External Environment of Business - Essay Example

External Environment of Business Globalization in the view of Alex MacGillivary Introduction The world has been coming closer and closer with the rising population and improvement in civilization. In the fifteenth century it was the Spaniards and the Portuguese who changed the way the world was working. The innovative survived and grew. Various changes that have been happening in the world in the last two decades have brought globalization to the point of people calling it the Global Village. The internet, the telecommunication revolution and the whole gamut of prospering trade through the swift transportation systems that see people shunting across continents like never before have all made the global village and globalization come of age. Many non governmental organizations that include many trade organizations and multi lateral forums, have recognized the need for a comprehensive vision on globalization. This has happened in other forums also that could represent the people of the world. World Trade Organization has its own view of the Globalization. While the other experts and researchers have their very own thought process on the issue of global village and globalization. This paper will look at the multiple view points and contrast it with the views of Alex MacGillivary. Globalization and WTO World Trade Organization promotes global trade; ethical global trade. With the increasing technological and political closeness of the countries the national boundaries are merging to produce one single working economy. The fall of the Berlin wall brought about an integration of Germany, as much as the Euro that brought about unified trading partnership between the European Countries. WTO heralds the coming together of all these practices that would include sub groups like the G8, BRIC (Brazil, Russia, India, China), and a number of multilateral forum primarily to work out consensus on the issues that plague the global trade. WTO works on the global trade sine globalization is more pronounced and felt in trade than on any other walks of life, let it be culture or sports exchanges. By bringing together a standard practice of trading code, the WTO aims at presenting a comprehensive Globalization that would bring in equality of all participants and fairness of trade for all stake holders of the planet. Globalization brings in multiple dimensions to the stake holders in terms of unfair dumping of products in specific areas, free market economies on one end and controlled or regulated markets at the other. Either of them cause problems to specific groups of people and could kill the lives of millions of people like what it did to the textile industry of India during the eighteenth century when Britain dumped its goods there. WTO wants to ensure that global trade that is at the heart of globalization to be free and fair to all concerned. Laissez faire is what WTO wants to promote. Free movement of goods and services across the boundaries of nations brought in through common governance. The economic globalization is the engine that is driving the process of globalization and the organizations like WTO. WTO wants to ensure that all the parties should be fairly treated and a long term vision of the planet is maintained. This is needed since for the current day gain, it is very often found that the long term vision is lost in many nations. In Indonesia, the smoke that masks the sun during summer has become a common place incident. The world has started ignoring the happening three years after the first time it occurred. Indiscriminate cutting of forests and land clearing are the major cause for the happening. WTO aims at bringing in wood control by ensuring that for every tree that is cut at one end of the forest there is another tree planted elsewhere and the cycle of cutting and planting should be continuous and not destructive. It is not a question of moving over to the next forest but rebuilding and harvesting the same forest area. Social forestry has become the watch word of many a forest departments the world over. This also stems from the reason that global villages affect each other by altering the situation at one place. The repercussion of the an action, let it be war in the gulf or gross deforestation in the Amazon, the effect is felt all over the world. Globalization is not just trade but also impact of environment across the world. When the earth quake in Indonesia became a Tsunami in India and Sri Lanka, the help flowed from all the nations across the world. Globalization is in bringing the humanity together. This view has been held by WTO and a number of other global organizations. Views of Alex MacGillivary While WTO is in the thick of globalization and tries to usher in its version of globalization that would make like easier and simpler for the common man, the author tries to relate the history and origins of the globalization process; where and how it all started. MacGillivary says that the globalization has been a continuous phenomenon that had its beginning with the beginning of the human civilization. When the man moved from Africa to Europe or when the Mongols of the Central Asia went about on a rampage across the continents of Asia and Europe, convergence of human civilization started. The noticeable shake ups in the world convergence has been happening earlier in the history. The shrinking of the world has happened during the Iberian Carve up when the Spaniards and the Portuguese sat down to divide the world into two portions one for each one of them. The world was looked at as one. Globalization has started. When the Britons drew the Greenwich meridian through England they brought together the world and made the world as one. Globalization of the time and they became the time keepers for the world. There are also other incidents during this period that extended from 1880 to 1890 which saw the red rubber and the Putomayo report, coming up on the plantations of rubber in Africa, specifically Congo and the atrocities committed by the British companies there and the kind of killing that was going on. This was one of the trade related atrocities that were brought out by the reporting and writing public. Similar changes were happening during the Cold War period. Cultural merging - spaghetti was becoming a food that everybody liked. Satellites were sent over the earth than brought about a clearer understanding of the earth and its structure and the starry world outside. The pocket radios and the birth of semiconductor technologies all brought about major changes in the way people thought and walked on the earth. The world was becoming smaller and smaller and every step in the technology or cultural growth made it that much smaller and easier to live. We also see the petrodollar debt crisis starting out and other off shoots of a global economy or a globalization of economy with a larger rich and poor gap. MacGillivary also brings out the fact that contemporaries in those days again spoke of globalization in the same feverish pitch that we do today about the shrinking world. The process of globalization has been happening from the very beginning of the human civilization with or with out the knowledge of the human himself and whether