Impact of Globalization on Business

 Preshern, St. F., 2014. Impact of Globalization on business, Economic Analysis, 47(4), pp.83-89
Fritz, L., Hadley, M., 2018,  Impact of Globalization on business, This Is How Globalization Is Affecting Entrepreneurs.  
 Talovic, S., Mahmutović, H., Kurtovic, S., 2017, Impact of globalization on performance of company, Researchgate.

 

What is Globalization?

Globalization is the process of expanding cultural, economic, and political activities worldwide. Globalization refers to moving towards a more integrated world. Globalization in Business refers to grow the business globally.

There was a time when consumers had access to limited sources of products and services available locally. Their choices were also limited to what they could access in the local market. But with the growth and evolution of the internet, there has been drastic change in this trend.
Globalization is a trend now, through which economies in the world connect to each other. The companies are no longer imprisoned in their region or countries and can implement a wide range of business activities around the world. Many companies are present in markets around the world, conduct research and development according to consumer needs.  

International business refers to the transaction of products and services between two or more nations, regions or countries. It includes transaction of capital, skills, people etc.  

When companies do business outside of their country or region, they face a number of challenges. These challenges require companies to reduce costs to persevere in the international market therefore consumers don't find products or services too expensive. This implies to locate production in places where production costs are lower. In the context of the pressure to reduce costs, managers must cope up to respond to local pressures to adapt products suitable for local market requirements, where the company is active. Below are the factors which impact on how business operates : 

 1. Increased Competition.
Competition in international markets is growing day-by-day, with more multinational organizations that capture markets worldwide. It can be for product and service cost and price, technology adoption, target audience or quick production, etc. As competition increases, companies need to improve their quality and to sell at low prices to persist in the market. So, it will have a positive impact on consumers. As the number of resources are available to get products online as well as offline, customers will go to find the highest quality at minimum price.
With the advent of globalization, producers in one country are enabled to invest in another country and grow their revenue. Service-based companies get great opportunities with globalization. For example, service providers in India can work for companies located in the USA at a lesser price. If a company in the USA got work from an employer like data entry, accounting, software development, then they have to pay more to the employer. Instead, they will prefer to take work from a company in India which is cheaper than that.
Sometimes it can force a business to run at lower price thus decreasing revenue. It may discourage the employer and manager in the company. It may lead to pessimism and stress on the team. So it affects the team's morale and spirit.  

2. Customer Behaviour
The choices of customers vary drastically throughout the globe. They expect good quality at the lowest price. All expectations need to be fulfilled when running business globally. Companies need to analyze customer behavior according to country, even according to region sometimes. One needs to understand what consumers want from an organization.
For example, the Indian Television show 'best of luck nikki' was made by foreign directors Phil Baker and Drew Vaupen. This was inspired by foreign show "good luck charlie". The first and second season of the show was just translation of dialogues in Indian national language Hindi. After that, they came to understand what Indian public wants. So they changed the dialogues and concepts in season three and four which was more hotter than first and second. Another example here is McDonald's. They have Greece Mac menu for Greece and they sell maharaja burgers in India.

3. New Technology Adoption
One of the most striking factors here is technology. It enables new business opportunities. It is one of the significant tools to persist into competition in the market. Globalization leads to technology transfer and technological improvement. Companies have to have efficient use and management of technology. One of the striking advantages of new technology adoption is scalability. It allows automating functions that previously needed humans. The amount of work will be increased with new technologies. In addition to that, there will be no risk of human error.
For example, hong-kong based company GREE is the world's most trusted and valuable brand for Air conditioners. Its success is hidden in its technology they adopted.  Generally, normal air conditioners have a single compressor. When temperature sets, the compressor stops. Now, if temperature grows, the compressor starts again. So, there is a start-stop of the compressor which might lead to temperature variation in the room and one might feel uncomfortable in the office or house. But in GREE, there is a Double compressor system. One compressor target the temperature set and another optimizes that temperature. So there will be constant temperature once it is set. They make all this work by the robots. They create 5000 robots every year and distribute them around the globe.
Sometimes it leads to organizations to put up higher investment while adopting new technology. It may also lead to inefficient employees. Moreover, there will be less value of human work while new technology will come. Modern technology leads to dependency of work on machines that humans no longer need to think. For example, if a calculator is a good invention, it also adversely affects human's ability to do calculations. 

4. Employment
As everything has two sides, globalization also has. As there will be need for marketing, accounting, and software support in different regions, lack of employment can be reduced.  Globalization has led to firms outsourcing their jobs to developing countries, which have led to lack of jobs in developed countries. 

5. Management
There is no debate about it. When companies run business globally, management is mandatory. Economies of scale and cost reduction are the main goal of management. Therefore, companies decide to locate production in countries where the cost for developing products is less. 

6. Saturation in market
Globalization has led to the saturation in the market in all industries. Michael Hadley, CEO and President of iCorps Technologies, said "This poses a considerable barrier to entry for new businesses, while placing immense pressure on established companies to remain competitive. In response, entrepreneurs are using data-driven insights to better inform and deliver upon key business objectives."
According to Lathan Fritz, Founder, and CEO of Amerisales, "Globalization has made it so there aren’t really any ‘cookie-cutter’ ways to offer products or services anymore in many communities." It's become the standard for every entrepreneur. 

To recapitulate, globalization has it's pros and cons at the customer side as well as producer side in the business economy. In order to take advantage of globalization, one needs to be very strategic.