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AMIR WAHID KHAN ATTA-UR-REHMAN KHAN ZAHID KHAN KUNDI

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The Effects of Globalization on Business

The effects vary a lot from one part of the world to another, and from one area of business to another. Communications infrastructure is important to modern businesses, but not all countries have got one. There is also the ‘non-traded’ sector ie goods and services which are not traded internationally. Domestic services, for example, have to be provided where the house is; you can’t export a clean house.

Competition

- Foreign businesses buy into domestic markets.- Deregulation opens up markets to competition.- Deregulation encourages innovation in new products and markets which challenges traditional market leaders

Meeting consumer expectations and tastes

- Generally, consumers all over the world are better informed, have higher incomes and therefore higher and more exacting expectations. This forces businesses to meet higher standards.

Economies of scale

Selling into a global market allows for enormous economies of scale, although not all industries benefit from these.

Choice of location

Businesses are now much freer to choose where they operate from, and can move to a cheaper and more efficient location. In the last decade the UK has been seen by many businesses as an attractive business location, especially in financial services, and many businesses have located in the UK which has boosted the UK economy but also provided increased competition for UK businesses.

Choice of location

This increased movement of businesses and jobs has, to some extent, forced governments to compete with each other in providing an attractive and low-cost location. Ireland, for example, offers ‘tax holidays ’ to businesses relocating there. Manufacturing businesses are increasingly relocating to low-wage countries such as Indonesia.

Multi-national and multi-cultural management

This is a major challenge to businesses and their managers. A multi-national business environment is more complex with more variables, and so is more difficult to manage.

A multi-cultural employment policy leads to employees of many different nationalities, languages, religions and cultures in different offices across the globe.

These employees react in quite different ways to incentives, to motivation and it is very difficult to find managers who are sensitive to all these different factors.

It is very easy to inadvertently give offence and demotivate workers.

For example, the Japanese were initially very disappointed with their Thai employees who didn’t respond well to Japanese methods of building up corporate loyalty and motivation. Once they turned production targets into a game, the Thais worked extremely well.

Globalization of markets

National borders are becoming less and less important. Markets stretch across borders and MNCs are well-placed to take advantage of this. The same issues of language and culture and so on arise.

Globalization of markets

Marketing, in particular, is a minefield because of its dependence on language.

For example, the GM Nova failed in Spain because ‘Nova’ means ‘doesn’t go’ in Spanish.

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