he realized the effect or not. Globalization will continue to happen and MacGillivary is of the opinion that 'globalization is not a destination but a process'. Global Village. Marshall McLuhan wrote about global village and the cause of the global Village as the electric technology in 1962, Understanding Media. According to him, a village needs to be in a position to communicate quickly and that it should be interdependent on one another by sheer necessity. This was foreseen by McLuhan in his book. Communication, he could realize, was happening through a multitude of channels now, television, telephones and the internet apart from many other sources. Instant communications across continents are a possibility. Another major requirement McLuhan talks about is on the effect of one action at one end of the village needs to be felt by a number of people across the same. This is also happening today as he rightly pointed. The effect of deforestation in Indonesia is felt in the rising temperatures of Al Nino in the Pacific. The melting of the ice caps in the polar region is resulting in rising sea levels and small island nations in the Pacific are going under the sea. The effect of one action is felt at the other end of the village, the Global Village. With the Television sets bringing the entire world to our living room we seem to experience another major McLuhan propositions for the global village of the electric era as he says. While the internal senses will help us feel what is happening in our body and mind, the external senses driven by the electric system would help us feel the world around us; literally on the other side of the world. We live mythically and integrally... In the electric age ,when our central nervous system is technologically extended to involve in the whole of mankind and to incorporate the whole of mankind in us, we necessarily participate... in the consequences of our every action. (1964: p.4) McLuhan's Global Village in which every body has to adjust to the happenings in the electronic world as if it is a part of his little home town though it might be happening far away and in a remote corner of the world. The effects of the electronic changes are felt by every one in the world. The changes that usher in a random life behavior that could lead to a change in the way life is lead and cultures are altered. A merged uniform culture across the nations and the world is foreseen. The new electronic interdependence creates the world in the view of a global village, says McLuhan. Laissez Faire Economics Laissez Faire had its beginning in France with 'laissez faire, laissez aller and laissez passer' meaning 'let do, let go, let pass'. Promoted and supported by Adams Smith, in his immortal treatise on economics, 'Wealth of nations', laissez faire was the free market trading system. In the early days of large scale businesses, it was found that the government intervention was needed to ensure free and fair trade practices. Under this condition, Smith came out with the free market scenario where he believed and preached that free trade with its own invisible hand of the market forces will ensure that the requirement of all the people will be met. Though this was accepted in many circles, it had its own share of detractors simply because, the free market is good in idealistic situations. But market is anything but ideal. There are rich and the poor; the cunning and straight forward; the lamb and the tiger. Free market economics would decide on what is the true price of any product or a service based on its demand. The various metal exchanges in the world and the stock exchanges of the world are all testimonies of free market with little or no control. But we are all aware of what happened to the free money market and dollar prices during the late 1980s and early 1990s. The bulls and bears of the stock exchanges have made many prosperous and millions paupers. All this is not due to any specific free trade mistakes, but due to the games that people play in the market. The forward trading that is allowed in most of the free trade areas and many more. Finally, the laissez faire is a good practice and is the ideal practice provided all players in the market are equals. That not being the case, it may not be the ideal situation. In order to ensure, free and fair trading practices, a controlling authority need to be placed. Anti-Globalization Movement Globalization has it own ups and downs. Globalization brought in with it a large number of parameters that were not straight away visible to lay men. Global trade and globalization of economy result in increased movement of goods from a large producing house to the one that produces less or from a point that produces products at a lower price to a point that produces at a higher price. This movement of goods would multiply exponentially if the consumption patterns follows laissez faire and increases when the price goes down. Until the consumption is met this movement of goods from the lower price market to the higher price market will continue. The result of such a behavior is that the higher priced market even if it has some specialist differences will cease to exist over a period of time. This has happened in a number of instances that we find in the world. This is more in line with 'the survival of the fittest'. Dumping of goods, like textile from China into Europe has literally ransacked the European textile industry. Similarly, Chinese toys and electronic gadgets seem to be getting the best of western equipments that leads to a slow death of the industry in those areas. There are specific indigenous industries in Africa that suffered extensively due to the onslaught of western goods, that they are closed and out of business. This results in large scale starvation, resulting even in death in third world countries. Large Corporations that mass produce the products of a specific kind and sell them killing the artistic and skilled work that was done earlier. A case under lens could be the Latin American furniture industry that was thriving once upon a time with all hand made furniture that had a class of its own. But now to the dismay of the local people, it is the American ready made and factory made furniture that lacks charm and spirit are being sold all over. Globalization will also remove such local skills from the scene and try to promote the machine based industry killing the artistic and individualistic service that was being rendered in a number of parts of the world. Changes in the Globalization in the last 120 years The world has transformed in the last century in the way they worked. Many major man made and natural events brought man together. Global village was virtually realized during this period. Globalization ushered in a growing life style where the poorly third world countries slowly identified themselves and moved forward to create a major shift in the world economic scene. However the large multinational corporations that took their birth in the mid twentieth century continue to grow bridging the world with their trade ties. Investments were made by these companies and large organizations across the world at various locations to ensure equal distribution of resources and also to ensure that these multi nationals