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Globalization refers to the integration of the cultural, political and economic systems across the globe. The major trademark of globalization is that, it results the free trade, cheaper foreign labor markets and free flow of capital. It is a system, where countries interact, in order to develop a global economy. During globalization, economies come together and integrate. This interaction is made possible by advances in infrastructure, communication and transport between the counties. Globalization key aspect about globalization is that, it integrates businesses, nations, people, and non-governmental organizations into the large networks. This is in order to expand the flow of money, commodities, services and information. It enhances convergence, efficiency, harmonization, democratization, homogenization and growth. On the other hand, globalization has a dark side that many people tend to overlook. To begin with, globalization results to the social dislocation and creates job insecurity. Issues pertaining towards the distribution of economic gains also arise, as some people tend to question the equality of the process. Many also worry that globalization will lead to a concentration of economic power by some states, the disintegration of cultures and the loss of sovereignty.
Globalization has been the one key aspect that has influenced the world market. Globalization has so many positive impacts on the society, and just like all thugs in the world, it has its negative side. There are no longer countries and its boundaries, if Rwanda goes through a genocide session, bombing in Iraq and political skirmishes in Kenya, it only takes a second, and we are informed with the news in the Television sets. Globalization is a process where national economies are merging into interdependent and integrated global systems (Charles, 2011).
According to Andrew (2006), globalization is synonymous to macroeconomic maturity. The maturity that many industries of the world are yet to comprehend has depth and true meaning. Comprehension can only be attained in grasping its politics, economic impacts and its volatility.
When a company becomes global, it becomes a multinational. This is a corporation that manages production in different nations and is sometimes termed as a global firm. (ILO) An international corporation is a corporation that has its management in the mother company, and operates in several other countries called subsidiaries. Globalization is a common word today. World economies increasingly integrate new technologies and communication gadgets to bring everyone together or closer.
The phrase global village’ is quite often in every businessperson or woman’s mouth. The phrase depicts the changes in the global market for the last three decades. Americans are initiating studies on the traditions of the Far East, in order to negotiate with the Asians in a better position.
For example, universities in New Delhi have introduced a curriculum, where students are being trained to mumble words like Americans to fit well in a conversation with their prospect American clients.
Currently, going global is a stabilizing and developmental aspect. The facts that companies will attain interdependencies in globalization of business activities pose certain perils. The risks inherent in this trend may one day turn against us and cause serious financial crisis. Markets are not static, neither are the times. The short-term opportunities overseas lure the firms, but, what are not so obvious, are the hidden risks accompanying them. With that in mind, companies should take aggressive position in initiating expatriates of their operations.
In today’s economies, having your business globally is both profitable and offensive at the same time. As consumers increase their demand, the economies of the world must increase their supply capacity. Then in this situation, an entity satisfies the market in an effortless manner.
Macroeconomic consequences of globalization were evidences as early as the cold war era. They have been increasing with the aid of developments in the world economies and the enactment of free trade. Creation of the internet and technological advancements has only accelerated globalization, but did not invent the process.
Reasons For and Against Globalization and the Social Responsibility of Globalized Firms
Is trading beneficial? The other side of the world may be endowed with a resource scarce locally, and one needs it to function. On the other hand, the local economy may possess some features of survival to a foreign corporate. Ability of bargaining between these two economies leads to a mutual interdependency. Of course, one part may have more bargaining power, but, the fact is, both of them benefit, even though it is not to the same degree.
Positive Impacts of Globalization
Scholars argue that a society’s degree of integration into the global economy is in this case, measured by trade and economic openness. This has a positive impact on its economic growth rate and reduction of aggregate poverty. Globalization varies depending on the region of the globe (John, 2004).
1.0 Raising Economies
Globalization has played a key role in the growth of economies. According to a report of IMF, China and India are the two economies that have benefited considerably from the onset of globalization.
Globalizing economies encourage the continued free trade and ideologies. When goods and services are produced, and there exists adequate capital flow, free markets are progressive. The research has shown that globalization facilitates consolidation of the overall world economies. It promotes connections and cordial dependence. Over the last 10 years, China has continually experienced 8-9 % growth annually, while India is hitting the 7% margin. All this growth can be directly attributed to the vast globalization in the two economies.
