This essay is dependant on organization's internal and external environment in today's modern economy. In addition, it discusses the drivers of globalization and effects of globalization on organization's environment.
Firstly, it is important to understand this is of globalization as there are many definitions. Secondly, the drivers of globalization are discussed in this essay including the history, aim and role of World Trade Organization. Further, the partnership between organization's internal and external environment in global market is analyzed. In addition, it highlights the changes that organizations have to handle when going global. However, it is very challenging as a business can control their internal environment but cannot control the external environment.
An early description of globalization was penned by the American entrepreneur-turned-minister Charles Taze Russell who coined the term 'Corporate Giants' in 1897. However, it had not been until the 1960s that the term started to be widely utilized by economists and other social scientists. It had achieved widespread use within the mainstream press by the later half of the 1980s. Since its inception, the idea of globalization has inspired numerous competing definitions and interpretations. Globalization identifies the shift towards a more integrated and interdependent world economy. Globalization has several different facets like the globalization of markets and globalization of products (Hill, 2004). Globalization has led to increasingly integrated markets across the world, changing the competitive environment where firms operate. When confronted with international competition in domestic and foreign markets, the least productive firms may be forced into bankruptcy while the most productive ones will take advantage of new business opportunities in foreign markets (IMF). Globalization attracts increasing interest and importance in modern day world affairs. It also inspires passionate supporters and critic (BBC). Globalization is the process of increasing the connectivity and interdependence of the world's markets and businesses. This process has speeded up significantly in the last 2 decades as technological advances make it easier for folks to travel, communicate, and do business internationally. Generally, as economies become more linked to other economies, they have got increased opportunity but also increased competition. Thus, as globalization becomes a far more and more common feature of world economics, powerful pro-globalization and anti-globalization lobbies have arisen. The pro-globalization lobby argues that globalization brings about much increased opportunities for nearly everyone, and increased competition is a good thing since it makes agents of production more efficient (investorwords, 2009).
The two most prominent pro-globalization organizations will be the World Trade Organization and the globe Economic Forum. THE GLOBE Trade Organization is a pan-governmental entity (which currently has 144 members) that was set up to formulate a set of rules to govern global trade and capital flows through the procedure of member consensus, and supervise their member countries to ensure that the rules are being followed. THE EARTH Economic Forum, a private foundation, does not have decision-making power but enjoys a great deal of importance since it's been effective as a robust networking forum for most of the world's business, government and not-profit leaders. The anti-globalization group argues that certain groups of folks who are deprived in conditions of resources are not currently with the capacity of functioning within the increased competitive pressure which will be as a result of allowing their economies to become more connected to all of those other world. Important anti-globalization organizations include environmental groups like Friends of the planet earth and Greenpeace; international aid organizations like Oxfam; under-developed government organizations like the G77; business organizations and trade unions whose competitiveness is threatened by globalization like the U. S. textiles and European farm lobby, as well as the Australian and U. S. trade union movements.
There are four main elements and drivers of globalization: globalization of markets, globalization of production, technology innovation and falling of barriers to trade and investment which is analyzed in more depth like the role and aim of WTO.
Globalization of markets refers to the merging of national markets into one huge global marketplace. Now selling internationally is simpler due to falling barriers to cross-border trade. A firm doesn't have to be the size of these multinational giants to facilitate and benefit from the globalization of markets. It is important to offer a standard product to the worldwide. But very significant distinctions still exist between national markets like consumer tastes, preferences, legal regulations, cultural systems. These distinctions require that marketing strategies in order to complement the conditions in a country.
Globalization of production refers to the sourcing of goods and services from locations round the world to take benefit of national differences in the cost and quality of factors of production. The idea is to compete better supplying a product with good quality and low priced. For instance, Nike is considerate one of the leading marketers of athletic shoes and apparel on the planet. The company has some overseas factories where has achieved a super production with low priced. Unfortunately Nike is a target of protest and persistent accusations that its products are made in sweatshops with poor working conditions. The company has signaled a committed action to increasing working conditions, however in spite of the fact, the attacks continue.
Technological changes have achieved advances in communication, information processing, and transportation technology, including the Internet and the internet (www). The most important innovation has been development in the microprocessors from then on global communications have been revolutionized by developments in satellite, optical fiber, and wireless technologies, and today the web and the www. The rapid growth of the internet and the associated www is the latest expression of this development. Besides, innovations have occurred in the field of the transportation technology. The introduction of commercial jet aircraft has reduced the time had a need to get from one location to some other. Now New York is closer to Tokyo than ever before. Another example of technological change would be websites such as ebay. com where any individual can sell almost everything to anyone in the world; it is actually the biggest garage sale ever. Another example of technological change would be production; in the 1900s people were making products largely yourself. Today, machines can whip out twelve sweaters in an hour and make sure they are higher quality. In this manner the global market can demand more products at an increased quality.
