Globalization and Its Impact on Global Management

Introduction

Globalization is one of the main processes influenced all spheres of human activities. Globalization involves creating a ‘new international economic order’, extending beyond the traditional modes of capitalism. If progress toward an open world economy is to be made, it will require a redesign of the entire socio-economic-political arenas of countries (Hirst and Thompson 1999). Though, the process of globalization appears inevitable from some viewpoints such as the advance of modern communication technologies, low barriers to trade, etc.. All nations involved will seek to gain conditions and positions acceptable to their interests, reducing co-operation and making the road to globalization long and difficult. These problems and changes create challenges and threats, advantages and benefits for managers and modern organizations operating of a global scale (Stiglitz, 2002). This topic is important because the economic interchange does not simply consist in the movement of goods and money but has also been accompanied by the movement of labor. Managing it satisfactorily can be accelerated only by a transformation to socio-economic-political systems based on new value systems. An international organization can only perform effectively through interactions with the broader external environment and adapting to specific cultural norms and business patterns. The paper consists of three main parts, introduction, the discussion section and conclusion. The main topics, analyzed and discussed in the paper, are problems of convergence and divergence, diversity management and challenges of knowledge and expertise transfers. Thesis Globalization creates many challenges for managers and demands new ways and methods of doing business, intercultural knowledge and strong personal skills of managers such as flexibility of thinking and strategic planning.

Globalization: Discussion Section

Definitions and Explanation of Globalization

Globalization is a complex phenomenon, so there are different definitions exist to determine, explain and identify this process. Giddens (2002) states that “the intensification of worldwide social relations which link distinct localities in such a way that local happenings are shaped by events occurring miles away and vice versa.’ (p. 64). An interesting argument is the debate regarding the distinction between globalization and internationalization with Hirst & Thompson (1999) contending that globalization does not exist because from their economic viewpoint it is not so much globalization but a continuation of an internationalized economy, referring to it as internationalization. The definitions mentioned above allow to say that nations enter the globalization process with macroeconomic motivations and political arrangements (Frieden 2007). The measures taking by global companies to deal with new business environment are complex, as well, involving the reduction of importing barriers and political economy alignment. One can observe that regardless of the specific terms used within the definitions offered, globalization generally appears to be regarded as a process, it is not happening in an instant, but it can creep up unannounced. Globalization can be identified as a set of changes and innovations aimed to unify cultural and business processes and level local differences (See Appendix 1,2).

Problems of Convergence and Divergence

Even before the ‘discovery’ of the phenomenon of globalization and a global culture, the issue of convergence versus divergence in management practices has been researched (Frieden 2007). It would appear from the previous arguments of globalization, that globalization itself is a convergence theory. An older argument as to the distinction between the two trends lay in the existence of similarities between macro-level variables and micro-level variables, with the latter referring to culturally based similarities and the former referring to environmental factors (Frieden 2007). Addressing convergence, Child and Kieser (1979) believe that the convergence position argues against cultural differences; ‘patterns of organization will be free of cultural influences, especially in industry, because contingencies of scale, technological development and so forth, impose a common logic of work and administration” (cited Stiglitz 2002, p. 706). The challenge for managers is that organization will opt to ignore cultural influences in favor of universal methods in order to remain competitive, suggesting an element of choice in the acknowledgement of culture, hinting at a degree of choice in management approach. Bhagwati (2002) emphasizes the importance of being responsive to local market conditions. IBM Australia, in order to level the problem of convergence and divergence, develops ‘one best way’ approach to management able to meet business needs and employees expectations. This allows the company to coordinate business processes, meet organizational goals and respond effectively to diverse employees groups.