China’s and India’s Social Responsibility for the Economic Growth
CSR (corporate social responsibility) is the ethical code a company or a country is expected to adhere to and respect. It means, companies are engaging in noble behavior or activities that have benefits to society. CSR has become the part of India’s corporate world (David and Renu, 2005). This is so, because companies have come to the realization that beside massive business growth, it is crucial to give back to the society. The move has encouraged trust and sustainability in the community.
Adoption of CSR has been skyrocketed by the nature of Indian societal norms. Economic problems, such as illiteracy, poverty, and lack of sufficient medical care are still the part of the nation. With all these limitations, the government has inadequate means to support its citizens fully; that is why the corporate entities have taken the mandate.
It is not a new term in India Tata, and Birla group of companies has taken an initiative of helping the communities, since they were pioneered. World street journal reported that many other companies have been doing the same by ways of donations, education grants and charitable events.
Corporate social responsibility in India has taken a new dimension. Companies are establishing subunits of firms to cater for strategic and objectives of the firm, as far as the CSR are concerned. The department has its budget, which is funded by the financing department of the company. (Gopala, 1992) For CSR programs to prosper, employees must take foot in it and volunteer their resources, which include time.
Social Responsibility in China
For a few years, press has displayed some circumstances showing the poor social behaviors in China. This behavior ranged from; overworking of employee, government, safe consumer products, and suicide incidents among workers, pollutant, waste disposal methods and employee underpayment. Given to the extent of social irresponsibility in China, the government, the civil society, the industrial, regulatory body and media drafted legal compliance that every business entity must comply to be able to operate in China.
The government of China changed a corporate focus from production-oriented to that of societal welfare in the year 2005. Act 5 of 2005 requires that companies engage in CSR. Government, after actualizing difficulties of forcing CSR on firms, has adopted a friendly approach to the issue. It has put in place a voluntary regulation code. One of those codes is the CE policy. CE was an official governmental strategy aimed at degradation reduction.
Firms have started embracing the practice of corporate social responsibility. In order to lighten their public profile, firms request social funding from the government. This is in the process of acquiring finances to fund activities of empowering the communities. Adoption of CSR takes a form of constructing political affiliations.
Supply chain in China can enforce the CSR programs. Multinationals are experiencing a lot of pressure from the supply chain regulatory body, to adhere to the social responsibility and its principles. This way, companies will have to be socially responsible through their outsourcing activities.
To make sure these measures were adopted; the supply chain is establishing an international standard ISO 14001 and 9000 respectively. Though ISO certification does not guarantee perfect CSR, it tries to see that the Certification provision is recognized as a benchmark of improved CSR.
Media can exert pressure on companies to participate in the community development. For instance, firms are required to avail information to the public. This is the information that would influence the public make a sound or poor decisions. The information pertain marketing and investments on publicly owned corporations.
2.0 Better Demographic Make-up and Ethical Issues
Most markets abroad comprise of younger consumers and a relatively educated demography. These markets have a growing number of the middle class consumers, urbanized society and high-income earners. Additionally, the family structure for these categories of consumers is adopting the nuclear western pattern, moving away from cultural, and tradition ways of living, such as cohabitating.
From the time immemorial, the world has experienced enormous benefits from its trading activities. The world was always aware of the benefits of trade. Ships made a voyage across the pacific and Indian ocean. The famous road connecting China and Roman Empire influences the way of live of people along it.
Though globalization enhances modernity, not everything that is modern is morally sound. As the workforce transfers from one country to another for expatriates, those old traditional ways that enhanced the moral standards of a firm and individual should not be abandoned.
Because of technological transformation, the world is becoming more interconnected. The impact of the global village is changing the way of thinking, relations and dynamically configuring of many lives. Scientists like Karl Max prophesied that the search for wider markets will do irreversible alterations of the societal structures.
3.0 Competitive Edge in a Socially Responsible Way
For many CEOs, the phrase globalization triggers many emotions. Globalizing operations create dynamic markets that promote competition, demand nothing but the best, and require expatriate in financial optimization. (Arthur et al. 2011). There is a new trend which supply chain is going an extra mile to compete with renowned market leaders of this time. Even though it is a strategic plan for a firm to compete globally, caution should be observed, so as not to engage in unhealthy competitive practices like monopolizing the industries. An excellent example is the Coca-Cola company.
