Business organization & globalization

A Report

On

Business Organizations in a

Global Context

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Table of Contents

1.

Introduction

2. The key differences between global business operations

2.1 Analysis of the key differences between organizations

working in different sectors, industries and context. . .3

2.2 Assessment of the responsibilities of organizations

operating globally.....................................4

2.3 Evaluations of the strategies employed by organizations

operating globally.....................................5

3. The impact of external factors on organization

3.1 The performance of a national economy impacts on the

activities of business organizations...................6

3.2 An explanation of the measures taken by governments to

influence the activities of business organizations.....8

4. The impact of global factors on business organizations

4.1 Explanation of the implications of global integration on

business organizations.................................9

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4.2 Assessment of the effect of international trade on

domestic products and services9

4.3 Review of the impact of the global economy on businesses

......................................................10

4.4 Assessment of how ICT has facilitated globalization10

5. A review of the current issues impacting on business

activities

5.1 Global environment in UK..........................11

5.2 Proposed strategies to address issues affecting business

activities in UK......................................12

6. Conclusion............................................13

7. Reference.............................................14

1. Introduction

Globalization is a common issue nowadays. It is a process of

removing the barriers and connecting people, ideas and things all

over the world (Manfred, 2003). Most of the organizations are

becoming global today, because organizations want to grow and

globalization is a great way for faster growth of any

organization.

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Lindum Group, a Lincolnshire Construction Company provides

construction services throughout the United Kingdom were founded

in 1956. It is one of the leading construction companies of UK.

It has become stable in this position because of its excellent

services. Now Lindum has offices in Lincoln, Grimsby, Spalding,

Peterborough and London.

In today’s global world, Lindum is considering an acquisition to

grow, which will move the company from a national to a global

entity. This will enable Lindum to give the world a better

experience of innovative construction services. As a manager, I

am preparing this report for the consideration of the senior

management team and the board for acquisition.

2. The key differences between global business

operations

2.1 Analysis of the key differences between organizations working

in different sectors, industries and context: As a consequence of

globalization, organizations operate their business in different

sectors, industries, as well as context. These have been selected

according to the companies’ scope and goal. Different nations put

emphasis differently on different sectors and context. So we have

to understand the difference clearly before operating globally.

A sector is basically one of the universal segments in the

economy in which a large group of companies can be classified.

Sector might be sub-categorized as private and public sectors

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according to the ownership. Private sectors are owned by the

government and are not profit-oriented. So people work for the

government whereas public sectors are owned and dominated by

general people. Here people works for the organization.

Corporations and non-profit organizations are the types of

private sectors.

Organization’s manufacturing, production, distribution and

marketing process differs on the basis of industry. For example,

Ford- a company of auto industry might focus on its production

process. On the other hand, Lindum- a company of construction

industry would focus on its service.

Context is the mode of organizational operations and how it is

structured, including the culture and values of the organization.

Cappelli and Sherer portray context as “the surroundings

associated with phenomena which help to illuminate that [sic]

phenomena, typically factors associated with units of analysis

above those expressly under investigation”(1991: 56). It might

differ organization to organization. An organization’s strategy,

tactics and operations might not be suitable for another

organization.

2.2 Assessment of the responsibilities of organizations operating

globally: It is the time to move the CSR to the concept of

“global responsibility” (Berthoin Antal & Sobczak, 2004). The

acceptance of global responsibility defines as an action of

leadership. It is a voluntary and deliberate use of resources of

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the organization in order to achieve sustainability. There are

huge responsibilities of organizations that operate globally.

Some of them are given below-

Customers: Customers are the main focus for any organization.

While operating globally, Lindum has to understand the customers’

needs and thus conduct the business consistently and fairly to

give the customers better experience. To make loyal customers

globally, organization has to keep its promises of delivering

quality products and services.

Community: Though customers are a big portion of the community,

the community stakeholder group is different. Community includes

local chambers of commerce, service club, social clubs etc.

Attending the meetings and conferences of the communities and

participate there is the responsibility of the organization as a

part of the global society. Donating to the charitable

organizations and supporting them enhance the goodwill of the

organization globally.

Employees: Employees are the key asset of the business. When

operating globally, the organization’s responsibilities toward

employees increase. It should not discriminate between the people

of home and host country during hiring. It should promote

workplace diversity as well as equal employment opportunity.

Following fair labor law and offering fair promotions appreciate

employees greatly.

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Suppliers: While operating in different countries, there are new

suppliers. Suppliers are not just entities from whom the

organization buys. So the organization should keep a good

relationship with its suppliers through honesty and fairness.

This enables the business to reduce cost and to speed up the

growth in new countries.

Law: when an organization plans to operate globally, it has to

understand the rules and regulations of the host country in

details. It has to abide by all of the acts and laws of that

country. It has to prepare contract papers and other necessary

documents during the business registration.

Ethics: Business partners require the organization conducts the

business ethically. If it pollutes the environment or involves in

illegal activities like cheating on taxes, it lost its reputation

in the host country and incurs a loss.

