Positive and negative effects of

Globalization
EXECUTIVE SUMMARY.
Business management is the act of getting people together to accomplish desired goals
and objectives. Globalization in short, points to the whole effort towards making the
world global community as a one village. Globalization on business management is
interconnection of international markets and managing businesses in a global industry.
This includes foreign investments whereby a company expands its business and invest in
foreign countries.

Globalization makes business management easier and efficient for the company.

Based on my research, Globalization simplifies business management in the world. This

is due to the advancement in technology, transport, communication, education, and
regulations of trade that makes trade fair to all parties. This attracts more people to
engage in international business and international trade. Managers within the global
face a lot of challenges due to high competition in the industry, good decisions must be
made in order to satisfy and maintain their customers and attract more customers for
their products. Companies enjoy economies of scale in the business due to reduction of
cost in the management.

This report explores a range of interlinking questions, starting with what is globalization,
what are the effects of globalization in developing countries and developed countries,
this is in terms of positive and negative effects. Globalization is something that affects
all of us, no matter what our profession or interest is.

Globalization is a very wide and a very important focus of discussion. I spent time
researching what it is and the effects it has in developed countries and developing
countries. So in this report I will define what globalization is and the effects according
based on my research. Globalization despite having benefits to the world, it also has a
negative effects of it.

INTRODUCTION.
Globalization in short, points to the whole effort towards making the world global
community as a one village. Goods that were only found in western countries can now
be found across the globe. Now under developed areas can enjoy the benefits of
scientific advances and industrial progress available in developed countries for the
improvement and growth of their areas.

Because of globalization the economies of the world are being increasingly integrated,
example mobile phones and internet have brought people closer. The world is
becoming a smaller place. Work can be outsourced to any part of the world that has an
internet connection because of improvements in traffic infrastructure one is able to
reach one’s destination in a short time.

Globalization can also be defined as an ongoing process by which regional economies,

societies and cultures have become integrated through a globe-spanning network of
communication and trade. The process of globalization includes a number of factors
which are rapid technology developments that make global communications possible,
political developments such as the fall of communism, and transportation developments
that make traveling faster and more frequent. These produce greater development
opportunities for companies with the opening up of additional markets, allow greater
customer harmonization as a result of the increase in shared cultural values, and provide
a superior competitive position with lower operating costs in other countries and access
to new raw materials, resources, and investment opportunities.

Globalization through global communications, global markets and global production

have promoted and facilitated by a fourth area of global activity in relation to money.
For example, the American dollar, the Japanese yen, Euro and other major national
currencies circulate globally. They are being used anywhere on earth and moving
electronically and via air transport anywhere in effectively no time. Most bankcards can
extract cash in local currency from the thousands of automated teller machines (ATMs)
across the world. Also credit cards like Visa, MasterCard and American Express can be
used for payments in almost every country in the globe (Scholte J.A., 2000).

People can move from one country to another, trade restrictions are reducing, domestic
markets are opening up for foreign investments, telecommunications are better
established and the countries that are leading the innovations are passing on their
technologies to other countries in need (Kulkami A., 2009).

EFFECTS OF GLOBALIZATION ON BUSINESS MANAGEMENT IN DEVELOPED

COUNTRIES.
Globalization has brought benefits in developed countries as well as negative effects.
The positive effects include a number of factors which are education, trade, technology,
competition, investments and capital flows, employment, culture and organization
structure.
POSITIVE EFFECTS
It would be rather difficult to discuss the extent of the positives that globalization has
had on the world at large. But still, here are some of the positive effects of globalization
and the positive impacts they have had on so many demographic segments of society.

Global market.
Most successful emerging markets in developed countries are a result of privatization of
state owned industries. In order for these industries to increase consumer demand many
of them are attempting to expand and extend their value chain to an international level.
The impact of globalization on business management is seen by the sudden increase of
number of transactions across the borders. In protecting yields and maintaining
competitiveness, businesses are continuing to develop a wide range of their footprint as
it lowers cost and enjoys economies of scale (Shah A.,2009)

Multinational corporations is a result of globalization. They occupy a central role within

the process of globalization as evidenced through global foreign direct investment
inflows. Their concentrations within Europe in western economies has led to size
constraints, therefore there is a need for new geographical areas to operate whereby
they will face a lot of competition in the market. Through this they will enlarge their
market and enjoy economies of scale as globalization facilitates time space
compression, economies compete at all levels including that of attracting investors
(Smith V.A and Omar M.,2005).

