Globalisation affect businesses across
The world is shrinking thanks to advancing technology, greater openness has made it easier for firms to buy their supplies from a wider range of businesses and sell their products anywhere in the world. Different governments and businesses have different views; many believe that freer trade between nations will offer prosperity and growth for all countries and businesses. Globalisation is not only due to political and economic change, it is also due to direct result of better and cheaper communication and technology.
This improved technology has made marketing easier through internet or television and a cheaper way to mass produce and sell products at affordable prices allowing businesses to compete anywhere in the world. Globalisation has created new opportunities for businesses as they can enter new markets and attract new customers. This allows businesses to grow in a rapid way as show in Igor Ansoff’s matrix (the risk increases from 1-4) and also benefit from economies of scale. Most global businesses use market development because they same the same product in a new market, global businesses can use diversification but it is more risky.
This also allows them to increase sales and profits. They also have a wider range of suppliers which the business can choose from. This gives global businesses more power as it allows them to bargain with suppliers and they maybe able to decrease the cost of raw material. This is one of Porters 5 forces. Business have been able to benefit from economies of scale and this has allowed businesses to build a global brand allowing businesses to increase reputation and brand awareness and allowing them to gain a competitive advantage over competitors.
Markets are moving away from globalisation because consumer demand is changing and customers now want tailor made products which are from their own culture and attitudes. Customers are now seeing global brands as arrogant and insensitive as they are not linked with their needs. Global are also seen to be not providing the customer service that local, smaller businesses can provide. This leaves consumers with a trade off between the good service of the smaller business and the cheaper price of the global businesses.
Globalisation is leading to unethical behaviour and as the amount of global businesses increases, unethical behaviour will also increase. This is because the level of competition between businesses will increase, and businesses will try to gain a competitive advantage through many ways including cost leadership because of the current economic conditions customers have low disposable income and are unable to buy premium products and turn to cheaper substitutes.
The advantage to global brands is that because they can product cheap products they can out compete the smaller local businesses and therefore customers have very little choice as they have low disposable income therefore they have to purchase off the global brands. An increase in production from global brands will lead to a depletion of natural resources, pollution of water through toxic waster and pollution of air through gaseous oxides. Environmental damage is not done though trade but mainly through the production process.
This is seen as a negative externality to the economy where the production takes place. Governments can be seen to promote these pollution havens as it is beneficial for them because the increase in GDP will increase employment rates and also mean that the standard of living will increase and people will now have higher disposable income. An additional benefit for that government is that government spending will decrease and they will benefit from increased tax revenue.
This will slowly more the economy into boom as GDP will be at highest, as shown in the economic cycle. Increase in global competition will lead to businesses reallocating resources and producing products in the most efficient way this may lead to unethical behaviour because businesses may violate human rights. This can be done by: 1. Poor health and safety conditions 2. Poor wages 3. Long hours 4. Poor training, this could be used to cut costs and can lead to accidents especially if using machinery 5. Lack of protective clothing
Also a rise of sweat shops e. g. Arcadia group have been accused of using unethical behaviour and have been linked with the use of child labour Uzbekistan. As Globalisation increase more of the worlds developing countries will be turned into pollution havens, there will also be an increase in unethical behaviour because the increase in population will mean an increase in demand for products and the demand will have to be met, this will cause businesses to expand into the developing countries and exploit unethical behaviour.
This unethical behaviour will continue because businesses are happy using this method as it can be seen by them to be the most efficient way of production, most customers are do not complain with cheap and innovative products and the when the economy is happy, so is the government. The only protest against unethical behaviour is small groups of individuals in the form of pressure groups and as they do not have enough power at the moment to do anything these conditions will continue, maybe in the future more powerful pressure groups may make a change to the unethical behaviour by businesses.