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Globalisation is a phenomenon that is used to interact among different countries attempting to develop global economy. It is a process of connecting the world's markets and business with each other. It is basically a process by which different economies, cultures and societies are combined together by latest communication system. Globalisation has been defined by different experts at different places, according to an economist Harris (1993), "the increasing internationalisation of the production, distribution and marketing of goods and services is globalisation". Another definition of globalisation is "the functional integration of national economies within the circuits of industrial and financial capital".(Rhodes, 1996). These definition show that globalisation has increased unification of world's economy by reducing trade barriers within many countries. Globalisation has also helped many businesses to go global and work throughout the world. The main factors behind globalisation are technological, socio-cultural and political factors. It has increased the sharing of goods and services between different countries. The concept of globalisation has become more popular with the advancement of technology and with the reduction of trade barriers that helped the exchange of goods and services faster. Globalisation has provided bigger opportunities and challenges. It helped investors to invest in bigger markets and bigger markets mean big profits. This means that globalisation is helping many countries to develop and when there is development the poverty reduces.
The process of strategic planning is not simple and easy one, it involves a lot of industry research and clear understanding of your market, your customers, your competitors, your team, your core competencies, the environment in which you are operating, changing parameter, your vision and mission etc. These are not easy question to answer as well as it's not a quick process. A simple process for developing business strategy mainly includes following steps:
Set Goals and Objectives
Develop Business Strategy through Strategic Analysis
Develop Team and Assign Responsibilities
Monitor and Review Performance
Reasons for the growth of globalisation
Countries always wanted sustainability in their trade and commerce no matter the country is rich or poor, developed or underdeveloped, they are always looking for sustainability. They are always looking to have same rules and regulation in terms of their imports and exports so they could have a certainty in their trade. Globalisation has opened the economies for many nations and countries do want to share good and services with each other. Technology is one of the biggest reason that has caused the globalisation to grow very rapidly. Nowadays latest communication system and transportation systems has bring the countries closer. Countries whether developed or underdeveloped also do realised the fact that if they want to make progress, they have to make proper transfer of technologies and foreign capital. Developed countries do realise the fact that if they want to have markets for their goods underdeveloped countries also have to perform economically good and globalisation make this possible. Natural clematises such as earthquake or tsunamis, also creating the feelings for many nations to integrate with other countries financially, socially or culturally. These are some reasons that caused the globalisation to grow in recent years.
Benefits of Globalisation
Globalisation has benefited many countries by creating direct impact on their economy, culture, technology and social fronts. Some benefits are given below
Countries that are well engaged with international economy are growing at much faster rate than those who are avoiding globalisation, the reason behind this may be the open markets available to these countries
Globalisation has also helped in reduction of poverty and helped in improving the standard of living in many countries. The countries having faster growing economies, the poverty in those countries ultimately reduces because of their growth
Globalisation has led to improving wealth through economic gains which led to health and safety resulting in increasing the expectancy
Globalisation has increased direct investment in developing countries by removing many trade barriers thus it helped in increasing global income
Globalisation has created an awareness and accountability towards environmental issues which helped in improving the global environment
Many global institutions like WTO and World Bank has helped different countries to solve their political, economical and financial problems. Thus helping developing countries in the process of development
Technology is improving dramatically which is helping in reducing the costs of communication between different countries, thus helping to improve business in different countries through this improved communication system
Modern communication systems has also created a democratic environment throughout the world
Globalisation being adopted by different companies, helped them to expand their business to many other countries which helped in creating employment opportunities for developing countries
Globalisation has created respect for different cultural identities and has provided greater recognition of diversity which helped in improving democracy and thus helped in providing human rights
Globalisation has also reduced the wars possibility between different counties and thus creating peace throughout the world.
Hence one cannot deny the fact that globalisation has benefited human kind in modern era through cultural and social integration.
Five key differences between the public and private sectors:
Managerial decision-making in the public sector takes place in the context of a democratic political process in which primary accountability is not to shareholders but to elected political representatives.