Cross-cultural management
Globalization tend to be the realm of elite because in many parts of the world they are
the only people who are affluent enough to buy many of the products available in the
global marketplace. Highly educated and wealthy people from different backgrounds
interact within a westernized milieu. Western styles, since are symbols of affluence and
power, the elite often embraces western styles of products and pattern of behavior in
order to impress others. Today Western culture and patterns of behavior and language
are staples of international business (Asgary N. and Walle A.H.,2002).

United states seems to have powerful impact upon many other countries and societies.
The world today has a popular cultural force. The popular consumer culture of the
economically dominant West is relentlessly and inevitably transforming other regions,
cultures, nations and societies. In addition, such perspective imply that technological
change, mass media, and consumer oriented marketing campaigns work in tandem to
remake whatever they touch in their own image. Even attitudes and ideas about society,
religion and technology are transformed by cultural diffusion brought by globalization.
Example, in America McDonalds represent fast, cheap and convenient food while it is
not the same worldwide. It’s of high price in other countries like China and Russia where
it involves cultural experience (Walle A.H, 2002)

Foreign trade
Globalization has created and expanded foreign trade in the world. Things that were
only found in developed countries can now be found in other countries across the
world. People can now get whatever they want and from any country. Through this
developed countries can export their goods to other countries. Countries do business
through international trade, whereby they import and export goods across the global.
These countries which export goods get comparative advantages. Organizations have
been established with a view to control and regulate the trade activities of the countries
in the world so to have fair trade. World trade organizations emerged as a powerful
international organization capable effectively influencing individual governments to
follow international trade rules, copyrights, policies on subsidies, taxes and tariffs.
Nations can not break rules without facing economic consequences (Piaseck R. and
Wolnicki M., 2004) .

The number of nations that are dependent on trade, foreign capital, and the world
financial markets increased greatly. Countries engaged in foreign trade enjoy
comparative advantage. The post Recardian trade theories predicted that specialization
in labor and capital intensive goods would bridge enormous wage gaps between the
poor and the rich countries, that is the developing and developed countries, sparing the
latter from massive labor immigration (Gerber J., 2002).

Resource Imperative
Developed countries need natural and human resources of the developing countries
while developing countries need capital, technology and brainpower of the wealthier
countries. Developed countries’ economies are increasingly dependent on the natural
and human resources of the developing nations. Growing interdependence of nations
and their activities on one another fostered by the depletion of natural resources; as well
as overpopulation (Harris P.R.,2002).

Foreign investment
One of the most visible positive effects of globalization in India is the flow of foreign
capital. A lot of companies have directly invested in India, by starting production units in
India, but what we also need to see is the amount of Foreign Investment Inflow that
flows into the developing countries. Indian companies which have been performing well,
both in India and off the shores, will attract a lot of foreign investment, and thus pushes
up the reserve of foreign exchange available in India. This is also one of the positive
effects of globalization in US and other developed countries as developing countries
give them a good investment proposition.

Managers’ objectives might not be the same with those of stockholders in some
situations. The more complex the corporation the more difficult it is for shareholders to
monitor management’s actions whereby it provides the managers more freedom to act
in their own self interest at the expense of shareholders. Multinational firms are more
complex than national firms. Managers might favor international diversification because
it reduces firm specific risk or adds to their prestige. These goals might be of little
interest to shareholders. This divergence of interests between shareholders and
managers, might reduce the value of multinationals relative to domestic firms
(Saudagaran S.M.,2002)

Competition
One of the most visible positive effects of globalization is the improved quality of
products due to globe competition. Customer service and the ‘customer is the king’
approaches to production have led to improved quality of products and services. As the
domestic companies have to fight out foreign competition, they are compelled to raise
their standards and customer satisfaction levels in order to survive in the market.
Besides, when a global brand enters a new country, it comes in riding on some goodwill,
which it has to live up to. This creates competition in the market and a survival of the
fittest situation.

