Globalization The tendency of investment funds and businesses to move beyond domestic and national markets to other markets

around the globe, thereby increasing the interconnectedness of different markets. Globalization has had the effect of markedly increasing not only international trade, but also cultural exchange.

Advantages of Globalization:

Resources of different countries are used for producing goods and services they are able to do most efficiently. Consumers to get much wider variety of products to choose from. Consumers get the product they want at more competitive prices. Companies are able to procure input goods and services required at most competitive prices. Companies get get access to much wider markets It promotes understanding and goodwill among different countries. Businesses and investors get much wider opportunities for investment. Adverse impact of fluctuations in agricultural productions in one area can be reduced by pooling of production of different areas.

Disadvantages of Globalization:

Developed countries can stifle development of undeveloped and under-developed countries. Economic depression in one country can trigger adverse reaction across the globe. It can increase spread of communicable diseases. Companies face much greater competition. This can put smaller companies, at a disadvantage as they do not have resources to compete at global scale. the Effects of Globalisation on Business

The effects vary a lot from one part of the world to another, and from one area of business to another. Communications infrastructure is important to modern businesses, but not all countries have got one. There is also the non-traded sector ie goods and services which are not traded internationally. Domestic services, for example, have to be provided where the house is; you cant export a clean house. Competition - Foreign businesses buy into domestic markets. - Deregulation opens up markets to competition. - Deregulation encourages innovation in new products and markets which challenges traditional market leaders Meeting consumer expectations and tastes - Generally, consumers all over the world are better informed, have higher incomes and therefore higher and more exacting expectations. This forces businesses to meet higher standards.

Economies of scale Selling into a global market allows for enormous economies of scale, although not all industries benefit from these. Choice of location Businesses are now much freer to choose where they operate from, and can move to a cheaper and more efficient location. In the last decade the UK has been seen by many businesses as an attractive business location, especially in financial services, and many businesses have located in the UK which has boosted the UK economy but also provided increased competition for UK businesses. This increased movement of businesses and jobs has, to some extent, forced governments to compete with each other in providing an attractive and low-cost location. Ireland, for example, offers tax holidays to businesses relocating there. Manufacturing businesses are increasingly relocating to low-wage countries such as Indonesia. Inputs vary in price across the world, and businesses now have more freedom of movement in moving to get hold of those cheaper inputs eg labour in developing countries, or financial advice in the City of London. One limitation on this is that managers wont always move to some countries if living conditions are unpleasant or even dangerous. Multi-national and multi-cultural management This is a major challenge to businesses and their managers. A multi-national business environment is more complex with more variables, and so is more difficult to manage. A multi-cultural employment policy leads to employees of many different nationalities, languages, religions and cultures in different offices across the globe. These employees react in quite different ways to incentives, to motivation and it is very difficult to find managers who are sensitive to all these different factors. It is very easy to inadvertently give offence and demotivate workers. For example, the Japanese were initially very disappointed with their Thai employees who didnt respond well to Japanese methods of building up corporate loyalty and motivation. Once they turned production targets into a game, the Thais worked extremely well. Globalisation of markets National borders are becoming less and less important. Markets stretch across borders and MNCs are well-placed to take advantage of this. The same issues of language and culture and so on arise. Consumers are more alike, but by no means the same. Many businesses have made expensive mistakes by not taking local variation sufficiently into account. Marketing, in particular, is a minefield because of its dependence on language.