Globalization has become the main factor in the present business world. This phenomenon impacts the business life, economy, environment and society in different ways. Due to global changes in the currents world, change in economic and business activities, political, transport and communication and development of technology force enterprises to struggle for survival by changing their strategies and going beyond their borders. Globalization is termed as a natural process that results from the growing and rapid process of generalization of the character and process of production. It is a worldwide trend whereby economies in different continents go cross borders to connect with each other. An organization is no longer limited within their borders and can implement several business activities globally. However, the entrance of firms in the global market is inevitable because of globalization. This essay discusses the impact of globalization in SMEs and other companies in general.
Globalization has enabled SMEs to access the global market. The SMEs were not able to access the global market for lack of internet connection. The internet connection hindered SMEs to access buyers and suppliers across the world (Uhlaner, et al., 2013, pp.593). Now every customer can access different products or services being sold using a smartphone. This increases the revenue of any small business beyond what they were able to produce before globalization took effect (Wirtz, Tuzovic and Ehret, 2015, pp.571). Networking and internet have made it easier for SMEs to compete globally due to the flow of information despite the physical location of the seller and buyer. Additionally, globalization allows international companies to hold meetings from headquarters and branches among managers relieving them travel expenses and time.
Globalization has led to competition among SMEs and international companies. Companies enter global strategies to maintain or gain a competitive advantage in foreign markets and to evade competition in the local markets. International competition is big and is growing at a faster rate with more multinational competitors who win markets worldwide (Chen and Zhang, 2013, pp.43). SMEs and other companies enhance their competitive position by stopping competitors in international markets or premature entrance into the domestic market of their competitors in order to suppress its development. The increase in speed and prevalence caused by globalization opens opportunities for the companies to perform on the international markets. The managers, therefore, come up and develop strategies for internationalization that helps them to transform their firms into globally competitive enterprises (Olimpia and Stela, 2017, pp.31). The managers seek to link the supply, marketing, production and other activities based on the international markets. SMEs and other companies face challenges and pressure when they compete globally which requires the companies to cut costs to prevent consumers from regarding their services and products as too expensive. The companies in the developing countries are forced to locate production facilities in areas where production costs are lower. For SMEs and other companies in developing countries to preserve the tastes and preferences of customers, there should be differentiation of products, distribution channels, government regulations, and management of human resources. The tactics and strategies for differentiation of services and products in local markets create extra costs which can lead to increased costs for the company.
Globalization in developing countries has led to the development of markets. Communication and information technologies, widespread cultural exchange, international tourism development, along with improved living standards in most developing nations have resulted to the emergence of a group of customers in different regions and countries (Palacios-Marqués, Soto-Acosta and Merigó, 2015, pp.27). The different regions and countries share the same purchasing power, lifestyle, educational profiles including dreams for high-quality products. This, with the combination of liberal trade and availability of global distribution channels paves way for great opportunities for SMEs and other organizations that want to offer their services and products to the global market. There is a large market potential outside the local market hence SMEs and other firms go out on the foreign markets to generate sales and grab opportunities for profit which cannot be realized at domestic markets.
Another impact of globalization is the availability of remote staff. In the past, SMEs and other companies in developing countries used to have physical staff only. Thanks to globalization since employees can work in an office from any part of the world. Example employees may be carrying out the same tasks but in different regions of the world but coordinate their duties through the internet (Ford and Håkansson, 2013, pp.1019). They can carry out a conference meeting and discuss ideas from different parts of the word. In addition, companies can have digital marketing agencies which conduct marketing strategies away from the headquarters. This has given SMEs flexible and reduction in cost while raising their revenue.
Globalization has led to foreign investment. Foreign investment provides capital, resources, and technology to a country that will support the economic development of the host country. Foreign investment leads to employment both directly and indirectly. However, developing countries use specific or general trade policies to be less or more welcoming to foreign investments (Bloom, et al., 2014, pp.2863). Globalization has also created employment where work such as software development, accounting, customer support, marketing, and insurance are offered to developing countries. People from different parts of the world are provided with job opportunities globally (Castillo, et al., 2014, pp.391). Developed countries prefer giving jobs to developing countries since costs are cheap. Most developing countries lack capital for development which hinders the growth of local industries and hence low employment rates. Therefore, the global nature of businesses has enabled developing countries to obtain gainful employment opportunities.
Globalization has acted as a business equalizer. Both the developing countries and developed countries have become a bit more equal. The internet gives both SMEs and other developed companies a business access to business information and marketing tools and any other tool that can make them competitive, larger, and more established companies. An example is the introduction of Uber and other technologies in developing countries. Globalization has made the business world more equal making small businesses to gain popularity where they would not have been able to before.
Globalization has led to expenses in the business world. The common drivers of globalization are global consumer habits, rising development costs, and trade liberalization, pressure from foreign competitors in the domestic market, need for economies of scale, and development of information and communication technologies (Trigueros-Preciado, Pérez-González and Solana-González, 2013, pp.109). Because of the desire to introduce investment in research, new products, achieving economies of scale, development, and innovation, reduction in costs and cheaper raw materials; firms are forced to organize activities considering the global market. This explains why firms decide to situate production activities in nations where the cost of developing and producing goods and services are smaller.
Globalization can negatively impact small SMEs in developing countries because of the opening borders. This leads to mass immigration which means that the country suffers the loss of its best business talent. This leaves SMEs with smaller sources of human resources to choose from. More so, the international business climate has also risen due to globalization (Love and Ganotakis, 2013, pp.13). The enhancement of communication and information technologies have imparted to the process of globalization and also provided instruments that facilitated the process of globalization. Markets that are coming up also recognize the technological, economic benefits and growth opportunities that globalization provides them.
Globalization has negatively impacted the developing countries and other developed countries. It has caused environmental damage because of the high rate of production among SMEs and other companies to meet the daily growing global demand (Ivars and Martínez, 2015, pp.1465). When production is high, more natural resources are put to use and they can be used up before the regeneration of others. The rules and regulations in developing countries on environmental protection are not strict compared to the developed countries. This implies that some of the multinational companies set up other companies in developing countries to take advantage of the situation in developing countries by manufacturing products that are harmful to the environment.
Job insecurity is another negative impact of globalization. The risk of job insecurity is increasing in developed countries hence globalization has led to companies outsourcing jobs to developing countries (Lange, 2013, pp.1107). This has resulted in fewer jobs in the developed countries. Outsourcing happens because businesses need to manufacture their products at a cheaper rate where the manufacturing wages and costs are lower than more developed countries.
Conclusion
Globalization has negative and positive impacts on SMEs and other companies. People want what is good to outweigh the bad but long exposure to globalization is something that businesses cannot evade. Globalization has positively impacted SMEs and other companies in developing countries positively in the following ways; access to global market through internet connection where SMEs can access buyers and suppliers has led to competition between SMEs and other international companies, and development of markets through communication and information technology. Globalization has also led to the availability of remote staff which has enabled employees to work from any part of the world. It has also led to foreign investment which provides capital, resources, and technology to the country where investment is being done. Additionally, globalization has acted as a business equalizer in the business world. On the hand the negative impacts of globalization include, a rise of expenses in the business world, mass immigration because of the open borders, environmental damage, and job insecurity.
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