Understanding Globalization for Managers

What is Globalization?

            Globalization refers to the alliance of the global economic order amalgamating through the reduction of international trade barriers such as import and export fees, trade embargoes, quotas and other tariffs.  The overall goal of globalization is to simply increase the wealth of nations on a global scale.  The means in which this can be accomplished is through policies, specialization, competition, and international relations.  Globalization is often described as the way regions, nations, people, societies, cultures, and economies have been connected through trade, communications, direct investments, migration, military presence, technology, and transportation.  Globalization can also mean the integration of popular culture (i.e. movies, art, and literature), sociocultural events, languages, and even ideas.  Once one culture, which is considered “advanced”, shares knowledge with another less advanced culture, the less advanced culture is then said to be globalized.  

            The term globalization is generally used to explain a flow of goods, ideas, and culture between nations; it does have a series of advantages as well as disadvantages which must be considered when sharing goods, services, and even information with other nations.  There are many aspects of globalization that must be taken into account, such as: industrial, political, financial, language, economic, informational, ecological, technical, ecological (regarding a nation’s resources), and religious.  Globalization is an extremely important topic to understand in today’s society and this paper is a breakdown of the most important economic aspects and effects regarding the issues and how they affect the United States.

The Globalization Effect

            In the United States of America, globalization is not a new issue.  We, as Americans, are constantly changing the face of our culture.  It is certain that we hold many traditions, morals, and values as a people; however, Americans naturally love change, shopping, communications, as well as technology.  Many businesses, as well as the employees within a business, have had to alter their ways of doing business because of globalization.  But how does globalization affect our nation in other economic ways, on a grand scale?  How do businesses, as well as managers, have to change due to globalization in the United States in order to stay in business?  Are all businesses affected by globalization?  Which facets of business have to change due to globalization? And, what has happened to a manager’s responsibility within a business since globalization? What are the effects of globalization on competition within and outside of the United States?

            Globalization has been a part of the United States since the birth of our nation. (Boudousquie & Leavell, 2007)  The United States traded tea, cotton, tobacco, and silver with England, traded fur with France, and traded various other commodities such as rum, slaves, sugar, and spices with the Dutch, Spanish, and Portuguese just to name a few.  Since colonial times, globalization in the United States has grown expansively throughout the nation and has affected the United States economy in many ways – which includes the way big and small businesses operate.  Globalization started rather small with businesses trading in colonial times, then later on when banks and investors began exchanging money across borders.  (Boudousquie & Leavell, 2007).  Today, American citizens are able to purchase knickknacks and even Japanese stock online from the comfort of their American home.  So, on a grand scale, globalization affects the entire economy, namely in the areas of technology, competition, political policy, culture, and even various other social issues such as immigration and online trade.  

            Competition is a very important aspect of globalization – it is competition which is the precursor to demanding that businesses and managers within businesses adapt their behavior to survive in the face of globalization.  Because globalization enables outsourcing and lower prices on domestic goods through importing, businesses in the United States are facing more financial issues.  For instance, some companies have closed factories in the United States because they have moved to foreign countries where they are able to cut labor costs. It is hard for United States’ businesses to compete with Chinese household commodities pricing when importing.  The main idea here is that importing is cheaper than making the goods in the United States.  When companies outsource for cheap labor, well, this exacerbates the current United States unemployment issues as well as the recession. So what must managers do in the face of globalization?  Should they compete with lower prices thus enhancing a recession? Or should they simply maintain their prices and risk losing their investment in their business?  Or should they move operations overseas (outsource) in order to keep costs low and still stay in business?  This is a true dilemma with companies and there is no real answer to this question.  However, as a business person, I would more than likely move operations overseas until things got better at home unless I could get by with lower prices for an indefinite period of time.  But then again, how will things get better at home with businesses doing this?  It truly is a dilemma and one that is an important question in the United States’ current state of affairs.

            Not all businesses are affected by globalization – yet.  I say yet because as time marches on, businesses who want to stay in business will have to compete with those businesses that are adapting and embracing technology as well as international relations.  As more and more businesses become integrated into the realm of globalization, managers and businesses will have to adapt to this change.  They can either adapt or go out of business; these are the rules of a competitive marketplace.  If companies are not able to compete with other companies, then they will eventually go out of business.  For instance, nowadays business are able to compete globally with the internet.  Many small businesses and some large businesses still do not have a website for their business.  As emerging nations gain broadband access, the market is growing, and fast.  These nations who are experiencing new policies (such as allowing internet sales globally and the use of at-home broadband access) are jumping at entrepreneurial opportunities and thus expanding the global market of trade.  (Renski, 2009).      