The falling of barriers to international trade permits firms to view the earth as their market. The lowering of barrier to trade and investments also allows companies to base production at the optimal location with the activity. Thus, a company might design something in a single country, produce a component parts in two other countries, assemble the product internationally and then export the finished product round the world. The lowering of trade barriers has facilitated the globalization of production. The data also suggests that foreign direct investment is playing an increasing role in the global economy. For instance, Panama is now allowed to trade Pharmaceuticals, foods, and school supplies without suffering a tariff. Also, some other import is at the mercy of only a 5% tariff as opposed to the prior 8%.
Decreasing and lowering of the trade and investment hurdles internationally is one of the top reasons of globalization. Following the establishment of the world trade organization where many countries participated due to the free trade agreements in the countries round the world. Following the establishment of GATT (General Agreement of Tariff and Trade) it's the trade agreement between the countries that are prepared to carry the free trade about the world.
The goal of these tariffs was to safeguard the neighborhood industries of those countries. But now the scholars of prosperity have though that the globe would be are more peaceful and good location to reside in when all the countries and their representatives coordinate with each other. The benefit for this is to the countries who do not have much source to utilizes their resources in order to attract the top foreign investment in their countries.
The WTO offers a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring an even playing field for all, thus adding to financial growth and development. The WTO also offers a legal and institutional framework for the implementation and monitoring of the agreements, as well for settling disputes due to their interpretation and application. The existing body of trade agreements comprising the WTO includes 16 different multilateral agreements (to which all WTO members are parties) and two different plurilateral agreements (to which only some WTO members are parties).
Over days gone by 60 years, the WTO, that was established in 1995, and its predecessor organization the GATT have helped to make a strong and prosperous international trading system, thereby contributing to unprecedented global economic growth. The WTO currently has 153 members, of which 117 are developing countries or separate customs territories. WTO activities are supported by a Secretariat of some 700 staff, led by the WTO Director-General. The Secretariat is positioned in Geneva, Switzerland, and has an annual budget of around CHF 200 million ($180 million, 130 million). The three official languages of the WTO are English, French and Spanish.
Decisions in the WTO are usually taken by consensus of the entire membership. The best institutional is the Ministerial Conference, which meets roughly every two years. A General Council conducts the organization's business in the intervals between Ministerial Conferences. Both of these bodies comprise all members. Specialized subsidiary bodies (Councils, Committees, Sub-committees), also comprising all members, administer and monitor the implementation by members of the many WTO agreements.
More specifically, the WTO's main activities are:
- negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers to trade) and agreeing on rules governing the conduct of international trade (e. g. antidumping, subsidies, product standards, etc. )
- administering and monitoring the application of the WTO's agreed rules for trade in goods, trade in services, and trade-related intellectual property rights
- monitoring and reviewing the trade policies of your members, as well as ensuring transparency of regional and bilateral trade agreements
- settling disputes among our members regarding the interpretation and application of the agreements
- building capacity of developing country government officials in international trade matters
- assisting the procedure of accession of some 30 countries who are not yet members of the organization
- conducting financial research and collecting and disseminating trade data to get the WTO's other main activities
- explaining to and educating the public about the WTO, its mission and its activities.
The WTO's founding and guiding principles remain the pursuit of open borders, the guarantee of most-favoured-nation principle and non-discriminatory treatment by and among members, and a commitment to transparency in the conduct of its activities. The opening of national markets to international trade, with justifiable exceptions or with enough flexibilities, will encourage and contribute to sustainable development, raise people's welfare, reduce poverty, and foster peace and stability. At the same time, such market opening must be associated with sound domestic and international policies that donate to financial growth and development according to each member's needs and aspirations. (WTO, 2009)
An organization's internal environment is composed of the elements within the business, including current employees, management, and especially corporate culture, which defines employee behavior. Also organization's resources, its features and competencies constitute the internal environment of the organization. The inner environment plays an essential role in the strategic management procedure for the organization. (Hill, 2004)
Although some elements affect the business as a whole, others affect only the manager. A manager's philosophical or leadership style directly impacts employees. Traditional managers give explicit instructions to employees, while progressive managers empower employees to make a lot of their own decisions. Changes in philosophy and/or leadership style are under the control of the manager. To analyze the inner and external environment of a business SWOT analysis is carried out to recognize strengths, weaknesses, opportunities and threats. THE INNER Analysis of strengths and weaknesses focuses on internal factors that provide a business certain benefits and drawbacks in meeting the needs of its marketplace. Strengths make reference to core competencies that provide the firm an edge in meeting the needs of its target markets. Any analysis of company strengths should be market oriented/customer focused because strengths are only meaningful when they assist the firm in meeting customer needs. Weaknesses refer to any limitations a firm faces in developing or implementing a technique. Weaknesses should also be examined from a customer perspective because customers often perceive weaknesses a company cannot see.
