MNG00723 Global Business - Assignment Solution

Question 1

Globalisation is the worldwide integration of economics, trade, communication, and finance such that a business or company changes or expands from serving a single country to market its products and services to the international market. In business, globalisation facilitates an organisation to increase its market by accessing more customers and expanding its sources of resources from the international pool (Gopinath, 2012). An example of globalisation is Swedish furniture company IKEA that sells ready-to-assemble furniture and other home products worldwide. The illustration illuminates globalisation as the geographical expansion and dispersion of business activities which allows business to source factor inputs, and access cross-border networking through shared assets or joint ventures. Globalisation in business studies depict a process that increasingly integrates and makes economies inter-dependent (Gopinath, 2012). Globalisation is a dynamic process characterised by an increase cross-border trade of goods and services, increased transfer of capital, development of global brands, labour migration, and emergence of trading blocs such as international trade organisation, escalating cases of outsourcing and offshoring, as well as the economic improvement in the developing countries.

Globalisation is beneficial to businesses that expand to serve the global market. Companies have the freedom to develop mergers and joint ventures which allow a bigger access to markets in the domestic country as well as other cost-related advantages. Through globalisation, a US-based company merge with another in Asia where it get access to a large market due to the large population in some Asian countries like China and India. Additionally, the company gets cost-related advantages such as tax exemption or low taxation, free land, cheap labour and raw materials that lower its cost of production.

Globalisation facilitates the free movement of goods and services, labour, and capital investment. This benefits developing countries where western companies outsource their services. For example, outsourcing and offshoring creates employment that improves the standard of living. Additionally, free flow of goods and services due to reduced trade barriers ensure consumers have adequate access to variety of goods and services.

Globalisation also facilitates the sharing of ideas, skills, and technologies across countries (Hill, 2008). When foreign firms invest in other countries, they bring new technologies, skills, and ideas that are shared with the locals for sustainability of the business. This enhances the economic development of the host country.

Nonetheless, globalisation increases the inequality gap in income and wealth. Outsourcing and offshoring companies concentrate in the urban centres creating a rural-urban divide as seen in India, Brazil, and China. Such divisions cause social and political tensions and instabilities as the people in the rural areas are excluded in sharing these benefits.

When companies move to other locations for search of cheap labour and raw materials, they export jobs to these countries (Hill, 2008). In most cases, only the top management and technical jobs that cannot be filed by locals are assigned to people from the mother country of the firm, creating structural unemployment.

Finally, globalisation causes competition that affects the performance of local firms. When international or global brands enter a local market, they cause unfair competition since they have better products and benefit from the economies of scale. This leads to the death of local companies and industries.