         Looking at new nations joining the global market, competitiveness cutting into profits, and overall changes around every corner, how has a manager’s responsibility changed due to globalization? I feel that looking through just the last 50 years, it is very clear to note that a manager’s responsibilities are becoming more diverse and decisions are becoming more and more difficult to make with any amount of certainty.  Managers need to keep one thing in mind, and this is that the global market is a very dynamic place.  For instance, one day steel may be worth $500.00 per pound and the next day it could be worth as little as $50.00 per pound.  Because demand and supply varies greatly just within one nation, it would be wise of the manager to keep in mind that globally this principle will be larger.  It is important to realize that as time goes on, this change will only be greater as more and more nations / people / businesses enter the market.  These “patterns of evolution are dynamic; terrains often undergo significant changes as globalization proceeds.” (Collis & Carr, 2011). 

Advantages and Disadvantages of Globalization

            There is a great debate currently on the advantages and disadvantages of globalization.  This debate is largely political and economic in nature and both sides have very good arguments and points to be made.  However, this paper is not designed to take sides on the issue, but rather to portray an objective point of view which highlights the important points of both the advantages and disadvantages of globalization.

            According to G. L. Breedon, of darkseptemberrain.com, some of the advantages of globalization are:  increased trade between nations, increased liquidity of capital which allows investors to invest in developing nations, businesses / firms / corporations have greater flexibility to operate or trade across borders, globalized mass media integrates world events, the sharing of information is increased, there is a great ease and speed of transporting goods, with globalization there is the chance of democratic ideals that can be spread to developing as well as other non-democratic developed nations, reduction of the likelihood of war breaking out between developed nations (because if they are trading partners, they will have more incentive to remain allies), and increase in policies that can help with environmental protection.

            Some of the disadvantages are: outsourcing – when developed nations send skilled workers to undeveloped countries due to the cut in labor costs and when companies hire other people in different countries who will work for much less than their home country; increased likelihood that if there is a problem with one nation that many nations could be affected (i.e. war, or natural disasters); threat of cultural limitations posed by the media favoring corporation interests; a chance that a nation may create a threat of violence when reacting to the transition of globalization in an attempt to preserve their heritage (culture clash); greater risks of disease being transported across borders;  transfer of capitalism or seeing prosperity in only materialistic terms; international organizations such as the World Trade Organization could infringe on national sovereignty; and decreases in the integrity of the environment of the developing nations as corporations move in and take advantage of lax environmental regulations.

Neutralizing the Disadvantages of Globalization

            As the previous section shows, there are just as many disadvantages to globalization as there are advantages.  How could we, as a global entity, neutralize some of the disadvantages in order to make globalization more of a smooth process for developing as well as developed nations?  For globalization to work well in the future, it will eventually be mandatory to make adjustments in order to fix some of the issues that are already inhibiting the advancement of people. Neutralizing the disadvantages of globalization would help the overall cause and effect of globalization in many ways; it would even perhaps help new nations embrace globalization in the future.  I agree with the statement by Mike Gordon, “"Made in China" is not necessarily a bad thing”. (Gordon, 2007).  I do feel that it is important to embrace developing nations in order for trade, technology, and information sharing to advance in every society simply because the advantages listed above create jobs and can help both developed as well as developing nations if the disadvantages were taken care of properly.  But the overall feel of globalization in America is generally bad.  This is that the people feel anxious, nervous, discontent, and anger regarding globalization due to the disadvantages.  A Professor in the Practice of International Trade says this of the overall American attitude: “globalization is highlighting two alternative visions for America: one vision is of a state with a cohesive set of purposes and interests and a commitment to the economic security of the middle class. A second (newer) vision sees the state as neither promising nor providing a larger sense of purpose.” (Janow, 2003).  This section contains some suggestions to negate a few of the aforementioned disadvantages of globalization. 

            First, outsourcing – anytime I hear about globalization critics have claimed that it is removing United States jobs to foreign countries.  This actually translates into developed nations hiring cheaper labor in other countries to cut costs.  Outsourcing sometimes also includes sending skilled workers to undeveloped nations to train these new, lower paid employees.  So what could we, as a nation, do in order to keep jobs here in the United States?  I feel that perhaps a good idea for this would simply be to not cut the costs and offer prices here that reflect United States wage demand.  I understand this is a hard concept, especially for companies who save millions per year in profit, not to mention that outsourcing creates jobs in other countries.  Therefore, why not simply expand without closing businesses in the United States?  Job loss due to outsourcing is a serious problem of globalization; according to Robert Morley of thetrumpet.com, “In reality, outsourcing makes Americans poorer over time, because America’s wealth and technology slowly migrate to other nations.” (Morley, 2011).   Obviously outsourcing is one of the major disadvantages of globalization that needs attention before it spirals out of control for developed nations.   I do not feel, however, that this is necessarily the case.  I feel that American wealth is simply branching out and the United States should be able to compete in international markets without the nation crumbling to the ground.

