Benefits of Globalisation to Businesses
Globalization is a process whereby the international integration is realized through the interchange of world views, ideas, products, and cultures (Dunning, 2014). The primary facilitators of globalisation have been the advancement of communication and transport technologies (Pieterse, 2015). Through the process, industries, economies, markets, policy makers, and the cultures are integrated to bring about the creation of a more unified society (Baylis, Smith & Owens, 2013). One would, however, be interested in understanding the benefits that the world has experienced through globalization. It is worth noting that the business has been the most affected area by the globalisation. Therefore, it would be the interest of anyone to understand the benefits, which the businesses derive from globalisation (Rodrigue, 2016). Therefore, one would focus on understanding the extent to which globalisation has been of benefit to the business world. Companies have derived great benefits from the increased integration through globalisation (Scott, 2013). In fact, among the benefits brought by globalisation include the aspect of the free trade, ease of labor movement, economies of scale in operations, competition, and higher returns on investment.
Other direct benefits are the gains realized from outsourcing and the global customer coverage. For instance, the Samsung Company has risen to become a great player in the electronics and have an approximated 45% of the customers from the international market (Rodrigue, 2016). The Boeing 777 Jetliner Company has equally been a great example of the benefits derived from globalisation. It benefits from outsourcing about 130,000 spare parts from about 500 suppliers across the world (Rodrigue, 2016). Therefore, there are the benefits that would be defined as market benefits realized from global market coverage and such others that would be considered production such as outsourcing raw materials and spares. The justification of this paper is to present a qualitative persuasive argument, which presents facts on the subject. In essence, the argument takes the stance that there are great benefits towards business in the era of globalisation.
Argument 1: As illustrated in the introduction, globalisation plays a great role towards businesses; the first benefit is through increased trade. According to the World Trade Organization report, the volumes of the global trade rose from about $296 billion in 1950 to about $8 trillion in 2005 (Fujita & Thisse, 2013). Such growth was gradual and was facilitated by the increased integration of businesses and interactions, which fostered trade. The volumes of production would keep rising due to the improvement of production technologies (McMillan & Rodrik, 2011). Secondly, one would note that increased integration created a way for producers to reach larger markets than were previously reached. Similarly, the producers would realize increased ease in accessing raw materials from other nations without facing restrictions, which limited the businesses to a single locality. Through that aspect, the improved quality production would be realized, which is facilitated by a continuous supply of the raw materials. Other companies opened manufacturing and distribution centers in other nations other than the native countries (Fujita & Thisse, 2013). Such provisions would not be realized without the effect of globalisation. The companies would also realize larger market coverage besides harnessing the benefit of increased customers. Therefore, the growth in trade would be understood from the perspectives of increased volumes of production, enlarged market coverage, and plenty of raw materials and production options for outsourcing (Pieterse, 2015).
Other direct benefits of globalisation and which related to trade were that distributors would realize higher gains and performance from the increased supply by different manufacturers from all over the world. Therefore, the returns would go higher; hence, creating more wealth and realizing higher rates of activities (Fujita & Thisse, 2013).
Counterargument: However, although the domestic production scale would be minimal, one would also argue in support of increased trade because; such could be evaluated from the perspective of increased exchange. Therefore, the nature of production notwithstanding, the level of exchange tends to increase as facilitated by globalisation (McMillan & Rodrik, 2011). The local and international traders realize increased activity in the change of products, even when the products are imports or exports. As such, the argument of increased trade would still be supported besides the refutation presented.
