The paper “ The Concept of Globalization and the Challenges of Globalization for Contemporary Companies” is a breathtaking option of literature review on business. As the world has changed from industrialization to globalization, organization management has changed a lot. The market has been able to dictate the way organizations act and how they manage their workers under globalization. Globalization has been able to evolve due to trade across international boundaries and technology. The effects of globalization have made it a concept that needs to be understood by the organizations as they operate in today's global market (Mussa, 2003).
Organizations have been faced with challenges and opportunities as a result of globalization. The purpose of this essay is to look at the concept of globalization and the challenges of globalization in today’ s organizations. The essay will start by defining the concept of globalization. Furthermore, the essay will discuss challenges today’ s organizations are faced with as a result of increasing globalization using examples. All this will be achieved through the use of peer-reviewed journals and textbooks. Globalization has been fueled through an increase in foreign investment and international alliances for trade.
The process of globalization has been aimed at nations being able to work together to build their strength and joining efforts for mutual benefit. Granell, (2000, p. 89) referred to globalization as ‘ It means integrating differences, putting together our strengths, building from the differences and being able to join efforts for a win-win process’ . According to Granell, (2000, p. 89) ‘ Globalization is a worldwide pressure for change’ . Gradual improvement in technology in areas such as communication and transport has made globalization possible.
The force that has made globalization to be realized is the benefits that people have been gaining from the process through trade, investment, access to resources and acquiring new ideas. Today, globalization is associated with better living standards. There are improved technology, quality medical care and an increase in global per capita income. According to Anuar, Supian & Anuwar (1996), globalization is the continuous integration of countries into the global economy. Globalization is still ongoing at an accelerating trend. Despite the positive outcomes associated with globalization, it still has its negative aspects.
Organizations have been able to enjoy the benefits of globalization and also exposed to the challenges that are associated with it. International trade has been a major benefit of globalization (Granell, 2000). Today’ s managers are faced with several challenges due to globalization. Failure to manage the challenges faced by organization managers can lead to loss of market and reduced return on investment among other negative impacts (Herrmann, 2012). The challenges brought about by globalization to the managers include managing diverse cultures, maintaining social responsibility and ethical standards globally and technological changes.
Thus, despite various definitions of globalization, they all imply that globalization is the integration of countries that have been supported by technological change and free trade. As the organization starts global operations, management is supposed to know different cultures and how they operate. The success of the global operation is based on understanding culture and its influence on business. Herrmann (2012) asserts that ‘ Cultural awareness, as well as the understanding of the challenge, will most likely lead to an opener communication between the subsidiaries’ . For most global companies, managers come from different cultures.
A manager can be transferred from the USA to China to operate the business there. Hofstede came up with the five cultural dimensions to help in decision making in different cultural environments (Hofstede, 1984). Different countries vary on the five dimensions of Hofstede’ s study. The five elements are power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus feminism and long term versus short term orientation. Power distance refers to the way power is distributed in society and the way society accepts the distribution. Uncertainty avoidance refers to the way in which each society accepts ambiguousness.
This refers to the way individuals adopt set boundaries or structures. The way the individual acts based on their interests or group interests is what individualism and collectivism refer to. All five aspects are different in each country (Hofstede, 1984). Herrmann (2012) asserts that ‘ employees may be resisting a company’ s corporate culture if it is counter to the beliefs of their own national one’ . For managers who are in a global arena, they are faced with different cultural scenarios. For example, a manager from America, which has a low power difference may face difficulty in adapting to China where there is a high power difference.
Managers who have no skills in multicultural management find it difficult to work in new cultures. They find it hard to lead a team in a foreign country without making mistakes (Mussa, 2003). Companies always find problems while adjusting to a new cultural environment. The company management is always faced with a dilemma when choosing to operate in a new country. This is due to the fact that they have to choose an entry approach that will lead to fewer cultural issues.
Strategies used in managing across cultures are training managers on cultural awareness, forming strategic alliances with local firms, supporting cultural diversity and initial assessment of foreign culture (Granell, 2000).