Globalization can be defined as the increasing interdependence and integration of the world’s population, cultures, and economies. It has resulted in the growth of international trade and the free flow of ideas from one nation to another. Moreover, globalization has led to increased economic cooperation among countries. Globalization is also important since it has enhanced the rapid diffusion of innovation and communication techniques from one region to another. The cultural and legal environments have influenced issues relevant to globalization. For instance, cultural differences have significantly affected companies’ operations in foreign markets. Legal factors such as tariffs and quotas can also influence international trade. Therefore, it is imperative for managers and other stakeholders to develop strategies that can assist them to avoid some of these cultural and legal issues. While operating in foreign markets, companies will be required to comply with the host nation’s business laws.
Globalization refers to the increasing interdependence and integration of the world’s populations, cultures, and economies. The interdependence has stemmed from the unrestricted movement of people and information, technology, and cross-border trade. Over several decades, nations have facilitated these movements through the formation of economic partnerships. In the 1990s, globalization gained prominence due to the influence of cooperative arrangements on society (Goldin and Reinert, 2007). The WWII, the Great Depression, and the effects of the WWI had detrimental impacts on the rise of globalization.
In the 1940s, the United States attempted to revive investment and global rules through the formulation of various foreign policies. The U.S.’ objective in formulating these policies was to promote international peace and prosperity (Spooner, 2015). The rule of law and free global trade assisted in the prevention of major economic disputes and conflicts. Some of the institutions that were established in response to the second wave of globalization include NATO, World Trade Organization, the World Bank, the United Nations, and the IMF (Goldin and Reinert, 2007). This paper’s core objective is to discuss the importance of globalization. It will also analyze how issues relevant to globalization are influenced by the legal and cultural environment in different countries. Moreover, the paper will examine how issues relevant to globalization are practiced in North America, Europe, and locally in the UAE. Lastly, the paper will discuss the implications of the issues studied on managers, employees, organization, and other stakeholders.
Globalization has resulted in the production of goods and services at reduced prices. It encourages nations to specialize in goods that they produce efficiently using the least amount of inputs. Such a concept is referred to as a comparative advantage. Comparative advantage promotes production efficiency and enhances countries’ economic growth. Consequently, production efficiency has immensely contributed to the decline in the prices of services and goods. Notably, globalization has further promoted cross-border trade. Countries have exported goods and services that they produce at a relatively low cost (Spooner, 2015). Comparative advantage is based on the premise that not all nations are efficient in the production of different goods and services. Therefore, nations benefit by engaging in international trade. Globalization means that nations comply with the WTO’s established procedures and rules. These procedures and rules are essential since they control international trade. They have helped countries to observe the policies of non-discriminatory and free trade.
Apart from promoting international trade, globalization has also scaled up several businesses in different countries. Large global markets have enabled firms to reach numerous consumers in various nations. Consequently, these companies have recorded a significant growth in their sales and revenues (Goldin and Reinert, 2007). Globalization has also enabled companies to expand their operations to various countries due to the reduced costs of doing business. The evolution of innovative technologies has enabled small businesses to reach consumers in the international market. For instance, the rise of social media platforms such as Twitter has changed how companies conduct their business operations.
Globalization is essential since it has promoted innovation. There has been a free flow of ideas and innovative techniques between countries due to the removal of various barriers. Notably, globalization promotes the adoption of new and innovative ideas. The diffusion of knowledge and technologies has been bolstered by increased foreign direct investment, free trade, and the global use of copyrights and patents (Samimi and Jenatabadi, 2014). It generates a wide range of positive impacts since it allows countries to advance their research and development. For instance, China’s expenditure on research and development has massively increased due to the positive effects of globalization.
Globalization has also assisted in the reduction of customer service costs. E-commerce businesses require customer service employees who can handle complaints and clients’ orders. Globalization has played an essential role in enabling companies to outsource some of their services to international markets at lower costs (Spooner, 2015). The costs of doing businesses in countries such as the United States has been on the rise. Therefore, several firms in the U.S. have outsourced their services to remote areas where the cost of business is low. These companies have recorded a reduction in their expenses.