Public management and decision-making is expected to be fully transparent and accountable to the public and subject to continuous scrutiny by the electorate, regulatory bodies, stakeholders and the media.
Public organisations have only limited choice about their products, services or markets, and cannot easily withdraw from difficult or unprofitable markets, or reposition themselves within new market niches.
The responsibilities of public organisations and public managers are boundary-less, in the sense that they are expected to take responsibility for everything that may happen within an area (e.g. natural disasters and civil emergencies) as well as to prevent the occurrence of social problems (e.g. gang crime, or alcohol and drug misuse).
Public managers are exposed not only to the risks of competitive private markets but also to the volatilities of politics and budgetary and electoral cycles.
The role of the private sector in the context of aid effectiveness:
Contributions from the private sector to the development process in developing countries are becoming more significant
Whilst there are plenty of initiatives focussing on the role of the private sector in development, there has been less focus on the private sector in the context of aid effectiveness.
Human resource management in context:
There are five key themes involved in HRM of Shell are given below:-
Senior managers of Shell always ensure that a strategy is in place in order to give line managers and employees' clarity as to the desired outcomes of their work as well as targets should be attained.
A crucial means by which Shell's goals are achieved is through aligning individual and team performance to them.
For Shell, the strategically focused performance outcomes are highly dependent upon securing employee commitment to the organization's goals.
The changed circumstances require worker flexibility.
Shell looks to secure both of the above behaviours is through the formation of a supportive organizational culture.
Corporate social responsibility context:
Hierarchy of Corporate Social Responsibilities (Carroll, 1991).
Windsor, D.: 2001, the Future of Corporate Social Responsibility, the International Journal of Organizational Analysis.
Responsibilities of organisations operating globally:
The adoption of global responsibility is an act of leadership, a voluntary and wilful deployment of the resources of an organization towards building sustainability. Organisations better sustain themselves and society. Innovative thinking from all the sub disciplines of management as well as the more fundamental academic disciplines including:
New mental models
Corporate social responsibility
Human resource management and development
Innovation and creativity
Cross cultural management
Leadership Theory and Leadership Development.
Journal of Global Responsibility is Indexed and Abstracted in British Library.
Strategies employed by organisations operating globally:
Global Business Strategy can be defined as the business strategies engaged by the businesses, companies or firms operating in a global business environment and serving consumers throughout the world. Shell as well as other companies operating globally follows the strategies given below:
It benefits in the economies of scale accruing to the company with it being able to produce in large quantities using more or less the same techniques of production.
It preserves the image of the home country which houses the global corporation since it helps in minimizing the costs of alteration, design or modification, handling and stocking the product, speeding up delivery systems.
It helps in saving the managerial time and effort to take decisions regarding the manufacture of different products.
It helps in faster accumulation of the learning experience as fallout of the learning-by-doing approach.
Section 2: The impact of external factors on organisations
The performance of a national economy impacts on the activities of business organisations:
National economy has various factors. If Shell wants to start business in that country, it needs to focus on all those factors. Some of them are discussed below which have impact on the activities of business organisations.
Consumer purchase power:
This measurement tells that how much a consumer can buy or spend out of his/her income. If purchasing power will be more, the consumer will spend more and ultimately organisations will make profit.
Economic condition of the country:
Shell needs to focus on the economic condition of the chosen country whether it is in boom or recession. Economic conditions include inflation rate, exchange rate, interest rate, tax and unemployment.
Political approach of the country:
It is important for Shell to know about the political stability of the country. Otherwise company would not be able to work on set rules and regulations. Rules and laws will be changing with the change in the government.
Entrance cost of the country:
Shell has to consider about the entrance cost of the particular country. It should know about all the tariffs and custom duties imposed by the government to save national economy.
Balance of trade:
Shell should see that how that country is maintaining balance of trade. Shell needs to work in accordance with that. It must check that trade always go in surplus.