4.0 Lowered Beta
Businesses are opting for meeting their increased consumer demands by expanding their geographical coverage and stretching their chain to international podiums. The effect of outreaching to the global market is manifested by the proliferation in inter-border trading. In order to gain competitive advantage, businesses are diversifying their projects abroad. Diversification of risks reduces the Beta inherent in any investment undertaking.
5.0 Foreign Trade
Trade has always been in existence, but globalization has institutionalized the practice. WTO (world trade organization) has played it roles in ensuring that people do not engage in uncivil and inhumane business practices, such as the slave trade. WTO and other organization are established to act as regulators and take control in matters of foreign trade (Peter, 2005).
Ethical Issues in Foreign Trade
Businesses must be expected to commit their operations in an ethical binding manner. Global firms CSRs should be contributed to improving the native and the foreign people economic welfare. It is the duty of a global organization to improve their living conditions of its human resources. It must give back to the community, from which it derives the resources to enhance its production activities. CSR is a new strategy of management. Companies are trying to build positive relations with the communities around them for a proper corporate image. As the virtue dictates, that should not be the motive for engaging in CSR. Every organization should have the interest of human kind at heart in every one of its endeavors. Through engaging in CSR, the organization will be killing two birds using one stone. These are qualitative enhancement of its workforce and the quantitatively influencing the society. Both improvement of workforce well-being and positive impacts on the society are equally important to the society (Arthur, 2010).
6.0 Globalization and Employment
Globalization of business activities has created employment opportunities to millions of people, who otherwise would be unemployed, elevating poverty level in the globe. Global firms are able to trap idle talent and make use of it. In the third world economies, capital inadequacy has hindered growth in local companies’, hence high levels of unemployment. Globalizing commerce has provided employment chances to these economies.
The current world comprises of various cultural make-up. People of a certain culture are open-minded; they will admit the flaws in their culture and try picking up cultural practices that are conversant with the agreeable behavioral norms. Society has enlarged because of the intermingling between people of different civilization. The intermingling of different cultures has created a group of people with a distinguishable culture all together. New cooking styles, custom spreading and new languages are among the various changes that have resulted from intermingling.
Social Responsibility on Diversity
Every firm or any corporate entity should value diversity of people working within it and those people that make its external environment. The decisions made should be bases on merits and not biases. People should be given room to have their opinion and perceptions on issues. Behaviors that undermine other people’s culture should be discouraged and declared to be illegal. Diversity value is all about, genuine, equal treatment and opportunity, attitude development and procedures that appreciate the richness in differentiation.
8.0 Reduction in Illiteracy Levels
According to the findings from a recent survey, the greatest impact of globalization has been on education. Today people seek education all over the world. There are no barriers to educational facilities anywhere. Students are studying in the institutions outside their countries. Studying outside your home country gives a student different exposure and it adds to the academic packaging. With interest, people get specialized course indigenous to the local market. He later spread the knowledge in homeland. For example, selected American went to Japan. The purpose was to pick one or two hints from Japanese production area, and they took these skills back home.
Negative Impacts of Globalization
The dispute about the contributions of globalization regarding its enhancement of the societal living standards can be substantiated. It has increased productivity, hence, creation of employment and availability of a variety in the market. (David et al, 2008) However, the second side of the story is different. Globalizing economic activities have caused poor people to have more demands of goods and services.
1.0 Cultural Conflicts
Cases of culture borrowing are rampant with the rate of globalization experienced today. Sharing the cultures and the heritage will result in fading cultures and disappearing boundaries. Cultures from wealthy nations dominate more, compared to those in the developing world. This is because these countries manufacture a variety of products that have influence on other people’s cultures. For example, technological supported tools, cloth wears and firms.
2.0 An Increased Loafer
Industrial revolution influenced some nations more than others. Those favored by the revolution become super powers. However, productivity declined consequently increased levels of unemployment. A large number of people found themselves on the streets. This was caused mainly by replacement of human labor force by machines.
As the industrialization progressed, urbanization established its roots, job insecurity became rampant. For instance, earlier printers were not able to adapt to new tech of linotype.
