Drivers of Globalization Essay
In today’s growth of technology companies can be based in one country and operate business on the other side of the world. Becoming a global organization has helped economies that would otherwise struggle. Instead of only being able to reach thousands of consumers an organization is now able to reach millions. An organization usually seeks to go global to increase revenue. Whether it is a small organization looking to build profits or a large publically traded organization looking to build shareholders wealth the organization is looking to grow financially.
With the aspiration of increased revenue there are certain drivers that bring an organization to a certain location in a specific time. Going global for an organization can prove to be risky, especially if the organization is not proficient in the countries financial processes, cultural differences, and ethical processes. Market Drivers An organization can be driven to go global based on the market forces. Marketing internationally have converged lifestyles around the world (Mowatt, 2012). The availability of products on an international level has allowed consumers to develop needs that drive companies to expand globally.
Traditionally global marketing costs less, but when marketing by country more niche markets can have more effect (Kokemuller, 2012). An organization that has been global for a few years is Smith Monitoring, based in Dallas Texas. This organization decided to go global into China. The purpose for globalizing into China was because the company had contacts in China from past mission trips. The organization noticed there was a large need for security systems in homes in and businesses in China. The organization found there market was in demand and enhanced on it.
Cost Drivers Organizations look to make profits and add to the shareholder’s wealth. Often times the drive to move into a global position for an organization is cost. The cost of running business can become more than the organization can bring on revenues. Saving on these costs by moving parts of the business to an international level can allow an organization to increase the profit margin and continue doing business. Technology allows an organization to be based in the United States but provide customer service from overseas and saving n the wages they would normally spend in the United States.
Initially, the organization used a few contacts from past mission trips and one of the owners transferred to China to establish the business in China. The costs were not a driving factor for the organization and there was an increase in expenses for the owner making the transfer. However, once the location in China was established the organization began offering training for locals educating them in the business and adding to the skills they could offer.
Government Drivers The taxes and fees placed onto an organization can be overwhelming and at times expensive. Many governments have reduced tariffs and free trade agreements making them more appealing for organizations to bring the business to other countries (Mowatt, 2012). The Chinese government proved to be a small challenge for Smith Monitoring, but thankfully they had good connections with citizens of China and were guided through those challenges with ease. Risks of Global Investing Exchange rates can be one of top risks for anyone investing globally.
An organization no matter how large or small needs to understand the way currency fluctuates and affects the performance of investments (Financial Web, n. d. ). There is a possibility that a U. S. company that imports overseas could risk exposure should the U. S. dollar decline, while a company that exports could develop a risk if the dollar should increase in value (Financial Web, n. d. ). When the economy goes bad in one country it can affect other countries currency rates. Foreign stocks can be a safe place, except for the economic decline in 2008 when there was no safe investment (Little, n. ).
Cultural Sensitivity and Ethics As more and more companies are becoming global cultures are beginning to make changes and adapting to these new organizations in their country. Companies still need to be considerate to the cultures of the location they are going to be doing business in. An organization that is not sensitive to the culture of a location could risk offending the locals. The local community is needed by the organization to be successful in the area, so an understanding of the culture is vital for success. Ethics are just as important for an organization going global.
Ethics in the United States might be unethical in another country, therefore there needs to be an understanding of the ethics where the business plans to operate. Since outsourcing is a major part of globalization there has been a risk to loss of work for laborers and manual workers, which is ethically putting harm to citizens in first world countries (Quigley, 2012). Another ethical concern is the educated people of third world countries that are leaving to work in first world countries, which leave the third world country lacking homegrown professionals (Quigley, 2012).
Conclusion In conclusion, globalization allows organizations to build profits and encourage shareholders wealth. A company can be only a few employees or as large as 500 but regardless of the size they all have a similar motive for globalizing which is building income. The drive to go global can vary by company. For one company the drive might be for marketing purposes. Companies can find marketing to be rather pricey in the United States, but the cost and availability to market is lower in another country.
Market availability can also be strong drive for companies that offer services or products not offered in a country. Costs and Government regulations could be another driving factor for organizations. However, there could be ethical concerns when saving costs begin to affect local employment and potential employees. Globalization can allow an organization growth beyond what could be imagined, but there can be risks that the organization needs to take into consideration when expanding.