Diversity Management

It is argued that the more markets internationalize, the more nations become integrated within the international arena of business and a consequence of this is managing people across national borders. The challenges of people management and career development of both international managers and those they manage in international operations become more critical to the international strategic planning and operations of firms, with culture being identified as a significant difference that must be considered. This suggests that there is a need for individuals and organizations to be cross-culturally sensitive, adaptive and responsive when managing across national borders (Wolf 2005). In many organizations, nationality has a significant influence upon managerial assumptions than perhaps age, and job function. Managers should remembers that culture can shape management perspectives but does not present a global approach to management or leadership, perhaps indicating that through identifying culture one cannot make assumptions and generalization in order to control it (Stiglitz 2002). In Hong Kong, the main challenge for McDonald’s was cultural difference. The company developed a two way cultural adaptation in order to meet local differences. For employees, it introduced specific training courses aimed to level cultural differences and language barriers.

Transfer of Knowledge and Expertise

The role of the manager is to transfer knowledge and expertise by means of global assignments and the effects upon international HRM. A successful knowledge transfer the MNC should promote the creation of a learning organization, and pay close attention to the requirements of management of global assignments. Knowledge management helps to connect people in global organization who operate in a distance, and has no opportunity to use printed matters or other sources (Wolf 2005). Following Giddens (2002) software in KM can benefited in any process or practice of “creating, acquiring, capturing, sharing and using knowledge, wherever it resides, to enhance learning and perfor­mance in organizations” (Giddens 2002, p,. 143). Thus the main challenges for managers if to apply knowledge and rules of their country to new environment influenced by cultural and social differences. For instance, in less developed countries KM software can become the main source of resistance to change and dissatisfaction of workers. Lack of skills and poor computer literacy will create barriers to successful knowledge transfer. The task of the manager is to inspire and motive them to use this new source of knowledge (Giddens 2002). The main challenge for Adidas in Hong Kong was computer literacy and lack of knowledge of the majority of employees. They introduced special training programs for the staff aimed to improve basic skills in a short period of time. The demand for skilled workers has exploded in the rich countries worldwide as the information technology revolution has created a huge need for computer scientists, programmers, and others in economies that are being overhauled by the new developments (Samson & Daft, 2005).

Conclusion

Companies enter globalization as they accumulate innovation capabilities that allow them to grow and expand into new markets. Although the globalization phenomenon is intrinsically related to the existence of a borderless world, the geographic barriers played a central role in the shaping of industries, markets and knowledge. Thus, globalization creates challenges and even threats for managers unaware of potential dangers and weaknesses of global workforce. The convergence arguments suggest that there is the beginning of a ‘global’ HRM model, whilst the divergence arguments present the idea that this is not the case due to resistance from national cultures. The process of globalization includes free trade and economic integration, policy of protectionism and economies of scale, cultural changes and homogeneity, increased political and social cooperation. On the other hand, knowledge and expertise transfers could help to improve performance and productivity but it is not easy to transfer these practices to other societies and countries. No country, developed or developing, can sustain a viable economy without the active participation of global business in many different sectors and industries. Globalization supports individual cultural creativity, democratic institutions and facilitates participatory cultural expression, political structures and entrepreneurs who help transform cultural talents into commercially viable cultural assets. Culture is good for globalization. A homogeneous world would not be good for globalization because diversity stimulates creativity, innovation, and the capacity to manage change. It also supports competitiveness so that multicultural societies are more convivial, accumulate more positive social capital, and are better equipped to fight political oppression, assimilation, and economic dependence. Managers should take into account all possible threats and challenges in order to respond effectively to coming changes and cultural differences. Therefore, when properly managed, globalization can be good for cultural creativity, diversity, and development.

Bibliography

Bhagwati, J. 2002, n Defense of Globalization. Oxford: Oxford University Press.

Frieden, J. 2007. Global Capitalism: Its Fall and Rise in the Twentieth Century. W. W. Norton; Reprint edition.

Giddens, A. 2002, Runaway World. Profile Books.

Hirst, P. and Thompson, K. 1999, Globalization in Question: The International Economy and the Possibility of Governance, Second Edition; Cambridge: Polity Press,.

Samson, D & Daft, RL 2005, Management, Thomson, Southbank, Victoria. Pacific Rim 2nd edition.

Stiglitz, J. 2002, Globalization and its Discontents, London: Allen Lane.

Wolf, M. 2005, Why Globalization Works. Yale University Press.

Appendix

Concept Map 1: Globalization

Concept Map 2: Globalization