Culture
The positive effects of globalization on culture are many! Not all good practices were
born in one civilization. The world that we live in today is a result of several cultures
coming together. People of one culture, if receptive, tend to see the flaws in their
culture and pick up the culture which is more correct or in tune with the times. Societies
have become larger as they have welcomed people of other civilizations and
backgrounds and created a whole new culture of their own. Cooking styles, languages
and customs have spread all due to globalization. The same can be said about movies,
musical styles and other art forms. They too have moved from one country to another,
leaving an impression on a culture which has adopted them.

Legal Effects
Increased media coverage draws the attention of the world to human rights violations.
This leads to improvement in human rights. Global economic growth does not
necessarily make people happier, worldwide free trade, should also benefit humanity as
well as protect nature, not just reward managers and stockholders. Those who would be
authentic leaders need to address inequalities. Globalization should promote openness
and information along with exchange with greater democracy and prosperity (Harris
P.R., 2002).

Gone are the days where the limited jurisdiction became a hindrance in the prosecution
of criminals. These days due to international courts of justice, these criminals can no
longer seek asylum in a foreign country, but will be brought forward and there will be
justice. Due to globalization, there is also an understanding between the security
agencies and the police of two or more different countries who will come together to
curbglobal terrorism. Hence, it is now possible to catch the perpetrators of crime
irrespective of which country they choose to hide in. This is undoubtedly one of the
greatest positive effects of globalization on society.

NEGATIVE EFFECTS
Globalization also have its side effects to the developed nations. These include some
factors which are jobs insecurity, fluctuation in prices, terrorism, fluctuation in currency,
capital flows and so on.

JOBS INSECURITY.
In developed countries people have jobs insecurity. People are losing their jobs.
Developed nations have outsourced manufacturing and white collar jobs. That means
less jobs for their people. This is because the manufacturing work is outsourced to
countries where the costs of manufacturing goods and wages are lower than in their
countries. They have outsourced to developing countries like China and India. Most
people like accountants, programmers, editors and scientists have lost jobs due to
outsourcing to cheaper locations like India.

Globalization has led to exploitation of labor. Safety standards are ignored to produce
cheap goods. “In practice, however, the recent experience in Latin America has been that
many such open-handed multinationals moved their operations to, for example, China
or South East Asia because of cost and market considerations”(Piasecki R. and Wolnicki
M., 2004).

FLUCTUATION IN PRICES.
Globalization has led to fluctuation in price. Due to increase in competition, developed
countries are forced to lower down their prices for their products, this is because other
countries like China produce goods at a lower cost that makes goods to be cheaper
than the ones produced in developed countries. So, in order for the developed countries
to maintain their customers they are forced to reduce prices of their goods. This is a
disadvantage to them because it reduces the ability to sustain social welfare in their
countries.
EFFECTS OF GLOBALIZATION ON BUSINESS MANAGEMENT IN DEVELOPING
COUNTRIES.
POSITIVE EFFECTS.
“I know that globalization has also created many negative effects, but I believe it’s
always better to look to the future with optimism and hope. Tomorrow, hopefully, we
will be able to minimize or even eradicate the evil forces that give globalization a bad
name. Thus we will be able to move forward with peace and harmony”(Kulkami A., 2009)

Poverty alleviation
As far as poverty reduction is concerned, globalization played a role in poverty
reduction in developing countries. In deed most developed countries experienced
reduction in poverty in the proportion of their living below the poverty line, including
fast developing countries like China, India, Vietnam. While other countries like Sub-
Saharan Africa registered an opposite trend (Lee E., 2006).

Employment situation.
Through globalization, people from different countries are provided with jobs
opportunities within the global. It has created the concept of outsourcing. Developed
countries prefer to provide work to developing countries where costs are cheap. Work
such as customer support, software development, accounting, marketing and insurance
are given to developing countries like India. Therefore the country that is given the work
enjoys by getting jobs.

It has given an opportunity to invest in the emerging markets and tap up the talent
which is available there. In developing countries, there is often a lack of capital which
hinders the growth of domestic companies and hence, employment. In such cases, due
to global nature of the businesses, people of developing countries too can obtain
gainful employment opportunities (Pillai P.,2008).

Technology
This is a powerful force that drives the world toward a converging commonality. It has
proletarianized communication, transport, and travel. People from different places
everywhere wants all the things they have heard about, seen, or experienced through
technology. Organizations through its managements can obtain knowledge from
different places in the world that can be used in the organization.