could bring in large sums of money as profits. The last 120 years of existence of the world starts with the 1900 and later. The last days of the century before that found countries colonizing multiple countries and one country brought in technological changes and the technological growth in the colonized country. Colonization also brought in globalization. Trans-continental companies started their existence. But by the beginning of the new century there were other instances that brought the world together, in the form of world wars one and two. Globalization was spearheaded by three major parameters during this last one hundred and twenty years; one, the technology changes; two, the need to be together and three, economic growth. Technology changes: From the very beginning of the twentieth century innovation after innovation changed the way human beings worked. From the aircrafts to the semiconductor devices, the changes that happened in all the spheres of life and the advances in technologies pertaining to automotive industry reduced the distances between the countries and human beings. The telecommunication revolution brought with it information transfer at stupendous speeds which could result in instant business or business at the speed of thought. Across the globe companies were soon able to realize the benefits of having their factories in a place where production could become cheaper. This led to outsourcing of production facilities. Globalization was ushered in by outsourcing, in sourcing and other methodologies of distributed manufacturing that are being adopted in various industries. All these meant that the business world is able to get things done at all the locations in all walks of life. Technology changes also brought about changes in the way people thought and worked together. They were able to avoid commuting to their office since telecommuting has become the way work is done today. Banks could work virtually bringing in and uniting all the people across the world for payments and transfers. Technology changes have colored every walk of life in these 120 years and we find that we use Chinese keyboards, Korean Monitors, American Processors, Indian Software, all supported by an UK based Service Provider. Globalization is real in the world of technology. Need to be together: There are always events that force people to stay together and work together. There is always a need that makes it imperative for their very existence. Such need came up during the world wars that ravaged the surface of earth twice during this century. It was not a surprise, when Germany needed support on the eastern hemisphere, it made an alliance with the Japanese to ensure their success in that frontier. Japanese could bring about major changes in the entire game plan by defeating the Russians and the Chinese. They also defeated the British in the eastern front and could advance into Burma. This was all possible because of the simultaneous and planned assault by Germans, Japanese and the Italians. The need to stay together was becoming more important to them now than at any other point of time. This also brought together the allied forces which had the US, the British and the French working in sync. Now, this need drove the countries to work together and produce the desired result. Globalization was ushered in because of these changes in the need. Indian troopers fought in Italy for the English. Americans landed in France to drive out the Germans. A coordinated effort from all the fronts resulted in ensuring not just success to the allied forces but also ensured that the countries retained a link that would go a long way in moving the globalization phenomenon one more step forward. Other needs were the need to share technological innovations and during the cold war period, the countries were polarized and were under specific banners like the NATO alliance or the Eastern Bloc. Both of them had their own agenda to control the growth of the other and domination of the other in the world. This alignment also brought in an helping hand from the other members of the group for certain military concessions, bringing in globalization at all the fronts when such things happened. Singapore become a separate country but the need to protect itself from the Malaysians made it to offer a base for the Americans there and in turn got itself a convenient position in the global trade. Now it is the pivot of most of the global trade passing through the Indian Ocean. Economic Growth: It has been a known fact that the economic growth results in globalization; or is it the other way, globalization results in economic growth. During the boom periods of market economy in the world, countries with commanding economic positions could bring about major changes in the price markets of the world. Countries started forming trade groups, like the OPEC and G8 which resulted in major changes in the trading methodologies that these countries adopted. They could fix the price for the products that they sold and hence command wider and stronger share in the global economic growth. This again brought in a major integration of the countries and hence globalization. The Oil crisis also brought in a realization that the countries just cannot live on oil alone and resources were pooled to find alternate sources of energy and a new cooperation between nations seem to have emerged. On the other front, technology advances could bring in outsourcing and other distributed working environments that resulted in major changes in the economic equations between countries. Countries that were totally dependent on agriculture were moving towards industrial economies since they could provide value addition to the basic agriculture based industry that they had and could command higher prices for the same commodity. Markets began to expand, with the growing population this was becoming an important necessity. The focus shifted from developed countries to developing countries where the markets were swiftly expanding. Chinese domination in the market was coming to the foreground. Currency markets were rolling over. United currencies were formed, like euro which catered to all of Europe. US dollar became a standard currency being accepted across the world for conversion and usage. Usage of a single currency for trade related transactions made the money market firmer and the traders happier. This made trading across the world much more easier. Plastic currencies changed the way business was done on the virtual network as much as the paper currency did centuries back. All these meant that the world was converging and will continue to converge. This again brought in globalization. Conclusion: Globalization was visualized originally as a part of the global village enunciated by Marshal McLuhan was conceptualized and the idea was widened with the growth in the technology, the need for growing together as a society and the economic growth resulting in large scale globalization. This was found to have its impact on the way countries interacted with one another, the way the companies operated and the method with which even individuals interacted. All these meant that the globalization has had a profound impact on the way the life was led on this planet. Read More