that time considered purchasing a vehicle is a need not a luxury. The exact situation is same in Russia where business analysts anticipate the country surpassing Germany and becoming the biggest car market within Europe. However taking advantage of such opportunities need a specific set of expertise. For instance there is no need in strategizing the activities of the forever more intricate network of world suppliers, extracting profit on every deal. In his book, Management Challenges for the 21st Century, Drucker wrote “to succeed in the ever competitive world market, a company has to know the costs of its entire economic chain and has to work with other members of the chain to manage costs and maximize yields”. Drucker predicted this balancing step as a trademark for current business to function split global polity and global world economies. Drucker however points out that proprietorship will definitely still exist. In his book Management in the Next Society however, business enterprise, pacts, know-how, contracts treaties and joint ventures will steadily be the building blocks of a business mergers. Globalization brings numerous potential advantages to world products and world economies. It is the benefits of globalization that cause economic wellbeing on global levels, therefore benefiting a wider population. Explained below are the benefits of globalization to business which enables the growth of international economies hugely. These benefits are; free trade which is the manner in which different countries exchange goods/services and resources. Meaning countries can focus on manufacturing products that have a less relative benefit. (World Bank World Development Indicators, 2010). This translates into countries manufacturing products at a very low opportunity cost. This consequently leads to reduced product prices for consumers, larger export opportunities for local manufactures, great choice for products, and economies of scale through focusing on specific products, free labor movement and increased competitive advantage. Another advantage of a global world economy is it presents greater competition. Local monopolies were safeguarded by lack of rivalry. Nevertheless globalization translates to companies facing greater competition from foreign ones. Disadvantages of Globalization Globalization has evidently benefited many businesses across the globe; however these advantages come with risks. One of the major disadvantages of globalization to companies is raising risks linked to inter-reliance across markets. As nations continue to rely on each other, a harmful financial shock in one nation can easily spread to others. For instance a decline in automobile sale in the United Kingdom was felt across other European markets because many of the vehicles purchased in the UK were imports form the EU zone. The 1990s Far East crisis was prompted by the decline of some Japanese financial credit banks. Most present example is the downturn of America’s sub-prime housing sector which generated a world crisis in the world banking system. Banks across the globe suffered a decline of asset value further decreased by borrowing among each other. As a result of the crisis it generated a liquidity problem and triggered a severe collapse in the world economy. Over customization for example, over dependence on manufacturing a limited amount of products for the international market is another disadvantage linked to globalization. An abrupt decline in global demand for one of the goods can throw several economies into recessive state. Several third world nations suffer by over customizing in a restricted range of goods such as tourism and agriculture sector. Several experts argue that currently we require a different sort of globalization. There ought to be methods to ensure that all countries benefit from the advantageous side of globalization. Developed nations should assist poorer countries by offering better education standards and demonstrating to them how new innovations work. Globalization has promoted ridding off man made obstacles, enabling rapid standardization of platforms and process, by integrating and linking nations that had initially lived separately.