Whereas a company may not record a significant growth in its revenues, globalization has leveled the global playing field. Consequently, small firms have competed effectively with other large companies in the international market (Goldin and Reinert, 2007). Uber is a typical example of a company that has benefited from the positive impacts of globalization. It entered the taxi industry through the adoption of new technologies. Based on these technologies, clients have been able to order their rides through their mobile devices. Moreover, Uber has leveraged social media and mobile marketing to expand their operations to different countries.
While the globalization process has led to job displacement, it has immensely contributed to an increase in new employment opportunities. Critics assert that globalization has negatively affected low-wage workers in several countries (Samimi and Jenatabadi, 2014). Moreover, they argue that several employees’ earnings have significantly reduced due to globalization. Companies have adopted new techniques and machines that have displaced workers from their jobs. Better paying positions have emerged in high-tech business areas such as the transport and IT sectors. Globalization is also important since it has resulted in the reduction of the gap between the poor and the rich (Spooner, 2015). Globally, there has been a reduction in the number of persons living in extreme poverty. However, in countries such as the United States, the gap between the poor and rich individuals has widened. The wide gap can be attributed to the rising wage inequality in the country (Goldin and Reinert, 2007). The rise of innovative techniques has reduced the demand for middle- and low-wage workers. Globalization has increased the demand for workers with technical and computer skills.
In several countries, the legal and cultural environment influence the globalization process. The globalization of the production of goods and services has offered many people the chance to access several products in the international market. The availability of foreign goods and services in the domestic market can displace persons who have engaged in the production of local goods and services (Goldin and Reinert, 2007). Globalization has increased the exposure of local societies to foreign cultures. Moreover, there have been changes in local cultures due to people’s access to foreign products and services. Several people have been asserted that globalization has negatively influenced their cultural identities.
The leading concern about globalization is that it has resulted in the homogenization of global cultures. The second concern is that it has led to the Americanization of the world’s cultures. Notably, the spread of American companies to other countries has different impacts on local cultures. For instance, the impacts of American corporations on other nations’ cultural identities are evident on the locals’ eating habits. In several countries, food is regarded as a fundamental component of the local cultures. Moreover, foreign restaurants and food chains tend to have a significant influence on the locals’ habits and mores (Goldin and Reinert, 2007). The French have pride in their local cuisines since they reflect their unique cultures. Therefore, some French people have expressed concerns that the increasing number of American food chains in the country may interfere with their cultural identity. Several countries have further complained that American films have flooded their local entertainment industry.
Apart from the homogenizing impacts, certain individuals have argued globalization has played an essential role in reinforcing local cultures. For instance, in India, satellite television has resulted in an increase in the number of local channels. Consequently, Indians have been able to watch television programs that promote their local cultures. It is imperative for global companies to take into consideration the cultures of different countries where they operate. Expatriate managers should undertake training programs that can enable them to gain information about local cultural values and practices. The indigenous people are likely to resist western practices and values if they feel that foreign companies threaten their cultural practices. Multinational corporations have faced challenges while operating in foreign markets due to cultural differences. IKEA, an MNC faced significant challenges while venturing into the Asian market.
Culture and society have fundamental effects on different aspects of global companies. Whereas culture and society are not included in a company’s operations, they are crucial elements that can determine how firms are managed. Moreover, they are likely to determine the type of goods and services that global companies should produce in the foreign market (Masovic, 2018). The success of foreign subsidiaries depends on their ability to produce goods and services that suit the local’s cultural values and preferences.
