Advantages and disadvantages of business globalization

Business Globalization Pro's And Con's

Business Globalization Pros and Cons

Globalization is a word that has come to be used in the every day vocabulary. The generic concept basically refers to a wide series of changes occurring at various levels, due to numerous causes and generating a next to infinite array of consequences. "Covering a wide range of distinct political, economic, and cultural trends, the term globalization has quickly become one of the most fashionable buzzwords of contemporary political and academic debate" (Scheuerman, 2006). The term has often been assimilated with the elimination of barriers and the creation of a free international market, the growing power of the western, and even American, ways in the international context (westernization or Americanization), the easy transmission of information across the oceans due to technological innovations (such as the Internet Revolution) or the idea that individuals across the globe can live in absolute peace. However it is present in multiple domains, including the cultural, technological, political and sociological, the business community seems to be the most exposed to the effects of globalization. And these effects are both praised as well as blamed.

Positive Aspects of Globalization

The general favourable outcomes of globalization revolve around an increased access to resources, including capital, labor force and technologies, all of which are aimed to support the development of industries across the globe and increase the living standards of the populations.

An important aspect of business globalization is that of outsourcing jobs outside the United States. This basically means that American entrepreneurs sign contracts with foreign service providers, which most often offer high quality services and cheap workforce. A primary con argument was that offshoring reduces the number of jobs available to the American citizens and as a consequence, increases the unemployment rate and decreases the population's living standards. In essence however, offshoring jobs materializes in cost savings, which then lead to benefits to the end consumer who will pay less for the purchased products, will have more money and an increased living standard, but will also forward an increased demand for other products and services, which will in the end actually create more jobs (Lindsey, 2004).

But globalization is not only beneficial for the international economic powers, namely the first world countries, and it also presents favourable outcomes for developing and third world countries. From this particular standpoint, less developed and developing economies often wish to adhere to the process of globalization, but are often prevented from doing so due to the unstable economic and political conditions within their countries. "Globalization cannot start in underdeveloped countries unless there is economic, social and political stability. Globalization will leave countries that become unstable" (Thurow and Lessard, 2002) Then, these countries make increased efforts in the sense of creating economic and political stability and increasing the population's living standards, all to their overall benefit. In other words, globalization stimulates the growth of developing and less developed countries.

Also from the standpoint of the developing countries, globalization allows multinational companies to expand territorially to regions with cheap workforce and create new jobs within these regions. The most eloquent example in this sense is giant Nike, which conducts all of their manufacturing operations outside the United States (they only handle marketing and design within America). The company, just like other American multinationals, has opened plants abroad and gave jobs to the locals. The never ending debate is fuelled by a large discrepancy between the low wage paid to, say an Indonesian worker, and the large retail price of the final product. Regardless of the possibility to explain the difference through sometimes insufficient sales, custom charges and other fees, fact remains that the multinational corporations most often offer their employees wages above the national average. In Vietnam for instance, the employees in foreign owned enterprises registered wages next to double than the employees in national organizations. "Multinationals actually pay what economists call a "wage premium," that is an average wage that exceeds the going rate in the area where they are located. Affiliates of some U.S. multinationals pay a premium over local wages that ranges from 40 to 100%" (Bhagwati, 2004). These organizations were also accused of severely breaking human rights and exploiting the staff by forcing them to work and sometimes even live in improper and unsanitary conditions. But whenever such accusations were brought, multinational officials would make increased efforts to improve the working standards. In other words, globalization increases not only the living standards, but also the working conditions within developing countries.

In terms of the laws that govern the business community, more globalized countries tend to implement regulations that stimulate growth and development, whereas governments in less globalized countries tend to interfere onto the market and regulate it in a direction opposed to liberalization and growth. "The more globalized nations tend to pursue policies that achieve faster economic growth, lower inflation, higher incomes and greater economic freedom. The least globalized countries are prone to policies that interfere with markets and lead to stagnation, inflation and diminished competitiveness" (Fisher and Cox, 2006). And the simple existence and studying of these trends results in a conclusion that globalization opens borders and creates more freedom, to allow people more opportunities and choices. "Thanks to globalizing economic freedom, people know that living in a state of oppression is not natural or necessary. People who have acquired a taste of economic liberty and expanded horizons will not consent to be shut in again by walls or fences" (Norberg, 2004).

Negative Aspects of Globalization

The criticism of globalization is a strong force and to prove it, several groups have been formed to militate against it. Their primary arguments revolve around a reduction in the jobs across the developed countries that outsource their operations to states with cheaper workforce, consequently leading to increased unemployment rates and decreased living standards. The anti-globalization organizations then state that offshoring companies exploit the native workers and force them to work in unsanitary conditions. And the exploitation does not only come from the international organizations, but also from the governments in the wealthy countries. These "governments use their trade policy to conduct what amounts to robbery against the world's poor. When developing countries export to rich country markets, they face tariff barriers that are four times higher than those encountered by rich countries. Those barriers cost them $100bn a year - twice as much as they receive in aid" (Make Trade Fair).