Measures taken by governments to influence the activities of business organisations:
Governments control the business activities is many ways both direct and indirect. Following are the ways by which Shell will be controlled:
Controlling what to produce:
In order to safeguard the interest of the community government may ban or limit the production of certain goods and services. For example, Shell can dug oil only from specific places permitted by the government. Moreover, Goods which harm the environment are also totally banned.
Employees Protection legislations:
Government may pass laws to protect the interest of employees such as laws against unfair discrimination at work and for applying jobs on the basis of race, religion, sex, age, or colour.
Legislations for health and safety at work:
To protect workers from harming by machinery.
Workers should be provided with proper safety equipment and clothing.
A reasonable workforce temperature is maintained for workers.
Proper hygienic conditions and washing facilities are provided.
Workers get adequate breaks between shifts.
Protect employees against unfair dismissal:
Business cannot dismiss the workers because they have joined a trade union or being pregnant. There should be proper warning before dismissing a worker otherwise it will be treated as unfair dismissal.
Ensure fair wages for the employees:
In many countries, government makes it mandatory to have a written contract of employment. It contains the details of the wage rate; working hours, deductions (if any) and other necessary details regarding working conditions. Minimum wages paid to different types of workers are also determined by the government.
Consumer Protection legislations:
Most of the countries have consumer protection laws aimed at making sure that businesses act fairly towards their consumers: A few examples are
Weight and Measures Act: goods sold should not be underweight. Standard weighting equipment should be used to measure goods.
Trade Description Act: deliberately giving misleading impression about the product is illegal.
Consumer Credit Act: According to this act consumers should be given a copy of the credit agreement and should be aware of the interest rates, length of loan while taking a loan.
Sale of Goods Act: It is illegal to sell products with serious flaws or problems and goods sold should conform to the description provided.
In the recent years government across the globe have passes legislations to control business activities from harming the environment. This includes setting limits to the pollution, making it mandatory for businesses to treat their wastes etc.
Government often influences location of business through
Planning controls involve restricting the business activities that can be undertaken in certain areas.
Provide regional assistance to businesses which involves encouraging them to locate in underdeveloped regions of the country.
Section 3: The impact of global factors on business organisations
Implications of global integration on business organisations:
The process by which a company combines different activities around the world so that they could operate using the same method. Global integration can involve the processes of product standardization and technology development centralization.
Businesses are affected by an external environment as much as they are affected by the competitors. Global factors influencing business are legal, political, social, technological and economic. Understanding of these factors is important while developing a business strategy.
Social factorsÂ - These factors are related to changes in social structures. These factors provide insights into behaviour, tastes, and lifestyles patterns of a population. Buying patterns are greatly influenced by the changes in the structure of the population, and in consumer lifestyles. Age, gender, etc all determine the buying patterns and understanding of such changes is critical for developing strategies which are in line with the market situations. In a global environment it is important that business strategies are designed keeping in mind the social and cultural differences that vary from country to country. Consumer religion, language, lifestyle patterns are all important information for successful business management.
Legal factorsÂ - These factors that influence business strategies are related to changes in government laws and regulations. For a successful business operation it is important that the businesses consider the legal issues involved in a particular situation and should have the capability to anticipate ways in which changes in laws will affect the way they must behave. Laws keep changing over a period of time. From the point ofÂ viewÂ of business it is important that they are aware of these changes in the areas of consumer protection legislation, environmental legislation, health & safety and employment law, etc.
Economic factorsÂ - These factors involve changes in the global economy. A rise in living standards would ultimately imply an increase in demand for products thereby, providing greater opportunities for businesses to make profits. An economy witnesses fluctuations in economic activities. This would imply that in case of a rise in economic activity the demand of the product will increase and hence the price will increase. In case of reduction in demand the prices will go down. Business strategies should be developed keeping in mind these fluctuations. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation. In case of lowÂ interest ratesÂ and increase in demand Businesses will be encouraged to expand and take risks. Therefore, business strategies should have room for such fluctuations.