Research: Organization has to research and analyze the market

segments to know the needs and culture of the new place.

Otherwise, it will be impossible for the organization to survive.

2.3 Evaluations of the strategies employed by organizations

operating globally: At first, Lindum has to understand that it is

now operating globally and thus has to develop appropriate

strategies. A global strategy is an organizational strategy which

takes into account the new global factors. For instance,

automobile companies like Toyota and BMW, have established global

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distribution channels and marketing networks, centered on market

leading brands that are known worldwide.

Major features of global strategy are categorized below-

1) Treat the global market by way of the local market.

2) Establish a marketing mix globally. It also identifies

national differences like the differences in preferences and

culture.

3) Launch production and distribution systems globally.

4) Concentrate on leading brands rather than focus on several

brands which confuse people.

To establish a global strategy, organization might do a PESTEL

analysis that is necessary to understand about the external

factors while operating on a global scale. The mission statement

should then come up with global focus.

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Figure 1: PESTEL Analysis

Then the organization would better know its objective to carry

out its plans that would help it to focus on global market.

The global strategy consists of a global marketing plan including

marketing mix, production process and distribution plans. For

example, Singapore Airlines followed a global strategy that

decided on which countries to deliberate its businesses in the

first place. Then it gradually created a strong brand image

globally to get instant recognition.

3. The impact of external factors on organizations

3.1 The performance of a national economy impacts on the

activities of business organizations: Because of globalization,

world is becoming closer. Countries are connecting together for

business purposes and for improving their economies. National

economy reflects the overall economic condition of a country. So

an improvement or decline of any factor of the economy has a

great impact on the activities of any business organization.

Monetary and fiscal policy of the economy affects the purchasing

power and borrowing capacity of the people or business. Banking

policy affects interest rates and prices of goods and dominates

the investment. If these factors are in favor of business, it

grows. Otherwise, it has to incur a loss.

Economic growth indicates the earning of the people and

development measures the amount of money invested in the economy.

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When the economic growth and development curve of the country

becomes upward sloping, people start to spend much on luxury

products.

An important factor of the national economy that influences the

business is the rate of employment and income. For example,

during recession, the number of unemployed people rises and

purchasing power decreases. As a result, business faces a dark

period.

If the people of the host country are educated, it is a plus

point for the global business. It is easy to work with the

educated people and train them. So education level is important

for the global growth.

Price level of commodities has a huge impact on business. If the

price level rises, cost of raw materials, production cost,

transportation and other costs also rise and lower the profit

margin of the organization.

There are many other factors in national economy that influence

the business organizations-

Trade Cycles

Inflation

Recession

Exchange Rate

Rate of InterestPage | 10

Population

Any change in the national economy might hamper the business a

lot. So business needs to be well prepared with strong strategies

back-up plans in order to cope with the changes.

3.2 An explanation of the measures taken by governments to

influence the activities of business organizations: Government

has some objectives like full employment in the country, reduce

inflation, balance the imports the exports, improve the standard

of living, and reduce the gap between the rich and the poor. To

achieve these objectives and to control the economy, government

always takes some measures that influence the activities of

business organizations. Some of them are given below-

1) Employment Policy: Government always tries to increase the

employment opportunity. For instance, UK government is trying to

make the businesses competitive in global market. For this

reason, government might arrange the training programs for the

employees and sponsor them.

2) Local Policy: Government makes the fund available for the

regions that face problems like illiteracy, high unemployment

rate or any other social problems and solve the problems.

3) Inflation Policy: Government tries to keep the economy in the

equilibrium level. In order to maintain it, government makes the

balances through instruments like interest rate. If there are

chances of people borrowing and spending too much, government

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turns the interest rate up. Then borrowing money becomes more

costly and purchasing power declines, which leads to the

reduction of the price.

4) Education and training policy: The government of UK plays an

important role to support the education and training changes in

order to make them more advanced.

5) Taxation policy: Businesses contribute a lot to the economy by

paying taxes. In return, the government helps businesses by

spending money on projects such as the constructions of airports,

roads and many other ways.

6) Global policy: The government can influence the global trade

by encouraging the sales of local goods in foreign countries, or

by discouraging the import of goods from other countries.

7) Establishing new laws: Government might influence the

activities of the business organization by improving the existing

laws or making new laws in the favor of the country.

4. The impact of global factors on business

organizations

4.1 Explanation of the implications of global integration on

business organizations: Because of the economic, political,

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social, and competitive forces for globalization, an increasing

number of industries have recently become global in nature

(Bartlett and Ghoshal, 1989; Kobrin, 1991; Morrison and Roth,

1992). Global integration is referred to as coordination and

control of business operations across borders (Cray, 1984).

Global integration is mandatory, rather than discretionary

(Porter, 1986; Yip, 1992). It is because of the rising

competitiveness of business today. Some important aspects of

global integration are written below-

Global Integration in supplies of raw material as well as

finished goods all over the world through a strong network.

Global integration in controlling the management system of

the organization.

Global integration in training and development programs for

employees.

