In earlier time, when there were no industrialization and no globalization, each and every country was doing business in their own home countries. At that time, the number of industries was so low that most of the sectors were ruled, owned and managed by the government. This was the time when local or the domestic producers earned really good amount of profits for their production of goods or services (lotey, 2010). But as time passed, the need of globalization was felt by everyone. In late 1980’s globalization hit almost every other country around the world, and those who were not part of it later accepted globalization in order to boost their drowning economy (Becky, 2000). Globalization is believed to be started from Africa (education, 2013). Earlier it was only limited to people moving from one place (country) to another. When people from different places reached other countries they shared their ideas & customs with that new country, this slowly led to the exchange of items between persons, then business and then at large between countries. A simple definition for globalization is: Globalization refers to all those processes by which the people of the world are incorporated into a single world society, global society (Albrow, 2000).
Importance of globalization
What does globalization means? It is the link between, the different countries with each other for the purpose of business, government affairs, or for migrating people from one place to another. Earlier the scope of globalization was only related to the business but when it was clearly and broadly defined by many eminent authors the meaning of globalization changed. The importance of globalization in today’s world holds much more space in the room. There is no country left being the participant of globalization. Earlier it was only possible for the big scale industries to operate their businesses in other countries. Globalization made it possible, even for a newly opened business to go globalize. With the introduction of globalization many developed countries has made an enormous growth since then and has registered their name in the list of big players. An example of such a country is INDIA. In early 90’s India opted globalization in order to save its drowning economy, and to everyone’s surprise with a GDP of as low as 0.5% in 1990-91, India achieved a GDP growth of 9.7% in 2007-08. So globalization has its own importance that can’t be ignored while studying about globalization.
Firstly we will discuss the threats of globalization to Big MNC’s given by (berth, 2014):
- Rise in competition: When a new company steps into and becomes a participant of globalization, they faces a tough competition from the existing participants, as the existing firms are already using high standards in their products and services, this force the new entrant to improve their standard in order to compete in the globalized market. Sometimes the scenario is totally opposite, a new entrant comes with such high technology that the existing players have to rework on their standards.
- Social Obligations: When a firm enters to operate their business in a new country, they are pre-occupied with several social obligations to fulfill. These obligations are kind of compulsory tax on the international firms. If these obligations are not met, then the table can turn out of the favor of the firms.
- Huge Taxations: Each country has their own taxation systems, few countries provides rebates in taxes to international firms, while few countries charge huge taxes in order to earn good amount as revenue from such business firms.
- Cost of raw materials: Most of the international businesses have turned to set up their branches in under-developed countries. Sometimes the firms do not get the required raw material in such countries so they bring it from their home countries which cost them really high, ultimately results in high expenses and low incomes.
- Hesitation of Local Public: If a globalized firm sets up in a really backward country, they do not get much attraction of customers as customers hesitate to buy foreign brands thinking that they must be very expensive.
Now we will discuss the opportunities of globalization to Big MNC’s given by (ferida, 2013):
- Location of Choice: Many countries in order to attract a large number of foreign brands to set up their industries in their countries, gave many benefits such as choice of location for the industry. This does not only turn in favor of the firms but also gave them a competitive advantage on others.
- Standard of Living Increases: In a country, when globalized firms enter the market of under-developed countries, the countrymen of that country positively try the product and services of that firm. This not only favors the firms but also increases the standard of living of the peoples living in these under-developed firms.
- Skilled Labor: Nowadays companies that go globalize, first study all the aspects of the targeted countries and then selects the most suitable country with skilled labor, resourceful lands and other benefits.
- Brand Name: Globalization has made it possible for all the firms to make their brand name all over the world by operating their business in all possible countries. It is up to the firms now, how to make that name.
- High Tech Machinery: One of the most important opportunities that globalization has availed to the companies are the high tech machinery. When a globalized company goes to other countries for their business, they observe the host country and their technology and if find appropriate they opt that technology into their workings.
