Question

how diversity impact globalization of business?

Answer 1

The ability to conduct business internationally is an absolute necessity if you hope to remain competitive in today’s marketplace.

“Globalization,” has served to stabilize business and financial markets in such a dramatic fashion that many industrialists have yet to reach an understanding of the depth and breadth of the impact it has had on lowering political, financial, and economic volatility.

Business globalisation is refers to a business expanding its sales and their assets over the national boundaries, involving a surge in capital, labour, goods and services.

Coca cola is a perfect example, as they have profitably expanded their business in the global consumer market. Coca cola has used various tactics to achieve this. To reduce their production costs, they have established transnational corporations. They have also focused on product branding and positioning, and revised their prices according to the competition.

In the past two decades, globalisation has greatly increased. It has had a significant impact on the management of businesses.

Globalisation is defined as by the OECD is “The geographic dispersion of industrial and service activities, for example research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets” (OECD)

Globalisation is making the economy of the world increasingly interdependent. This can be seen in the growth of trade, increase in flow of capital and also a boost in Multinational economic activity. For their macroeconomic health, world economies depend on each other.

Glimpse of the Past

Globalisation over time

Globalisation is not a new phenomenon. In reality, it has slowly and gradually been making its way in the world economy since the dawn of time. Until the recent times its impact has not been visible. The Chief Economist of the World Bank, Nick Stern, divided the expansion of globalisation into three phases:

Phase One: initiated in 1870 and ended during the 1920s and 1930s(interwar period), with a descent into global protectionism. This was a time of speedy growth in the international trade. This growth was increased by the economic policies that aimed to liberalise the flow of trade, and also by the rapid development in technology, this reduced the costs, such as of transportation.

Phase Two: After the Second World War, the second phase of globalisation was aided by a rise in the world trade and also the reconstruction of the economy. The establishment of new international economic institutions, supported this expansion.

In order to promote stability in the monetary system, provide a sound basis for multilateral trade and to help restore economic activity, the International Monetary Fund (IMF) and World Bank were created. Their aim was to promote economic co-operation between nations.

Phase Three: The current wave of globalization is demonstrated by a quick rise in the ratio of trade to GDP for many countries and also by a continuous increase in the flow of capital between countries and the trade of goods and services.

Main Motivations and Drivers for Globalisation

A large motivator of globalisation is the desire of MNCs to enhance their profits and returns. Globalisation is also driven by the enthusiastic approach that individual national governments have, to take full advantage of the wider macroeconomic and social benefits that are a result of increased trade of goods, services and the rapid increase in the flow of financial capital.

The main drivers of globalisation are as follows:

Technological change especially in communications technology. Example: UK taking their business and data to India due to cheaper skilled labour. There has been a massive reduction in the cost of transmitting and communication information- this is a huge factor responsible for the growth of trade using internet technology.

Quick and low costing transportation it also includes shipping containers also known as “ISO” containers. This reduction causes the prices of the manufacturers to come down, and make competing with the local manufacturer uncomplicated and trouble-free.

The low costs are as a direct result of the advances in transport technology. The speed and reliability of the transport, makes new and developing markets in the grasps of companies all around the globe.

Deregulation of global financial markets the abolition of numerous rules and regulations, for instance, rules concerning foreign ownership. Privatisation also took place, as a result businesses were now open to purchase and/or take-over. This allowed businesses in one country to buy those in another. For example, many UK utilities are owned by French and US businesses.

Removal of capital exchange controls the opening up of the capital markets facilitates direct foreign investments. It also encourages freer flow of money across the borders.

Free trade numerous barriers to trade have either been removed or relaxed because of regional groupings such as the European Union (EU), where as some have been removed by the WTO making trade cheaper and more attractive.

Changes in consumer tastes and willingness to try foreign goods resulting from the arrival of the global satellite the awareness among the consumers has increased.

Advancement of the global consumer market; world demand and taste have greatly merged to global demand for numerous products. The second most recognized word in the English language is “Coke”. Americanization is often seen as a backlash against globalisation. As the products become for and more identifiable, comparatively cheaper and of higher quality it gives a boost to the global consumer.

Effects of Globalisation on Businesses

The effects of globalization vary from country to country, region to region and of course from business to business. Communications infrastructure is of high importance to modern business, but all countries do not have access to it. There is also the “non-traded” sector i.e. goods and services that cannot be imported or exported. For example, domestic services are provided where the house is; a clean house cannot be exported.