Global integration in export.

Reducing the entry and trade barriers among countries and

creating an open-economy worldwide.

Maintaining a standard of goods and services that are

provided by the organizations of different countries.

Constant research and analysis globally by the organizations

in order to get competitive advantage globally.

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Structure and strategies for gradually minimizing the cost

and improving quality.

4.2 Assessment of the effect of international trade on domestic

products and services: In recent years, international trade has

been expanded rapidly. Export and import of the countries is

rising more rapidly. These have both positive and negative

effects on domestic product and services. Some of them are given

below-

If import increases, people will get more alternatives for

the same product so that they can differentiate the quality

and buy the best one.

If the price of the domestic goods is higher than the

foreign goods, people will not prefer the domestic good,

which will result the sales reduction of domestic goods.

Opposite might also be happened.

If there are a lot of foreign and domestic goods are

available in the market, there will be a huge competition.

Thus the quality of domestic goods will improve in order to

sustain in the competitive market.

If export increases abnormally, then there will be

possibility of not to serve the local needs fully. A deficit

of domestic goods and services will be started.

Some internally well-known brands might grab the market

share which would discourage the domestic products.

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4.3 Review of the impact of the global economy on businesses:

Today every country has some impact of whatever happens in other

countries (Harsha, 2004). The uncertain global economy may pull

up the success or failure for the business. It might affect the

business in many ways. People can get the news of every single

product that is manufactured in any part of the world through

internet. So there is a universal standard for almost every

product nowadays. As a result, the competition among the

businesses for survival is increasing prominently. The amount of

risk is also rising high. The only way for the businesses now is

to continuously come up with unique and innovative products. For

example, Apple is constantly introducing its unique and

innovative products and grabbing the market share.

4.4 Assessment of how ICT has facilitated globalization:

Globalization has expanded so rapidly because of ICT. ICT

contributes to the “Death of distance” (Cairncross 1998). It has

facilitated globalization in many ways-

Advanced and strong ICT networks speed up globalization

It have simplified global markets and processes of doing

business globally

It has challenged traditional economic system

It has cut down the lengthy process of doing business

internationally

It has an impact on everyone in the global market

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It has linked the personal computers to a global network

which is internet

It has created virtual organizations for global business

ICT plays a major role to make the global economy faster. It has

created a new global economy based on information, globalization,

and networking (Flew 2002, 69)

5. A review of the current issues impacting on business

activities

5.1 Global environment in UK: Although the world economy is

currently facing downturns, the economic condition of UK is

stable. UK is moving forward to recognize itself as a leading

Business Centre of Europe. UK is a perfect place for global

business as the UK government supports and takes care of

international businesses.

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Figure 2: Global Environment

As a result, it has become the sixth largest trading nation in

the world. UK’s strong position in research, development and

technology lead to its global environment. The government has

strong strategies like building up multicultural trading method,

lowering tax rate, shutting down illegal business and reducing

barriers in overseas trade to support global business and

sustainability. The manpower of UK is so high because of the

effective training programs of UK. Its strict laws and regulatory

system for business such as Anti-Bribery Legislation keeps the

global environment clean.

5.2 Proposed strategies to address issues affecting business

activities in UK: UK is a very good choice for doing business.

But any business must follow some strong and effective strategy

in order to sustain in this competitive global world (Leo, 2005).

Lindum might follow some strategies that are described below-

Innovation: The business world has become so competitive

today that there is no alternative of innovation for

existence. So Lindum should focus on creativity.

Technology: In last few decades, technology has improved so

much. Now most of the steps in business process are

automated. It is important to save time and increase

production.

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Market Extension: Organization should tailor their products

or services in such a manner that it would be able to create

and attract new markets for the existing products.

Product Extension: To satisfy the target market,

organization should come up with new or modified quality

products.

Invite new people: Organization might take a strategy to

welcome new investor and business process. It might result a

huge profit.

6. Conclusion

A lot of research proves the positive impact of growth on

business (Hick, 1998). For any types of business today, growth is

very important. And when organization decides to go for a global

growth, it has a huge impact on business. But, because of

globalization, global growth of business has become a common

thing in today’s world. One thing should be considered carefully-

whatever the growth or business expansion strategy organization

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follows, the center of the strategies should be the customer

satisfaction.

7. References

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Oxford University Press.

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Voluntary and Binding Approaches, Organisation for Economic

Cooperation and Development (OECD), Paris.

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Edward Elgar, pp. 46-62.

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x. Kotler, Philip & Keller, Kevin Lane (2009) Marketing

Management Pearson Education International, 13. Edition

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Palgrave MacMillan

xii. Ruggie, J. G. (2004b), The Global Compact: An Extraordinary Journey,

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Raising the Bar. Creating Value with the United Nations Global Compact,

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xiii. Schutter, O., Lebessis, N. and J. Paterson (eds.) (2001),

Governance in the European Union, EUR-OP, Luxembourg.

xiv. World Commission on the Social Dimension of Globalization

(2004), A Fair Globalization.

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