Refutation: Nevertheless, in spite of the presumed great gains in the growth of trade, the argument fails to highlight the immediate concerns, which concern the “killing” of smaller companies by the multinationals or other domestic large producers. In fact, globalisation would enable the large multinationals to reach all other countries. In so doing, the large companies would realize the benefits of having higher capital and ease in doing business than the local and growing companies (Baylis, Smith & Owens, 2013). The possible outcomes would be that the large companies would compromise the operations of the small companies. Through “killing” the small companies, increased trade would not be realized as argued. From another perspective, it is evident that the operations of multinationals in a country will channel much of the returns generated to their mother country (Scott, 2013). Hence, the initiative of increasing domestic production in the country would depend on the foreign traders (Baylis, Smith & Owens, 2013). Therefore, from that premise, this paper would refute the earlier claim that globalisation increases trade, especially when looked from the perspective of domestic production.
Argument: Besides facilitating the realization of all other benefits to traders and consumers, globalisation benefits businesses through increased choices. In the aspect of choice, one would want to explain the will power to select or the availability of substitutes or complements goods. The argument presented, therefore, reasons that businesses derive much from globalisation because they have the opportunity to make choices among many suppliers, customers, raw materials, as well as in decision-making processes (Hay & Marsh, 2016). Businesses thrive in the environment of peaceful correlation in a competitive world. Therefore, globalisation starts by providing traders with the opportunity to invest in any country and especially where they consider being less competitive or which presents higher opportunities regarding the number of potential customers. As such, the traders would have to make the choice of whether to position itself either in one country or the other. Secondly, businesses have access to much information through increased interaction (Gwynne & Cristobal, 2014). The information enables the traders to choose or to engage in various productive activities. Therefore, a trader would have the opportunity to choose between domestic productions or engage in trade in business with foreign products. Similarly, the business would decide on accessing raw materials from the local market or even from the international markets (Steger, 2010). The right choice leads to increased returns for the trader; hence, the perceived benefit. Another element of choice by the businesses as enabled by globalisation is on sourcing talent. Businesses are enabled to choose employees and individuals with talents from across the different nations by globalisation (Gwynne & Cristobal, 2014). The ease of movement of people for labor explains a great benefit that businesses would derive from globalisation.
Counterargument: One would note that choices are not the creation of globalisation as even before the increased integration of businesses, they would still make choices. Therefore, if businesses were making losses, such would have been suffered even without globalisation. The art of business revolves around taking risks and therefore, with or without increased integration, businesses would still make choices. Therefore, the argument that globalisation would be blamed for making businesses lose through choices would not be correct. In fact, as the argument was, globalisation facilitates decision making through the improved mechanism of making choices (Steger, 2010). Therefore, the refutation that choices, as facilitated by increased integration, would be blamed for causing sufferings to businesses would be improper. This paper, therefore, confirms that increased information through increased interactions with the businesses facilitates informed decision-making. The choices that businesses make through information have been proven to be beneficial to the businesses as against the reasons presented by the refutation.
Refutation: The assumption that globalisation brings benefits to businesses through choice would not be justifiable. The benefit would be more perceived by the customers than the traders would. In fact, businesses would risk higher operating costs and losses as associated with the choices made by customers (Hay & Marsh, 2016). For instance, when a business produces according to the normal demand and then an international business introduces other goods, which are cheaper, and of competing for quality, then the business would suffer great losses from the choices made. Again, choices made by traders as facilitated by globalisation may not be wholly beneficial to the business (Rodrik, 2011). For instance, a business may opt to engage in international trade, hence transport the products to a foreign region, and suffer a loss, which would be associated with poor marketing and distribution (Rodrik, 2011). The wrong choices may also involve outsourcing labor and raw materials as against utilizing the locally available materials and talent. Businesses would suffer great loss for the choices made without proper information.
Globalisation has been said to be the process where there is increased global integration. The integration facilitates interactions of individuals, businesses, and nations. The increased integration is explained by the ease of exchange in trade, language, cultures, and technology. There are associated befits of losses that are associated with globalisation. However, focusing on the businesses, then the benefits would override the losses. In the argument presented, this paper focused on understanding the perceived benefits that businesses derive from globalisation. In particular, the arguments presented revolve around the benefits that businesses derive from increased trade and the benefits that they realize through the power of making choices.