Apart from cultural factors, issues relevant to globalization can also be influenced by the legal environment. Certain countries have legal provisions that control the sale and distribution of foreign products. Such laws are likely to influence the production operations of various multinational companies (Masovic, 2018). In the recent past, the United Kingdom has enacted laws that have had adverse impacts on the operations of several foreign companies. For instance, the introduction of the minimum wage laws and the increased need for companies to recycle have affected MNCs’ operations in the United Kingdom. The existence of different cultures and bureaucratic systems can affect companies’ decision to invest in global markets. Legal forces are essential as they affect several aspects of global companies’ policies.
Some countries have laws that restrict the free movement of goods and services across borders. Such laws may have negative impacts on globalization and international trade. Despite the globalization of businesses, companies are often required to adhere to the host nation’s rules and regulations. For Google to conduct its business operations in the Chinese market, it was required to deal with the government’s restriction on the right to free speech. Some laws also regulate the Internet and the adoption of new technologies. Consequently, it is imperative for global companies to monitor the legal climate in nations that they intend to operate in the future.
Governments in several countries can intervene and regulate international trade through the enactment of different laws. While enacting these laws, the government may have the ultimate purpose of protecting local industries and employment opportunities. The protection of local industries may also require governments to formulate protectionist policies.
Governments have different policy areas that they can rely on while creating rules that control and manage international trade (Ritzer, 2010). For instance, the government may impose tariffs on imports in an attempt to encourage the consumption of local goods and services.
The second policy area that can assist governments to control and manage international trade is subsidies. The government can decide to provide subsidies to local companies to increase their production capacity. In developing nations, the government has provided local firms with tax breaks in a bid to bolster their production capacity. The support can also take the form of low-interest rates. Some developing nations have rules that limit the operations of multinational companies. They require that key products such as vehicles be assembled locally to promote economic growth. Notably, nations are likely to formulate bureaucratic policies to deter the entry of some imports.
How Issues Relevant to Globalization are Practiced in North America, Europe, locally in the UAE
North America, Europe, and the UAE practice globalization in different ways. These regions practice globalization through the formation of different trading blocs. In North America, the main trading bloc that has promoted trade is the NAFTA. NAFTA has played an essential in increasing the economic integration of different regional markets in North America. The integration has stemmed from the rationalization of production. Based on the integration, countries in North America have exploited their comparative advantages to obtain economies of scale during their operations. Significantly, market integration in North America has implications for several issues such as national sovereignty and income distribution. NAFTA has assisted in the free movement of goods and services across different countries in North America. The free flow of goods and services has been enhanced by the removal of tariffs and other barriers that may hamper cross-border trade. Consequently, there has been an expansion of exports and imports in the NAFTA trading bloc. Investment opportunities have also increased in the region due to economic integration.
Similarly, in Europe, countries have practiced globalization through the formation of the European Union. The EU has played an essential role in promoting economic integration within the region. It has resulted in the free flow of human capital, goods, and services among member states (Ritzer, 2010). Countries in Europe have practiced globalization through the adoption of a common currency. The single monetary policy that the European Union formulated was aimed at maintaining stable exchange rates among different countries in the region. The launch of the Euro has promoted economic integration in Europe. Notably, the EU has helped in promoting peace among member countries. The EU’s primary goal is to enhance sustainable development based on price stability and economic growth. Through the European Union, nations in this region have experienced a rapid diffusion of information and technologies across borders.
The formation of the European Union has resulted in the creation of a single market. Member states have immensely benefited from the trade that occurs in this market. The EU has also led to the abolishment of border controls, a situation that has resulted in the free movement of individuals. Consequently, it has become easy for people to travel, work, and live in Europe (Ritzer, 2010). Notably, all EU citizens have the freedom to choose the EU nation they wish to work or study. All EU countries are required to treat EU citizens as in the same manner. There should be no discrimination of EU citizens. The EU has been classified as the largest trading bloc worldwide. It is the largest import market for several countries. Moreover, it is regarded as the world’s largest exporter of different goods and services. The EU’s intention has been to liberalize trade beyond its borders. It is committed to assisting victims of natural disasters in different parts of the world. Each year, the European Union has helped and supported several persons who are in dire need of humanitarian aid.