Competition

Foreign businesses buy into the domestic market. Deregulation opens up the markets to competition- it encourages innovation and creation of new markets hence challenging the traditional market leaders.

Meeting consumer expectations and tastes

The high awareness and exposure of the consumers, their high incomes results in them having greater and higher expectations hence forcing the businesses to meet their standard.

Economies of scale

Selling in the global market allows enormous economies of scale, though not all businesses benefit from it.

Choice of location

Businesses can now operate from cheaper and more efficient. UK has been seen as an attractive location specifically for financial services. Many businesses have located in UK, boosting their economy and also providing increased competition for the domestic businesses. The increased movement of businesses and jobs has forced the governments to compete with each other to provide attractive and low costing locations. Example Ireland offers “Tax Holidays” to relocating businesses.

Multinational and multicultural management

This is one of the biggest challenges faced by businesses and their managers. A multinational business environment is complex and has more variables, thus difficult to manage. A multicultural employment policy results in employees of various nationalities, languages, cultures and religions, in various offices across the globe.

Globalization of markets

The importance of national borders grows less. Markets are stretching across the border and the MNCs are well placed to take full advantage of this.

Globalisation is directly proportional to the economic growth of a country, as it eventually contributes positively in reducing any country’s poverty level.

A- International & Regional Institutions, Policies, Governance

B – Domestic Policies, Institutions & Governance

Diversity Explained

When used in business terminology, “Diversity” [Def.] refers to a company that has hired a diverse workforce. In the employees they have men, women, and people of different racial and ethnic backgrounds.

In the global market such a company can understand the market conditions and demographics in a much better way. They can then use this information and equip themselves to thrive.

A company that has a diverse workforce is more likely to improve its productivity and their employees are more satisfied, than a company with a limited workforce.

The federal and state laws in the US, prohibits the companies to discriminate on the basis of race or ethnicity when hiring or assigning employees.

Workplace Diversity

Diversity in the workplace results in many benefits as well as challenges.

Benefits

Communication is a key element for the successful running of a diverse company. Along with diversity come substantial benefits. Such as:

Better decision making

Improvement in problem solving

Greater innovation and inspiration for creativity

Recognition of the employees talents

This leads to:

Improved product development

Successful marketing

Employees having a sense of belonging

Greater commitment and loyalty of the workers

Challenges

Management faces numerous problems in managing a diverse workforce. Many organizational theorists have raised their concerns over the motivation and management of a diverse workforce. Diverse organizational work environment should be considered as low context cultures. Many challenges are to be faced by the management. Such as:

Miscommunication within the organization

Interpretation of messages can vary from person to person since no two people have the same experience of events

Cultural bias including prejudice and discrimination

Assimilation

Impacts of Diversity on Globalization

Globalization of operations, products and services means multinational financial services firms must redefine the nature of their diversity programs. But morphing inclusion policies present benefits and challenges to both companies and local employees.

Globalization has changed the dynamic for firms looking to employ an old definition of diversity, notes Gerard M. Lupacchino, senior vice president for product development at Novations Group, a Boston-based provider of consulting and training services. In a report released in April, Novations Group observed "more employers have broadened their diversity efforts because of the impact of globalization." The company's survey of more than 2,500 senior human resources and training executives in the U.S. and Canada found more than 40 percent of organizations had expanded the scope of their diversity and inclusion programs, up from just 15 percent in 2005. The survey also noted another 24 percent plan to broaden their efforts in the near future.

"As the concept of 'diversity' as a human resources issue was considered primarily a U.S.-based problem, U.S.-based companies with global operations struggled with the consistent implementation of training in this area," explains Lupacchino. "Since diversity issues defined (and their litigation) vary tremendously around the world, the level of acceptance of this training also varies."

Global Variants

But the changes afoot in business are pushing managers to move on global diversity demands.

Lupacchino notes that if you walk into a U.K.-based firm, or the regional office of a global financial services firm, you'll likely find a range of "diverse" faces, languages and religions. You may also see more women. "The reaction to the U.S. concept of 'diversity' is often ambivalence at best, as these firms see themselves as already diverse, he says.

Lupacchino believes experience has taught global companies:

· Diverse organizations are not necessarily inclusive.

· Inclusive firms are not necessarily diverse.

· Diverse firms do not necessarily outperform their competition.

· Diverse firms that are inclusive often outperform their competition.