Television and medias played a big role in influencing the perception of the world, from
a relatively small national unity and reality, into a global market and international
concerns. As multinationals establish subsidiaries in new locations, they transfer know
how from the parent to the local operation. Knowledge flows from one unit to another
as a whole organization benefits from development activity. One of the ways that
organizations use in knowledge transfer is the movement of personnel, which takes
place within multinationals. This build up a bank of knowledge about working in
different situations with people from different cultures and this represents a stock of
knowledge that could be developed and used to benefit the organization (Kamoche,
1997).

Education.
Globalization from the point of view has positive effects as well as negative effects. It
has increased the access of higher education example universities and reducing the
knowledge gap in developing countries, it equally has negative aspects which can
seriously threaten universities in those countries. From point of view it has brought
more positive effects to developing countries through increasing access to higher
learning institutions. Today you can move in the search of the best educational facilities
in the world including developing countries without any hindrance. This is due to
increased output from secondary schools, greater participation of women in higher
education, a growing private sector demand for graduates, and the exorbitant costs of
acquiring education in foreign countries, especially those in the nort (Mohamedbhai G.,
2002).

Foreign trade
Despite having negative effects of globalization, it has a good side too. One of the most
significant effect it has brought to developing countries is Trade. Before people used to
exchange goods for goods or services for services but now people can trade goods for
money. This is mostly through International trade whereby people exports and imports
goods within countries. Globalization has led to reduction of costs in trade within the
globe. It has led to reduction of tax of importation of goods.

According to economic theory, foreign trade is in principle, beneficial to any country

engaged. The international division of labor allocates the resources more efficient
whereby it increases the economic welfare of all countries engaged in foreign trade in
long run (Kaitilia V and Kotilainen M., 2002).

Foreign investment
Foreign investment is a direct result of globalization. Foreign investment is always
welcomed as it provides resources, capital and technology to a country that will support
economic development of the host country. This improves employment as in direct and
indirectly. Increases exports to a country and thereby improves the current account and
therefore will help to the repayment of foreign debt. This however has some criticisms
for leading to too much foreign control (Kaitilia V and Kotilainen M., 2002).
Developing countries can use general or specific industrial and trade policies to be more
or less welcoming to foreign direct investments, capital and foreign tourist services.
They can directly and indirectly shape their participation in the economic activities in the
globe (Piasecki R. and Wolnicki M., 2004).

Market sector
Globalization of markets in developing countries is growing so fast. The emergence of
global markets for standardized consumer products on a previously unimagined scale of
magnitude. This brought benefits which are economies of scale in production, reduced
world prices, distribution, marketing and management (Levitt T., 1983)

IKEA is one of the company that is growing fast in developed countries. Its market is
increasing within the global. It has become the world’s largest home furnishings retailer.
The managers are facing a lot of challenges in managing them (Nanda A., 1990). IKEA
can now be found in so many places in the world example Malaysia.

NEGATIVE EFFECTS
Globalization is a tool that benefits all sections of mankind. We cannot ignore the
negative effects it has in developing world.

Unemployment
Globalization is a blame to world’s unemployment situation though it brought some
jobs opportunities. Despite the fact that it brought jobs opportunities to the global but
it is still a blame to the current situation. “It ‘s true that global economic integration and
increased travel have resulted in increased competitiveness at the national and
enterprise levels, forcing producers to find ways to cut costs, improve efficiency, and
raise productivity”(Kigundu M.N.,2002).

“The most important factor to determine the level of employment during 1980-2000
was national or regional macroeconomic policies which were implemented and
sustained. In addition those countries with liberal macroeconomic reforms, pursued
politics promoting flexible labor markets and employment practices, decentralized
industrial relations systems, and judicious enforcement of labor. On the other hand,
countries with employment laws, regulations, and policies experienced higher level of
employment because they were not able to attract and retain as many new
jobs”(Kiggundu M.N.,2002).

For example ,Indonesia faced unemployment and poverty that grew to levels not
experienced in two decades, health conditions worsened, and the natural environment
degraded (Piasecki R and Wolnicki M.,2004)
Spread of fast foods chain.
Fast foods chain is growing very fast. But some of the most rapid growth is occurring in
the developing countries, where it’s real changing the way people eat. “Kentucky Fried
Chicken(KFC) is the largest, fastest growing, and highest potential units” (Bartlett
C.,1986).