Industrialization changed America’s economy and society permanently. Immigration, technological advancement and laissez-faire management are the most turning points of industrialization. Division of the society has also received emphasis from industrialization. Some scholars attribute slave trade to industrialization.
With industrial growth come environmental pollution, water pollution, air and lethal waste disposal mechanisms. Factory gas emissions in addition to exhaust from the vehicle industry are the principal cause of alarm in environmental degradation. Ammonia by products drained into water bodies kill marine, which are a source of food and a mean of balance of payment to coastal nations like Japan. (Hugh and Larry, 1976)
Corporate Social Responsibility and Ethics
Adopting rules is not sufficient at all. Sound environmental approaches have to be created within an entity for effective implementation. Grievances addressing methods are mechanisms of the problem resolution. Proper channels settle the long-term problems. With this in mind, following stipulated codes by trade unions in certain countries is an easy task.
Why Globalized Entities Need Ethics in CSR Strategy
Every business has a moral duty to provide quality products to its customers. Moral conscience drives ethical business manners for the good of the local citizens and their financial growth.
An Enlightened Self-interest
The code of conduct that governs businesses is in the self-interest of business owners. A business person makes a promise to the customers, employees, or contractor and he has to honor the promise made to them, by serving them with respect. He gives quality products at the fair prices. He must treat his employees with respects and dignity. Reward all the stakeholders with generous dividends and capital gains, and pay taxes honestly, as per the laws of that country. This leads to increased sales volume and profit for the businessperson. Therefore, business ethics ultimately results in customer’s satisfaction, healthy competition, sound relation and social peace. (Sunita, 2005)
Ethics requires that businesses comply with rules in the host country, where the multinational company seeks to get established. Patent rights, Trade Acts and Monopoly, are all aspects that need to be considered when setting up in a foreign country. Trade Acts are laws passed to curb unethical business behavior. The above Acts ensure that all stakeholders are treated fairly, and they receive the true information on businesses, especially in the advertisements.
Mechanisms of Promoting Business Ethical and CSR
Corporate Vision and Mission Statement
These are statements that illustrate where the company is going, and how it aims at getting there. Vision and mission statements give a picture of ethical practices that guide a business. Business (transnational or local) will adhere to socially responsible behavior that will assure its survival.
Sunita (2005) clearly illustrates that the code of conduct tells how an employee of a company or the company itself should act. It realizes that no one can anticipate all ethical dilemmas, but this code of ethics cannot deal with every moral problem. However, the code can be a substantial assistance in maintaining ethical practices in business.
Industry’s CSR and Behavioral Code
The future of developing nation’s environment will lie on policy-makers. Wise decisions should be made on investing on more efficient and friendly disposal methods.
Corporate Social Responsibility Measurements
Like output and input, social responsibility cannot be measured numerically. For the project started, such as feeding the destitute, companies can share the burden with the government. The number of settled homeless people can act as a benchmark, as to how the firm is doing in its CSR.
Managers of the CSR strategy should put in place objectives and goals for the companies. This means a clearly defined success or failure. CSR of a firm can also be measured, based on how the organization is relating with the native people in the foreign country. Hostility from local people may indicate poor corporate social responsibility of the transnational organization. A multinational community can establish its relation by engaging in community activities and sharing with the local people.
ISO is an abbreviation of international organization for standardization. The body was initiated to give guidelines for embracing approved social responsibility. Corporate social responsibility is embedded in ISO 26000. The measure promotes volunteering of corporations in socially beneficial activities, like elevation of poverty in developing economies. ISO 26000 is termed as a guideline to languages of dialogue and not a restrictive certifying mandate.
A Continuous Audit
Audit ensures that those areas prone to ethical mishaps have been addressed. Transparency and accountability is necessitated by business code of conduct. Auditing enhances continuous update on behavioral norms of businesses in the globe. Management should give space and atmosphere consistent with their strategy of CSR. Employees will have trust in management that listens to them and structures a problem-solving mechanism. With this in play, employees do not need to go through the trade unions to have their matters heard.
What transnational companies abroad should be public-oriented? Corporations ought to be socially responsible for the society they are established. With such openness, activist bodies will have nothing to point fingers. Global corporations are turning to CSR as a strategy to help them gain competitive advantage. This explains why Wal-Mart is doing well, despite its low-priced products.