Global Business Environment - Essay Example

Global Business Environment Name Institution Course Date Global Business Environment Introduction Today, globalisation is considered the fundamental driver that has negatively and positively impacted business organisations (Sahoo, 2006). The process of globalisation typically is an inescapable phenomenon in the history of man which has brought the world closer since the era of early trade through exchange of commodities, culture and information. Globalisation is therefore defined as the practice of integration of the globe into one market that offers several opportunities to many people and businesses with the removal of the trade barriers that existed among countries. In particular, globalisation is playing a core role in the developing countries (Renn, 2012). Small and medium-sized businesses in such countries are experiencing some advantages and also disadvantages due to globalisation. Generally, with regard to advantages, developing countries have created new opportunities for the developing countries (Renn, 2012). In contrast, globalisation has brought about some challenges for developing countries in divergent proportions especially in small and medium-sized business organisations. This essay will detail out the pros and cons of globalisation for the small and medium-sized companies from the developing countries. It will also highlight some recommendations for the policy makers of developing countries on the basis on how they can tap the benefits globalisation bring to the table. The paper will also describe how supranational institutions can support the efforts of developing countries in order to successfully participate in the available globalisation process. Globalization has both benefits and limitations and they will always be here to stay. Local small enterprises in the developing countries may go bankrupt whereas the huge corporations in the developed countries dominate the economy (Kotilainen and Kaitila, 2002). There are various advantages of globalization to small enterprises to in developing countries. Firstly, it has been able to increase free trade within the small enterprises in the developing countries (Thirwall, 2003). This has been able to increase companies’ capital liquidity. In addition, it has enabled investors to focus to developing countries giving opportunities to the small enterprises and in turn increasing flexibility (Kotilainen and Kaitila, 2002). Also, globalization has brought gains through global mass. This has tied the world together increasing communication leading to global mass media. This has given access to important information through information sharing. Small business enterprises in developing countries have taken advantage by linking themselves to the global market. Furthermore, globalization has also been able to eradicate cultural barriers (Thirlwall, 2003). Countries have been able to join together through education as well as politics economically. This has reduces cultural barriers significantly and led to development of a global village. Developed nations have used this as a medium of distributing ideologies to small enterprises in developing nations exposing them to greater opportunities that are available worldwide (Sahoo, 2006). For example, North America had a trade agreement between their neighbors, Mexico and Canada, which has allowed them to interchange their products and services with minimal restrictions regarding import and export. Additionally, it permits businesses in developing countries become part of the global businesses. This has been made possible by making the developing countries a conduit at which international trades are transacted (Kotilainen and Kaitila, 2002). The small enterprises therefore take this opportunity to be a part of the international business. Also, globalization has enabled free movement of` labor. Worker can now move from one nation to another thus advertising their skills to employers which contribute to the economy. For example, the United Kingdom hired nurses from India to take place and fill in the shortage of nurses that was experienced in the UK. This in turn encourages the small enterprises in developing countries market their products and services globally (Thirlwall, 2003). On the other hand, the cons of globalization with regard to the small companies in developing countries are as follows. There is an exponential growth and increase of inequalities and especially when it comes to income (Thirlwall, 2003). This comes about between both the industrialized nations and the less industrialized ones. There is also the aspect of decrease in environmental integrity. Large corporations in the developed nations look down upon small corporations in the developing countries hence taking advantage of their weak rules leading to an environmental degradation through pollution. Also, globalization encourages utilization of cheap and available labor. Small enterprises in developing countries face a great challenge since non-skilled labor from developing nations are fished to huge corporations in the developed nations seeking cheap labor (Thirlwall, 2003). This in turn causes an economic disrupt which eventually affects other nations. Moreover, globalization in developing nations also leads to limitation of cultural expression. It inflicts threats to mass media which is being controlled by huge corporations. This poses risk to small enterprises in developing countries causing limitation to cultural expression (Kotilainen and Kaitila, 2002). One of the biggest disadvantages of globalization is the damage it causes to economies in their first stages (Prasad, 2003). It forces competition between smaller companies in developing countries and the large corporations in developed countries. This comes as a disadvantage to the small enterprises. In addition, globalization causes substantial negative effect on taxation. Since companies in different companies trade amongst each other, large corporations in more developed countries tend to take advantage of and exploit taxes by avoiding paying any taxes. They therefore hurt consumers and small business enterprises in developing countries in form of high taxes (Prasad, 2003). This is because the small enterprises have less to no control over the big corporations. These results to an increase in taxes which is intended to make up for the lost revenues due to avoidance of tax by the large corporations. For example, the large corporations at times exploit their tax havens such as Luxembourg, Hong Kong as well as Switzerland whereas the small enterprises languishing in developing countries affected by higher taxes (Sahoo, 2006). The decision of a country to globalise and enter other markets requires the strong vision and commitment from the leadership (Ayyagari et al., 2003). These people should be convinced that this is an important step for the available businesses for long-term development. Only then would they be able to fight and overcome the various challenges and risks that accompany the globalisation process. Without the commitment of policy-makers, the organisations in the developing countries will probably be affected negatively by internationalisation before they can even benefit from it. Policy-makers are known to developing legal and regulatory frameworks that institute the ‘rules of the game’ in a country and govern how the government, businesses and civil community interact with each other. Policy-makers therefore are known to influence investment decisions and the opportunities available to economic actors as a result of globalisation (Lall, 2001). To start with, policy-makers should facilitate the availability of or the access to equity finance and loans for the small