The external environment in which an organization operates presents both threats and opportunities. Growth or decline in international trade, national protectionism and regional trading blocs are a few examples of the political and financial environment, that have considerable impact on the marketing of the maritime industry. There are different means of classifying the types of external environment that always just reflect the preferences of different authors, but there are some core types which are always identified.
Your Kotler et al. (2004) text offers a comprehensive classification of the external environments, which it refers to as the macro-environment, as the following: demographic environment, economical environment, environment, technological environment, political environment, cultural environment, technological environment, administrative/legal environment.
The administrative and legal environment in a country provides a framework within which a business operates. In a few countries this environment is very restrictive and has significant effect on all areas of the organization; in other countries the administrative/legal context is more permissive. Understanding the administrative/legal environment is vital to determining if organizational change can take place. The administrative context within that your organization operates may be shaped by a unique mixture of forces, including international, governmental, nongovernmental policy, legislative, regulatory, and legal frameworks. An organization is affected by the policy or regulatory context that gave rise to it. This consists of specific laws and regulations that support or inhibit the institution's development.
Both the types and the level of technology in the society give insight into understanding an institution. Institutions dealing with Western paradigms are reliant on the state of commercial infrastructure, e. g. power, water, transport; those which concentrate on indigenous research paradigms may have totally different dependencies. Thus, it's important to understand the amount of relevant technology in the institutional context and whether such technology is defined by computer literacy or by highly developed indigenous ways of verbal and nonverbal communication. It might also be ideal for an assessment to add a consideration of the process by which new technology comes into use, both to comprehend how difficult it is to acquire needed research technologies and also to develop an appreciation for the society's willingness to embrace both new knowledge and change.
The economy and legal system of a country are shaped by its political system. As a result, it's important that organizations understand the nature of different political systems. Political system means system of government in a nation. Political system can be assessed according to two related dimensions. The first the amount to which they emphasize collectivism as apposed to individualism. The next dimension is the degree to that they are democratic or totalitarian. These dimensions are interrelated; system that emphasize collectivism tend toward totalitarian, while system that place a high value on individualism have a tendency to be democratic.
In the economical environment, the organizational analysis should centre on those areas of the monetary system that directly impact the kind of project being considered. For instance, inflation, labour laws, and opportunity costs for researchers in public areas institutions directly impact organizational activities in several countries. Countries with foreign currency restrictions represent different environments for institutions than countries without them, for such restrictions have ramifications for research, e. g. for equipment procurement and maintenance.
Social and Cultural Environments
Social and cultural forces at local, national, and frequently regional levels have profound influence along the way organizations conduct their work and on what they value in terms of outcomes and effects. For instance, the mores associated with an indigenous culture have a bearing on the work ethic and on the way in which people relate with one another. Undoubtedly, the most profound cultural dimension is language. The extent to which organizational members can take part in the discourse of the major scientific language will determine the extent to which research efforts focus inwardly or contribute to regional and global research agendas. Understanding the national/regional/local values toward learning and research provides insight in to the type and nature of research that is valued. For instance, what's the relative priority placed on contract research together with local clients, e. g. testing products and procedures with indigenous populations, as opposed to sharing information with academic peers internationally, or producing biostatistician data that will form national or regional policy. Coming to these priorities involves culture-based decisions.
Organizational architecture can be utilized by multinational enterprises to control and direct their global operations. To succeed, a company must match its architecture to its strategy in different ways. Firms whose architecture does not fit their strategic requirements will experience performance problems. Additionally it is necessary for the several components of architecture to be constant with each other (Hill, 2004). Organizational architecture refers to the totality of your firm's organization, including formal organizational structure, control systems and incentives, processes, organizational culture, and people. An organization can analyze their internal environment including their features before they opt to go global. It needs different know-how of the new geographical market and a business would need to make necessary changes in internal environment to enter the new geographical market successfully.
- http://www. cliffsnotes. com/WileyCDA/CliffsReviewTopic
- www. imf. org
- www. wto. org
- www. bbc. co. uk
- www. Investorwords. com
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