Globalization has become one of the most widely discussed issues and concepts in the business world during the last few decades. Globalization influences economy, societal life, and business environment in a number of ways (Bella, 2010). The increased level of competition, information transfer, outsourcing, and technological advancements are the major impacts of globalization on the business community (Boudreaux, 2008). Moreover, the impact of globalization on organizational culture and operations cannot be ignored -- perhaps these two areas are the major concern for business leaders when they have to watch over their competition with the international brands operating in their home country (Korine & Gomez, 2002).
Five Critical Factors which impact Organizational Culture and Operations
There are various factors which impact the business operations, sales, financial performance, and industrial relations of business organizations in the international landscape. However, a few of these factors can be regarded as the most critical when it comes to assessing the level of competition between local and international firms. These five critical factors are now discussed below in detail:
In this 21st century, business world observes a very stiff competition between local and international brands in each and every aspect of their business operations. Organizations find it impossible to compete just on the basis of their high quality products and services. The most important factor that makes an organization competitive or non-competitive is the costs of running its business operations. Therefore, organizations are always in a quest to find innovative ways and techniques to reduce costs and increase their profit margins (Parker, 2005). Outsourcing has become famous with the emergence of globalization in the business world. Offshore outsourcing is one of the most popular and successful techniques of cost reduction of the present times (Robinson & Kalakota, 2005). It is a phenomenon by which an organization allocates some of its business processes and operations to some other organization in the offshore markets. The primary purpose behind offshore outsourcing is to control the business costs and hand over every type of responsibility related to the allocated business operations to the organization in the offshore market (Miller, 2004).
Control over Operational Costs:
Outsourcing brings various benefits to organizations in one form or another. The biggest benefit which is realized from offshore outsourcing is the control over business costs (Hira & Hira, 2008). For example; if the labor is cheaper in the offshore markets as compared to the local market, a majority of organizations tend to switch their business operations in to those markets in order to reduce their wages and administrative costs (Robinson & Kalakota, 2005). Taking the United States as an example, labor costs are very high in the domestic markets. Labor oriented manufacturing and services organizations are therefore shifting major parts of their operations into other countries where these costs are lower, like; Mexico, Vietnam, China, India, etc. This international shift of business operations or offshore outsourcing makes these organizations able to manage their business costs in a better way (Miller, 2004).
Competition between Local and International Brands:
Another reason why offshore outsourcing is a preferred choice when it comes to competition between local and international brands is the lack of specific business experts in the local markets and their availability in the offshore markets (Robinson & Kalakota, 2005). Secondly, there is an economic crunch in the world's financial market for the last few years. Especially, this economic crunch has badly affected the United States market causing thousands of job losses and bankruptcy of various big organizations (Miller, 2004). In such a situation, offshore outsourcing is a better choice to move the business operations to other countries where this economic slowdown is not so severe.
Focus on Core Operational Areas:
Offshore outsourcing is a very useful technique for those organizations that just want to focus on their core business activities and take the services of offshore vendors to handle their secondary businesses (Robinson & Kalakota, 2005). In the United States, numerous organizations have started outsourcing their business units to other markets in order to take the advantage of cost saving due to low labor costs, low level of competition, etc. (Miller, 2004). In this way, outsourcing brings benefits to both -- the economy as well as its participants, i.e. individuals and business entities. For the economy, outsourcing strengthens the local companies with respect to their international presence and an increased market share and sales volume. At the same time, individuals enjoy high quality and reliable products and services which are the results of outsourcing efforts by their local companies (Hira & Hira, 2008).
Marketing and Promotional Efforts:
Moreover, outsourcing boosts up the marketing and promotional efforts of business organizations. The outsourced business processes not only create brand awareness in the international markets, but also do marketing research for those particular products and services in the new markets. Outsourcing has also enabled the United States organizations to get benefit from time zones differences in different regions.
For the last few years, it has been a blazing debate that offshore outsourcing causes an increase in the level of unemployment in the United States market (Hira & Hira, 2008). But reality is that it produces more jobs at the international level. Offshore outsourcing reduces business costs which persuade the companies to expand their existing business operations in the local markets. In other words, U.S. companies can save their business costs through offshore outsourcing and invest the saved money in the new product development and services improvement processes (Hira & Hira, 2008).
2. Market Efficiency
Due to globalization, the markets have become more efficient and responsive to external environmental factors. There is a pure equilibrium between the supply and demand factors, i.e. companies can now find customers for their products in both local and international markets. In contrast to the past when companies were limited to their geographical boundaries within the home country, Globalization has made it convenient for them to assess out shore markets to sell and promote their products in a very cost efficient and effective fashion (Boudreaux, 2008).
Globalization has made the markets more efficient by reducing the time, financial, and informational constraints which organizations generally used to face prior to their international reach. For example, companies can take the advantage of time zone differentials and promote their products 24 hours day through internet marketing mediums. Similarly, outsourcing has enabled them to avail labor, technology, and manufacturing capabilities from foreign markets which are more expensive in their local markets (Parker, 2005).
More Efficient Operations Management:
In the past, companies were not able to achieve a good balance between the demand and capacity options of their products and services due to the limited number of customers and inefficient markets. Globalization has positively influenced this trend by opening new horizons of global reach for the companies. Now they can not only promote their products at the international level, but can also build their brand identity in the international markets which can be the potential target markets for their future business expansion. Due to this more efficient operations management, companies are better able to compete with international brands operating in their home country.
3. Marketing and Promotion
Due to globalization, business organizations have successfully reached farther world markets which were inaccessible in the past. Now, they are able to market and promote their brands in all the corners of the world by using advanced marketing mediums. The traditional marketing mediums like television, radio, newspapers are now accompanied by modern communication mediums like social media networking sites, internet global search engines, smart phone connectivity through satellites, etc. All these mediums have enabled business organizations to target potential customers from all over the world (Cadle, Paul, & Yeates, 2010).
These marketing mediums not only promote the companies' products in the international markets, but also present their true image to the most important stakeholders from different perspectives. For example, companies are now more exposed to global watch for their social and economic contributions. When they promote their products to international customers, they are also required to show who they actually are. It is done by showing their corporate social responsibility efforts like contributions to social welfare, educational advancement, recruitment of culturally diverse workforce, adherence to the equal employment opportunity and environmental protection laws, etc. On one side, globalization has made the marketing and promotional efforts more efficient; and at the same time, brought a number of challenges in the form of its social welfare contributions (Weinstein, 2005).
4. Economic Forces
When an organization expands its operations in an international market, it has to conduct a full-fledged analysis of its external environment, i.e. The forces which can impact its business operations, culture, or public image in a positive or negative way (Cadle, Paul, & Yeates, 2010). Due to globalization, it has become quite easier for organizations to assess these environmental forces in context of their own business operations. However, once an organization enters into an international market, it has to face these forces and associated threats and challenges in the normal…