and medium-sized enterprises. While maintaining comprehensive government finances assist in the availability of finance needed for the development purposes, the access to such finances can be enhanced by making sure that the issues of collateral are managed competitively through the availability of equity finance guarantees for the small and medium-sized enterprises, and easy access to mortgages (Ayyagari et al., 2003). The policy-makers can also ensure that legal frameworks give a chance for various financial instruments to be used through the transfer of negotiable instruments such as checks and promissory notes (Lall, 2001). Without the access and availability of long-term finance in developing countries, it will be hard for small and middle-sized business to make the important investments in innovation and technological advancement with an aim of improving their trade capacity and create a partnership with foreign direct investors. China is an example of developing country that has benefited from globalisation. Based on China’s experience, there are some recommendations that other countries can implement in order to benefit from globalisation with regard to policy-makers’ change of governance (Ayyagari et al., 2003). First, policy-makers should understand that the ultimate goal of globalisation is development and not just protection or even opening up. Therefore, they should institute an opening-up policy that is able to fit the country’s level of development in order for the small and medium-sized companies to be protected from undue foreign competition and in order the nation’s trade to be open for foreign participation (Lall, 2001). In addition, the policy-makers should increase the country’s capabilities and readiness to absorb foreign capital together with other advanced elements and enhance the benefits of opening up by means of carrying out reforms with regard to the stages of opening up (Lall, 2001). Moreover, the policy-makers should come with ways to avoid risks that come about due to portfolio investments and create an environment where the will enable the country take advantage of the benefits and foreign direct investments can offer in terms of capital formation, management standard improvement and advancement of technology by choosing the relationship with FDI’s over portfolio (Ayyagari et al., 2003). Policy-makers can also take the responsibility of enhancing the policy coherence at regional and international level by coordinating with country-based and international donors in order to enhancing the pooling of technical and financial resources by considering the development level of the country. Also, they should seek for official development assistance that is often available for developing countries that assist in capacity building in investment through appropriate market access (Ayyagari et al., 2003). The supranational institutions have also played a major role in ensuring that a lot of efforts have been put to developing countries helping them participate in the globalization process (Adsera and Carles, 2002). The efforts are as follows; The World Bank has provided a large range of expertise aimed at providing aid to globalization in the developing countries. It has brought together a range of experts to look upon the economic perspective of the developing countries and aimed at financing as a key contribution to the trade agenda. It has also contributed greatly by lending which has substantially grown over the years. This has helped in distribution of funds to the developing countries which have given small business enterprises with the opportunity to kick-start encouraging globalization (Chen and Martin, 2005). In addition, the supranational institutions have also shown their support by offering technical assistance and trade-related training to the developing nations. For example, the World Bank has been able to offer these services to about 14 low-income countries, which has seen to increase over the years which has highly improved the economic status of most developing nations opening them up to a much greater trading platform (Chen and Martin, 2005). Furthermore, these institutions have also helped with economic analyses and have put in quite some effort to enhance competitiveness when it comes to export. This has enabled developing countries come up with growth and competitiveness report. For instance, Pakistan and India brought up their agricultural reports to the World Bank (Chen and Martin, 2005). These activities provide chief perceptions on business and trade weaknesses and therefore policy reforms have been able to be looked into (Adsera and Carles, 2002). Finally, these institutions have established generalized products which aid developing countries in benchmarking their performances in trade. This is by making trade reforms and as well approximating the effects of the reforms. For instance, UNCTAD has a World Integrated Trade System data platform which helps government simulate the impacts of economic reforms and as well analyze trade related distortions. Conclusion Globalisation is a phenomenon of global economic, political and even cultural integration. Due to it, the world is considered as one huge nation. Globalisation plays a core role in the developing countries and impacts them positively and negatively. It has created so many opportunities for small and medium-sized enterprises in the developing countries such as development of free trade, global mass media, reduction of cultural barriers, free movement of labour to name a few. The challenges facing small and medium-sized enterprises in the developing countries due to globalisation include increase in inequality and competition from international corporations, fishing of skilled labour by huge companies, inequality in taxation among other challenges. In order to protect the small and medium-sized enterprises, policy-makers from the developing countries should initiate a number of changes in order to assist in the globalisation process. They can initiate policy coherence, opening-up framework, chose foreign direct investors over portfolio and provide access to equity finances. The supranational institutions can also take part I ensuring that developing countries participate effectively in the globalisation process. For instance, the supranational institutions have provided developing countries with experts who look upon the economic perspective in these countries in addition to providing financial assistance to them. References Adsera, Alicia, and Carles, Boix 2002, Trade, democracy and the size of the public sector: The political underpinnings of openness. International Organization, Vol. 56, n. 2, p. 229–62. Ayyagari, M., Thorsten, B & Asli, Demirgüc-Kunt 2003, Small and Medium Enterprises Across the Globe, World Bank Policy Research Working Paper 3127, August, Washington D.C. Chen, S and Martin, R 2005, How have the world’s poorest fared since the early 1980s? World Bank Staff Paper 3341. Lall, S 2001, Competitiveness Indices and Developing Countries: An Evaluation of the Global Competitiveness Report, World Development, Vol. 29, No 9, p. 1501-1525. Kotilainen, M & Kaitila, V 2002, Economic Globalization in Developing Countries, The journal of Economic in Developing Countries, pp 70. Prasad, E 2003, Effects of financial globalization on developing countries : some empirical evidence, Washington, D.C: Internationl Monetary Fund. Renn, J 2012, The globalization of knowledge in history : based on the 97th Dahlem Workshop, Berlin, Ed. Open Access. Sahoo, A 2006, Sociological perspectives on globalisation, Delhi, Kalpaz. Thirlwall. A. P 2003, Growth & Development with special reference to developing economies, (7th ed), Palgrave Macmillan, New York. Read More