Here in this part of the assignment we will study about this topic in detail. As every country was entering into the globalization era because of its booming benefits, many were afraid of its unseen threats. It is an old saying “every good thing comes with a price to pay”. Similar, was in case of globalization it came with numerous benefits yet it didn’t managed to fade off its threats (Bellarus, 2010). To explore the topic of globalization’s opportunity and its threat, we will take an example of a firm that is currently doing really good at domestic and international level. Zara is a Spanish firm providing, Clothing line products, now all around the world and before globalization their supply was only limited to Spain. Zara is perfect example of a globalized firm that really worked hard and turned every opportunity of globalization into their favor. The owner of Zara is announced the second richest man of the world by (Magazine, 2017). How the owner of Zara clothing company managed to reach the spot of second richest man of the world, then the answer would be globalization (Buck, 2000). Zara presently owns 2100+ stores in almost 40 countries of the world. In 2015 Zara was listed in global brands list on 15th spot. Zara took every opportunity of globalization to make maximum profits out of it. Zara deals in Men, Women and Kids clothing; there is no doubt about the quality of the clothes you will get under ZARA roof. Below is the picture showing one of the ZARA showrooms in London at the most prominent place. This picture is a proof in itself about the success of ZARA because of globalization.
Globalization helped Zara in opting newer, better, safer and economic technologies. In every region or country where they incorporated their work Zara created a large number of jobs, in return they got trained & skilled labor (employees). In some regions they also received rebates in taxes from government of developing nations. These were some of the opportunities that are enjoyed by Zara. Now we will talk about the threats that emerged from globalization to this clothing brand. The first very common threat is the competition from the local brands. It is not always about brands but preference, even now there are a large no of peoples in developing nations that hesitates to buy branded clothes because of a their misconceptions that branded clothes means expensive apparels. Another threat to this emerging MNC is the lack of skilled labor in developing countries. When such companies with high technologies set up their branches in countries with outdated technologies and unskilled workers, the profits as well as the name of the company suffers. Another major threat could be cultural rifts between the company and the peoples of the host countries (Jicksy, 2012). An example of such threat is: In India, Coca-Cola Company compared and showed in an advertisement that their product (soft-drink) is better than milk, which affected the sentiments of many Indians, this advertisement created a cultural rift between the peoples and the company and this rift resulted in huge loss for the Coca-Cola Company.
Now we will talk about what the managers of these big firms learnt from the process of globalization. A manager is a person who manages every little or big action of his/her related department. A manager is a key person in the success of any business as the higher end only makes the rules, regulations, frame policies and set objectives, but it is a manager who makes sure that every single employee is working towards the achievement of that objective. In the process of globalization, a firm decides to set up their branch or an office into a country other than their home country. The high end authorities come up with this decision and the managers of that particular firm then studies, observe and gathers the information about setting up another branch in another country. If everything goes right, managers report back to the high level officials and finally they incorporate their branch in host countries.
In the process of globalization the managers of international firms explore their own field of capabilities and strengths. Globalization has really good and positive effects on the working of the managers. A manager working with a globalized firm not only gets the chance to work in their own country but also enjoys the opportunity of working in a host country (cuepper, 2017). Below are the points a manager working in a globalized firm can learn from the interplay between the host and home country in achieving success:
After observing all the facts and information about the globalization, a detailed and a brief conclusion have been written here. Globalization has its own merits and demerits that one cannot ignore. It is now really important for a company as well as for a country to be a participant of globalization. In order to earn worldwide brand recognition, a company needs to operate their businesses in overseas with better or with the same standards that they are providing in their home countries. All this has become possible just because of globalization. It has numerous threats as well, but globalization has helped many economies from drowning and it helped in developing friendly relations between the governments of different countries. Globalization has not only helped the business firms in earning brand name and profits but it has also helped the management in learning new aspects and new things about the dynamic environment of business. Hence Globalization is really important and substantial part of a business and an economy.
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