A Z Narasinghe

MULTINATIONAL BUSINESS Globalization

Name: Calvin Jason M.G.

Course Title: London Met - BBA

Batch No: 003

Multinational Business

Globalization is an ever developing factor that keeps changing the international business landscape.

1. Define the term ‘Globalization’ giving emphasis to factors that derive it.
2. “Globalization can be advantageous and disadvantageous for both business and countries”. Discuss the statement.

"Globalization" was introduced and came fast into popular usage in the early part of the 21st century, describing the improvements of people, knowledge and ideas, and goods and money across country boarder. It has led to increased interconnectedness among the world's populations, economically, politically, socially and culturally, integrating global economic systems (Peter Schwartz and Peter Leyden). Technology keeps changing every day. The airplane, the telephone, and the Internet are just three inventions. But these inventions are which attributable to the spread of globalization. So in simple term technology and communication invented globalization.

It is very important to learn and know about globalization, especially as students who study “Multinational Business” as a subject because multinational business is totally based on globalization. In other words globalization is what has given birth to multinational business. Therefore, the importance of learning it as a subject is that globalization is about the interconnectedness of people and businesses across the world that eventually leads to global cultural, political and economic integration. It is the ability to move and communicate easily with others all over the world in order to conduct business internationally. In today’s world, globalization is an important concept for students in higher education to understand and appreciate because of the demand in business and industry to hire people who can work with people of other nations and cultures and if need be can travel independently internationally to promote their business or industry. In addition, the world faces global challenges that will take interdisciplinary groups to solve these challenges.

Many authors have described the concept “globalization” in various ways. Globalization refers to all those processes by which the peoples of the world are incorporated into a single world society, global society (Albrow 1990). Globalization may indeed mean the end of the nation-state if the nation-state fails to redefine itself to meet the new conditions it faces in the global environment (Carnoy 2001). Globalization is a term used to characterize the growing tendency between firms to perform their trading practices by moving outside their graphical and economic boundaries in which they exist (Brinkman and Brinkman, 2002). According to Charles Hill globalization is moving toward a world in which national economies are merging into an interdependent global economic system. So in general globalization refers to the changes in the world where we are moving away from self-contained countries and toward a more integrated world. Globalization of business is the change in a business from a company associated with a single country to one that operates in multiple countries.

There are mainly two facets of globalization. They are the globalization of markets and the globalization of production. Taste, preference and purchasing behavior differs from nation to nation and each country’s market is different than the other due to various reasons such as taste, preference, culture, religion, education, etc. But in today’s world there is no big difference between countries and human behavior, especially when it comes to business. Customer taste, preference and expectations are mostly the same all around the world. For example, Coca Cola is consumed all around the world, people who never knew or didn’t bother to know what a hamburger are now having hamburgers very often thanks to McDonald’s. Apple iphone, Sony PlayStation, IKEA Furniture and many more products are being bought and sold all around the world because globalization has brought almost all markets together that their tastes, preference and expectations are no longer different. This is what it means by globalization of markets.

“Cost” sounds like a threat when it comes to the business world because cost is the biggest challenge or the barrier which blocks and keeps firms from reaching its ultimate purpose, profit maximization. Each and every firm, like it or not has to bear a huge cost on labor. But globalization has given a solution for that too same as it has given solutions to various other problems which countries face today because countries can no longer stand and survive on their own without

depending on another or more. Currency and wage rate differs from country to country. In some countries (mostly in developed countries) it’s extremely high but in some it’s not. Therefore, it is cheap for firm to outsource labor from developing countries where they can get the same work done spending just a cost comparatively. For example, building Boeing’s 777 involves eight Japanese suppliers and a supplier from Singapore. Boeing outsources 65% of its 787 aircrafts to foreign companies (Lecture Notes).

It is common knowledge that there is always a positive and a negative side in everything. Same way there are advantages in globalization as well as disadvantages too.

Advantages:

The process of globalization can bring more jobs opportunities in host country when MNCs move their production operation into developing countries. According to Rama (2003), job creation only will occur in export-processing zones where large amount of work forces are required in order to keep the production running. Example; Coca-Cola decided to invest in Malaysia with a new bottling plant, consist of $301 million investment. They stated that this investment will able to create 600 to 800 jobs at the plant with 8,000 jobs connect with local suppliers (Agence France-Presse, 2010).

Globalization can bring good and bad effect to developing countries. Developing able to reduce the amount of population that live below poverty level with the help of globalization as the effect of job creation has been achieved (Lee and Vivarelli, 2006). Local citizens are able to get a job and ensure the survival of their family and improve their living standard.

Transfers of technology depend on resource available by MNCs with the ability to achieve the level of technology development in order to make them competitively in global market. Hence technology transfer to subsidiary in other country allow developing country to learn the operation of new technology (Mansfield and Romeo, 1980).