Globalization Issues in Business

Globalization is the diminution or elimination of state-enforced restrictions on exchanges across borders, and the increasingly integrated and complex global system of production and exchange that has emerged as a result. ~ Tom G. Palmer, Cato Institute

A few years back, most businessmen focused on making their businesses reach every corner of the country. Running the show on a national level was considered an achievement only a few could be entitled to. Slowly, things changed. Businessmen started contemplating about the bigger approach to business. They started traveling around the world in search of better prospects. Labor was somewhat being a barrier in expansion, as it was expensive. The solution to this problem was to hire labor from cheaper markets, which happened to be the third world countries, who had the skilled labor required, but did not have the prospects. Starting from here, the relations started increasing between two countries, which gave rise to easy communication. With all this came globalization, and later, all the issues in various business. Let's understand all these issues, positive and negative alike, in the following segments.

What is Globalization?

Globalization is nothing but the functioning of a business on a global level. When you treat the entire globe as your potential market, you globalize your business. Usually, there are certain barriers when it comes to the functioning of the business on an international platform. These barriers might include ones such as political, financial, and even geographical. When a businessman overcomes these barriers, he successfully globalizes his business. This concept can be looked at from another perspective too. Today, the sharing of information has reached a level we thought it never could. Upcoming artists and basically other 'like-minded' people could never share their interests, projects and views over a common thought. Globalization and international business thus, also mean the sharing of ideas and views on an international level.

Issues of Globalization in Businesses

Business is not just a corporate firm that provides certain goods and services. Business is any initiative started to earn profit. If this business, for earning more profit, is operating from different regions in the world, it will be affected by certain globalization issues. A business can be an IT firm developing some software, and a business can also be a merchant trading in cloth or something as simple as pickles. Let's check out both, the pros and cons of globalization on a business.

Pros:

Increase of Market
One of the best advantages of globalization is that it increases your prospects and your opportunities. When you look at the entire world as your customer, you suddenly increase your profit margin by many folds. Similarly, a bigger market also means better competition. Thus, prices will be negotiated for you, and you can choose what is most profitable to you. The best example of this is labor. If you can't afford the labor in one place, you can look at many other. A bigger market also offers many other benefits, such as opening up of related businesses, more tie-ups, more mergers, more acquisitions, and simply, just more business at the end of the day!

Foreign Currency
Globalization issues in business also include positive ones, and this is one of them. Globalization has also brought about a huge investment in poor countries in terms of labor and capitalization. With this, we see global development of countries together. The standard of living improves for many, and poverty reduces considerably. There is less difference between the values of global currencies, as they have to deal with one another on various platforms. Every country will gain something or the other from another country and thus, it becomes important that currencies are not hiked to an extent that they remain out of maximum purchasing capacity. There is more stability in global financial relations.

Technological Development
Technological development is a great boon for almost every country. Technology is something that is continuously redefined. Continuous innovation in the smallest parts of the world, lead to technological changes for the better. These technological advances can be shared with the entire world through globalization. Better the technology, better the output, and better the output, better the profit. As soon as a business goes global, it becomes aware of different technologies all around the world. These technologies and technological innovations can be implemented in the business for better gain.

Cons:

Shift in Employment
Though a business creates a lot of employment due to globalization, it does not do so necessarily in the actual country that it is home to. This is one of the most discussed globalization issues in businesses today. This might affect the business from the social perspective, where it also has a responsibility towards the society it functions from. When you hire people from another country to work for you, you create employment in that country and not in yours. Though English is the official language almost everywhere in the world, in some countries, it might pose itself as a barrier. Specially when employees of the same company, from two different countries, need to communicate on the same subject.

Recessions and Depressions
This is perhaps one of the most negative effects of globalization on businesses, as compared to any other. Before globalization came into the picture, companies were affected by financial situations pertaining to their own country only. Let's take this one example to understand the concept better. A business called 'A' functions from the United States, and has sister companies in India and Australia called 'B' and 'C' respectively. There are 50 more companies like A, which is quite a possibility. If recession affects the United States, it will automatically affect India and Australia as well. This means that due to globalization, the dependability of one country on another has increased to a greater extent than before.

Unfair Payments
One of the most common complaint against globalization in businesses is that it leads to unfair payment of wages and salaries. Skilled labor is paid differently in different countries by the same company. Thus, the rich company goes on becoming more rich while the labor's skills are yet not appreciated with justice. This leads to strikes, less employee retention, and problems with the unions.

Globalization issues in businesses also include the effects on environment due to their expansion. The governments give permission for more MNCs to be set up, as this increases the investment in the country. In this process, forests and agricultural lands are destroyed. Globalization, if done in the right way, is most profitable for any kind of business. Though all these globalization issues will continue to exist, will proper planning, the negative effects can be curbed to some extent.