Globalization and Corporate Social Responsibility in International Companies
The world today has become a single market unit where the economies and people are integrated into a single market brought by international trade. Companies are now free to invest globally and tap the potential of other economies. There is advanced capital flow from developed countries to the developing ones. Moreover, we find migration taking root in the world coupled with free flow of technology and goods. This has been influenced by cultural diversity and social-political expectations. Most companies are producing goods for the whole world; as such there is need of awareness on global effects brought by international operations (Wall, p.84). This requires a greater responsibility by the companies to act responsibly towards the environment, customers, workers and the international communities. International companies are facing various challenges that affect their corporate strategies and goals as their scale of operations is wide in a volatile market that is distributed across the world.
Effect of globalization on corporate social responsibility
The global market is sporadic and very competitive. Companies are devising various strategies to counter the spill over effects of globalization. Fisher and Lovell (p. 96), say that there are massive environmental disasters due to limited financial resources available to be injected into the Company’s capital base to boost social endeavors. The management has been constrained as such reducing the amount of money used to promote community aspirations. According to Kotler and Lee (p. 76), organizations are unable to finance community programmes like education, provision of roads and other infrastructures. Therefore, there is need of maintaining low prices in line with the global trends. This means there is need of corporate intervention towards the aspirations of the society though the management is constrained in terms of available resources. The production techniques have changed drastically leading to adoption of new technologies that has led to job losses as the emphasis has been on lean production to achieve productivity and profitability. This has denied the global job market an opportunity of earning an income (Gerry, Scholes and Whittington, p. 156).
Organizations of today are financially incapacitated due to reduced revenues; they are unable to provide a good working environment and essential tools of work like protective clothes to the workers. Moreover, it has been difficult for Companies to pay employees competitive salaries because of low prices fetched by goods across the globe (Sun 35). This has led to the recent trend in outsourcing of services and manufacturing in countries where production is achieved efficiently and at a lower cost. This has benefited the organization and therefore, the company specializes in areas that it has competitive advantage. Equally, the customers are able to get top quality goods at a lower price while the organization’s profitability increases leading to higher earnings on the shareholders investment.
Damain and Cohen (p. 19) argue that the global business environment is uncertain; the investments in diaspora are faced by many challenges. The various world economic regional blocks are unique and calls for diversified, thorough study and massive investment in research. The recent oil spill has caused untold environmental disaster in the Gulf of Mexico, prompting organizations to be cautious when venturing in new grounds as this calls for a heavier social responsibility, notably British Petroleum Company is bound to meet all the costs associated. This is an environmental challenge that will rake huge amount of financial resources from the company. There is dire need for the company to change its corporate social strategy to reflect the facts on the ground (Werther and Chandler, p. 107).
Financial scandals from management have been detrimental to the reputation of the organization thereby scaring away current and potential investors. This has lowered the company goodwill leading to poor prices of the company’s stock. It has a negative effect, as the leadership didn’t act responsibly to the global investors, thereby making them shift their finances to other non lucrative investments. The degree of transparency in reflecting the actual true financial performance has been on the decline. Most international corporations operating in diaspora have lost touch with the local government and have failed in financial transparency thereby denying the host countries the much needed taxes. Some have formed allies with their preferred political leaders to gain favors at the expense of the impoverished citizens. This has aggravated corruption in the government thus leading to backwardness in the economy thereby increasing the poverty index among the nationals.
Reilly et.al (49) explains that the recent trend in global deregulation has favored business across the world. The easing of trade barriers has encouraged companies to give back to the community by employing various strategies. They are able to provide goods at fair prices due to long term treaties and concessions agreed upon. This has made it possible for the companies to be engaged in voluntary initiatives by collaborating with non governmental organizations to provide social amenities and necessary infrastructure to the benefit of the society. There has been increased collaboration and exchange of ideas brought about by information technology, thereby opening opportunities for small companies to compete globally (Murray and Blowfield, p. 57).
It is worth noting that globalization has both positive and negative attributes to the corporate social responsibility. The leadership should consider the benefits and the added value the company derives, the negative aspect demonstrate a conservative management style of leadership that does not appreciate the role of the firm to the external and internal environment which are part and parcel of the organization. In essence, it is beneficial if the organization honors and appreciates the society by developing strategic social responsibility benchmarks. The firm will reap the benefits both in long run and short run.
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