Across cultural and language differences - as well as time zones - managing diversity issues becomes even more difficult. Says Lupacchino, "Now layer in the complex matrix relationships of a U.S.-based office working with their Zurich counterparts, or a Japanese office working with Latin American partners, and the reality of how each culture sees relationships, activities, time usage and social conventions looms over every interaction. Not only have traditional 'diversity' topics become less relevant in the global economy, but those organizations who consider their work 'done' or 'enough' are falling far behind those companies who have connected diversity, engagement and development into one powerful human resources strategy."

Changing the Status Quo

The multi-country presence of U.S.-based financial firms certainly requires a change in mindset when it comes to implementing diversity initiatives, says Peggy Hazard, managing director and head of global services for Simmons Associates, a New Hope, Pa., consulting firm specializing in organizational development, diversity/inclusion management, global culture and HR management. "National culture recedes and a global hybrid culture develops, especially for executives working in high finance internationally," she explains.

Of course, notes Hazard, there can be layers of difference, depending on the part or sector of the organization an individual works in. For instance, executives would find it difficult to notice much difference between the cultural norms of top level management from an international office to the U.S. headquarters. Most executives across the globe are now exposed to a "Western way of thinking," she says.

However, lower levels of the corporate ladder may foster less English proficiency and less understanding of other cultural issues. "There are cultural layers within a country, and managers always need to be aware of that," says Hazard. "They need to be an advocate, managing and inquiring and asking for feedback in the actual environment."

Global Worries

Getting a handle on this "international dynamic" of diversity has become an essential part of global business. "You have to look at how the differences among people affect how they interact and judge others and then impact results," Hazard says.

However, U.S.-based companies haven't done well when it comes to broadening the definition of diversity. "Even when there is a broad definition, we tend to base diversity initiatives on race, ethnicity, handicap, sex or sexual orientation," says Hazard. "If you're taking this definition abroad and managing an international office, they're not going to relate to what you're saying."

Talent management is probably a more apt way to describe the diversity initiatives across the globe, with managers understanding the location-specific challenges. In China and India, for example, generational differences are a major challenge. "The younger generation there is much more westernized, so the incentives and ways to 'on-board' employees might need to be different," she says.

While many managers adapt global policies to their own needs, as the definition of diversity expands, some African-American employee groups have expressed fears that their concerns will not be addressed, Hazard says. "They are saying that it's fine to have a broad definition of diversity, but don't use that definition to sidestep the race issue here in the U.S. People might hate complexity in the system, but that's the reality.

Conclusion and Recommendations

In the 21st century, globalisation is changing the international framework conditions and, consequently, the fundamental conditions as well.

Globalisation presents a number of new challenges, for example:

The fight against international terrorism

Relations between the West and the Muslim World

Problems in the area of energy and the environment

Conflicts and the suppression of human rights

The prospects for continued global growth

The fight against poverty, especially in Africa

More non-state actors on the international scene

The world is moving in the direction of a global network and the new challenges are to be addressed accordingly. This requires strong partnerships and presence worldwide.

In the age of globalisation, it is the objective of businesses to contribute decisively to furthering their interests on the international scene and to enable them to pursue a policy internationally that will help foster broad and committing international cooperation regarding the challenges presented by globalisation.

The businesses must focus sharply on the challenges presented by globalisation

For example terrorism, relations between the West and the Muslim World, new challenges with respect to energy and the environment, global competition, poverty reduction.

Must establish open and strong partnerships in domestics markets as well as abroad

Implying, among other things, enhanced co-operation with civil society, enterprises, organizations and ministries.

They must be present in the hot spots of globalization

Implying, among other things, proposals for new embassies and the reinforcement of existing missions.

Some argue that globalization is driven by technology, and that it represents an unstoppable force. Perhaps – in the long run. We cannot take it for granted that the world will continue down the road of globalization, greater prosperity, and greater democracy. Political, cultural and religious forces play the dominant role in shaping the future of globalization. The world and the economic system we live in are highly imperfect. There is much that needs to be done to make it work better. But as we do that, we should maintain a perspective that reflects what Winston Churchill said of democracy (Democracy is the worst form of government, except for all the others that have been tried): “The pro-market, pro-globalization approach is the worst economic policy, except for all the others that have been tried”

In conclusion globalisation creates an opportunity for businesses to expand revenue streams, diversify risk and increase brand equity. Many companies have successfully expanded their business as a response to the drivers of globalisation. There has also been a noticed development in the global strategies of companies as a response to globalisation.