Most people prefer to buy fast foods because it’s cheap and quick. This replaces home
cooked fare enjoyed with family and friends. Traditional diets and recipes are yielding to
sodas, burgers, and other highly processed and standardized items that have a lot of fat,
sugar, and salt resulting a global epidemic of diabetes, obesity, and other chronic
diseases. Meanwhile, fast food producers require farmers to raise uniform fields of crops
and herds of livestock for easy processing, eliminating agricultural diversity.

Western culture.
Globalization has led to the spread of western culture and influence at the expense of
local culture in developing countries like Africa. Most people now in developing
countries cop what people in developed countries do. So, its like they ignore their own
culture and practice western culture ( Goyal K.A., 2006). For example dressing styles and
eating habits, language. All these can affect management in one way or another
example it can cause misunderstandings because of language barrier.

Trade
Average tariff rates continue to be high in many developing countries, including some
that have recently implemented trade reforms. Example,India. Trade policy continues to
be an important aspect in globalization at least in some of the lower income developing
countries.

widespread use of

computers, faxes and mobile phones, introduction of the internet and

e-commerce, and quicker and cheaper means of transportation in some cases

offered opportunities to developing countries, but in many cases deepened the

gap between global firms and traditional industries

globalization opened up new opportunities for developing

countries to create jobs and expand exports. In practice, many developing

countries competing for foreign investors offered longer tax holidays,

costly subsidies, and various incentives for multinationals. The

competition among developing nations reduced positive net effects of

globalization or, at best, delayed them.

Causes of Migration

Movement of people from one place to another in search of work (Source: eiu)

Nowadays, many people decide to migrate to have a better life. Employment opportunities are
the most common reason due to which people migrate. Except this, lack of opportunities, better
education, construction of dams, globalization, natural disaster (flood and drought) and
sometimes crop failure forced villagers to migrate to cities.

Migrants

People who move from one place to another in search of work or shelter are called migrants. 
Most of the times migrants people are not skilled or educated therefore they usually employed as
daily wagers (workers who are paid at the end of each day, for their services). Daily wagers do
not get enough money for the survival of their families and suffering from many problems such
as they do not have enough food to eat, sanitation, hygiene, a proper place to live etc.

Read about Effects of Blowing Air

Impacts of Migration

Migration is becoming a very important subject for the life of cities. Many opportunities and
attraction of big cities pull large numbers of people to big cities. Migration can have positive as
well as negative effects on the life of the migrants.

Positive Impact

 Unemployment is reduced and people get better job opportunities.

 Migration helps in improving the quality of life of people.
 It helps to improve social life of people as they learn about new culture, customs, and languages
which helps to improve brotherhood among people.
 Migration of skilled workers leads to a greater economic growth of the region.
 Children get better opportunities for higher education.
 The population density is reduced and the birth rate decreases.

Read about Seeds here in detail.

Negative Impact

 The loss of a person from rural areas, impact on the level of output and development of rural
areas.
 The influx of workers in urban areas increases competition for the job, houses, school facilities
etc.
 Having large population puts too much pressure on natural resources, amenities and services.
 It is difficult for a villager to survive in urban areas because in urban areas there is no natural
environment and pure air. They have to pay for each and everything.
 Migration changes the population of a place, therefore, the distribution of the population is
uneven in India.
 Many migrants are completely illiterate and uneducated, therefore, they are not only unfit for
most jobs, but also lack basic knowledge and life skills.
 Poverty makes them unable to live a normal and healthy life.
 Children growing up in poverty have no access to proper nutrition, education or health.
 Migration increased the slum areas in cities which increase many problems such as unhygienic
conditions, crime, pollution etc.
 Sometimes migrants are exploited.
 Migration is one of the main causes of increasing nuclear family where children grow up without
a wider family circle.

Read about Moon and Starts in Sky here

Solved Example

Q1. What are the benefits of living in the villages?

Sol: In villages, people live in a natural environment. There are so many soothing sounds. Like
the gurgle of the flowing river, the murmur of trees and the chirping of birds. People here live
together like a big family and help each other, in good and bad times. The elders settle quarrels
among them.

Q2. What are the demerits of village life?

  Sol: There are less earning opportunities in villages. There are hospitals with lack of facilities.
People are not aware of new technological advancements. Quality of education is poor as
compared to a city.