Political factorsÂ - This refers to the changes in government and government policies. Political factors greatly influence the operation of business. This has gained significant importance of late. For example: companies operating in the European Union have to adopt directives and regulations created by the EU. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Business must consider the stability of the political environment, government's policy on the economy etc
Technological factorsÂ - These factors greatly influence business strategies as they provideÂ opportunities for businesses to adopt new innovations, and inventions. This helps the business to reduce costs and develop new products. With the advent of modern communication technologies, technological factors have gained great impetus in the business arena. . Huge volumes of information can be securely shared by means of databases thereby enabling vast cost reductions, and improvements in service. Organisations need to consider the latest relevant technological advancements for their business and to stay competitive. Technology helps business to gain competitive advantage, and is a major driver of globalization.
Section 4: A review of the current issues impacting on business activities
Globalisation has helped many businesses to go global by moving their business operations to foreign countries. There are different reasons for this business activity. One reason could be to overcome the competition by adopting reactive or defensive approach. Some companies do adopt the proactive or aggressive approach in order to beat the competition. However most of the companies adopt these both activities so they could minimize the competition for them. Companies in order to keep ahead of their rivals move as fast as plausible to those markets which are rising and could be developed markets in future.
Companies that adopt reactive or defensive approach get global for reasons of trade barriers, customer demands, competitors globalisation and regulations or restrictions. Companies do shift their business to other countries to avoid trade barriers. This they do by stopping their products to export and starts manufacturing in the country which is importing. In this way they avoid tariffs, quotas or any other restrictions on exports. Companies also respond to customers demand to provide products that are reliable through effective operations and also by this they build their supply chain. Companies get global to compete their rivals and to keep themselves alive in global market and some time companies face restrictions or regulations by their local or home government which causes them burden, so they move their operations to other countries.
Reasons for going global who adopt proactive or aggressive approach are growth opportunities, economies of scale, incentives and saving costs. Companies do invest their excess profits to expand their business but when the local market is mature which is not getting them desired results. So in that case they move to other countries to expand their business. Companies go global to seek economies of scale through achieving higher levels of output, so that they can minimize their production cost per unit and through economies of scale they can increase their profits. Some companies in order to gain benefits of incentives program given by developing countries starts their operations in these countries. Incentives are relaxation in taxes or other opportunities provided by developing countries to investors to bring new technology and business in their countries. Some countries move their business to overseas countries to avoid high tax rates imposed by their local governments. The EXTERNAL FACTORS include all those factors which exist outside the firm and are often regarded as uncontrollable. These external forces can further be categorized as MICRO ENVIRONMENT and MACRO ENVIRONMENT.
MICRO ENVIRONMENT includes the following factors.
1. SUPPLIERS: Suppliers are those people who are responsible for supplying necessary inputs to the organization and ensure the smooth flow of production.
2. COMPETITORS: Competitors can be called the close rivals and in order to survive the competition one has to keep a close look in the market and formulate its policies and strategies as such to face the competition.
3. MARKETING INTERMEDIARIES: Marketing intermediaries aid the company in promoting, selling and distribution of the goods and services to its final users. Therefore, marketing intermediaries are vital link between the business and the consumers.
MACRO ENVIRONMENT includes the following factors.
1. ECONOMIC FACTORS: Economic factors include economic conditions and economic policies that together constitute the economic environment. These include growth rate, inflation, and restrictive trade practices etc. which have a considerable impact on the business.
2. SOCIAL FACTORS: Social factors includes the society as a whole alongside its preferences and priorities like the buying and consumption pattern, beliefs of people their purchasing power, educational background etc.
3. POLITICAL FACTORS: The political factors are related to the management of public affairs and their impact on the business. It is important to have a political stability to maintain stability in the trade.
4. TECHNOLOGICAL FACTORS: Latest technology helps in improving the marketability of the product plus makes it more consumers friendly. Therefore, it is important for a business to keep a pace with the changing technologies in order to survive in the long run.
As globalisation has progressed, living conditions have improved significantly in virtually all countries. However, the strongest gains have been made by the advanced countries and only some of the developing countries. But it is wrong to jump to the conclusion that globalisation has caused the divergence and nothing can be done to improve.