            Other disadvantages such as environmental control (air, soil, and water pollution) issues that corporations bring with them to the undeveloped nations, the spread of communicable diseases via the trade of goods, and threats upon national sovereignty can all be very easily neutralized by the addition of new policies and laws to create new margins of trade.  My suggestion would be to eventually create global standards for health and environment procedures in order to create a common understanding of the rules of trade.  For instance, if all countries were no longer allowed to use lead paint, if all countries had to make sure their food processing equipment was cleaned properly, or if all countries had to abide by cape and trade laws, then perhaps there would be much less disease and environmental issues on a global scale.  The culture clash between corporations and the people of the underdeveloped country could easily be averted by simply learning the culture and becoming less ethnocentric and more open minded to new customs, languages, traditions, mores, values, and norms of the particular country.  I understand this could create more costs for the companies who are outsourcing to teach/train their managers on the different cultures, and if policies are in place to protect people and the environment then possibly it could even out the trade playing field a little in terms of cost.  I have learned something new when doing research for this paper and that is globalization is occurring on very uneven terrain.  For instance, developed nations choose to outsource mainly to cut costs by hiring cheap labor, and in some cases the corporations are able to surpass strict laws in the United States by going to another nation with lax health / environmental policies.  And simply because the laws are different in each nation, the playing field is uneven.  There are many trade laws in effect for certain nations, some nations simply do not comply, some nations are not required to comply  I truly believe that if laws were as globalized as trade, that the negative effects of globalization would not be nearly as bad.      

Conclusion

            Globalization is the integration of knowledge, goods, and services with an overall goal to promote wealth and prosperity to every nation it touches.  Globalization encompasses every facet of an economy that is currently, or will be, partaking in trade with a different nation.  Globalization is not a new concept to the United States as we traded in early colonial times with England, Portugal and various other nations for goods; therefore the overall principle is the same, but many details have changed throughout the years since that time.  Because of globalization, managers, corporations, employees, and corporations themselves have had to evolve in numerous ways just to keep up with domestic as well as international competition.  Today, the average consumer is able to purchase spices and herbs from India via the internet instead of going to a local store.  Globalization has created much new work for managers and corporations as well as creating much ease for the average consumer. There are many advantages and disadvantages to globalization; within the past few decades especially, there has been a very heated debate regarding globalization.  This debate is largely due to technological advances and globalization spreading faster than are the policies which are able to control trade.  The major advantage is that globalization can help emerging economies / nations but the downside is that it could also hurt an already developed country if proper precautions are not taken.  I feel that with the correct balance of policy and knowledge that most, if not all, of the disadvantages of globalization could be neutralized in the future.

References

Boudousquie, R., Maniam, B., & Leavell, H.. (2007). Globalization: Its Impact on the United       States             Economy. The Business Review, Cambridge, 9(1), 94-100.  Retrieved October      30, 2011, from ABI/INFORM Global. (Document ID: 1416813331).

Breedon, G. L. (n.d.). Advantages and Disadvantages of Globalization. Home. Retrieved             November 1, 2011, from http://www.darkseptemberrain.com/ideas/advantages.htm

Collis, D., & Carr, C.. (2011). Should You Have a Global Strategy? MIT Sloan Management        Review, 53(1), 21-24.  Retrieved November 2, 2011, from ABI/INFORM Global.       (Document ID: 2478300251).

Gordon, Mike.  (2007, July). The world is flattening at an ever-hastening pace. Aftermarket             Business, 117(7), 62.  Retrieved November 4, 2011, from ABI/INFORM Trade &             Industry. (Document ID: 1310806121).

Janow, Merit E..  (2003). The Rules of the Global Game: A New Look at U.S. International         Policymaking / The Politics of Globalization in the United States. Journal of Policy       Analysis and Management, 22(2), 322-324.  Retrieved November 4, 2011, from       ABI/INFORM Global. (Document ID: 310004431).

Morley, R. (2011, January 18). TheTrumpet.com by the Philadelphia Church of God. The Death   of American Manufacturing. Retrieved November 4, 2011, from http://www.thetrumpet.com/?page=article&id=1955

Renski, H.. (2009). New Firm Entry, Survival, and Growth in the United States: A Comparison   of Urban, Suburban, and Rural Areas. American Planning Association. Journal of the             American Planning Association, 75(1), 60-77.  Retrieved November 2, 2011, from        ABI/INFORM Global. (Document ID: 1843935431).