The UAE has developed policies that promote the free movement of business ventures and human labor. Currently, the UAE’s workforce is composed of individuals from different countries. Moreover, several individuals have invested in this region due to favorable legal and business policies. Consequently, the UAE has been transformed into a leading commercial hub in the world. The UAE has practiced globalization by developing economic policies that attract foreign investors and support the private sector. It has provided facilities that have assisted in business development. The UAE’s vision has been to create an economy that supports international business infrastructure. Globalization has enabled the UAE to expand its operations in different markets. The UAE has depended on its import and export market for economic growth. African countries have also formed trading blocs to increase economic integration and enhance the free flow of trade.
Managers should realize that while operating in international markets, the cultural and legal environments tend to be important. They will be required to adhere to a wide range of legal provisions in the host country. Certain socio-cultural factors are likely to affect the success and profitability of multinational corporations. They include customer preferences, level of education, religion, language, and culture (Kapoor, 2014). Therefore, it is imperative for managers and other stakeholders to develop strategies that can enable them to respond to the effects of these factors effectively. Notably, these factors are beyond expatriate managers’ control. Consequently, expatriate managers should train their employees on the strategies they can use to reduce the effects of sociocultural factors.
When companies expand their operations to foreign markets, the effects of globalization on the management is paramount. Managers and other stockholders should adopt measures that can assist them to train and develop employees who have varying cultural identities. Some of the challenges that managers are likely to encounter while operating in international markets include technological adjustments, foreign regulations, and cultural differences (Kapoor, 2014). The HR department will be expected to support employees that it transfers to foreign markets. Assistance with work permits and travel documents will be necessary. Moreover, the HR department will be required to train these employees on cultural issues. In the host country, the HR department will need to recruit and develop local employees. Several countries have rules that require multinational corporations to employ a certain percentage of local workers. Therefore, in the host country, the HR department should develop training programs that can equip the local employees with the necessary skills and competencies.
Labor and tax laws can affect a company’s ability to expand its operations to international markets. Managers will be required to deal with environmental and labor laws and various tax rates. It will be necessary for managers to comply with the local government’s policies (Masovic, 2018). The managers will also be required to develop strategies that can enable them to compete with companies in foreign markets. Environmental laws can also have significant impacts on a firm’s operations. Several countries have laws that require both local and multinational firms to engage in production decisions that have minimal impacts on the environment. The failure of foreign subsidiaries to adhere to such rules may have a wide range of legal consequences to MNCs.
Globalization can be defined as the increasing interdependence and integration of the world’s populations, cultures, and economies. It is an essential process since it has resulted in the increased flow of goods, human capital, ideas, and services from one nation to another. Moreover, globalization has promoted international trade and the growth of foreign businesses in various countries. Globalization can be influenced by both cultural and legal factors. Certain countries have criticized globalization due to its negative impacts on cultural identities. While operating in foreign markets, it will be essential for managers to adhere to the host nation’s business laws. Several regions practice globalization differently. For instance, the NAFTA has promoted economic integration among countries in North America. Similarly, the EU has enhanced peace, prosperity, and political goodwill among nations in Europe.
Goldin, I. and Reinert, K. (2007). Globalization for Development: Trade, finance, aid, migration, and policy. World Bank Publications
Kapoor, K. (2014). Globalization and its impact on managerial skills. International Journal of Management, 2(2)
Masovic, A. (2018). Socio-cultural factors and their impact on the performance of multinational companies. Ecoforum, 7(1)
Ritzer, G. (2010). Globalization: A basic text. Hoboken: John Wiley and Sons
Samimi, P., and Jenatabadi, H.S. (2014). Globalization and economic growth: Empirical evidence on the role of complementarities. PLOS One, 9(4)
Spooner, B. (2015). Globalization: The crucial phase. University of Pennsylvania Press
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