ECO 740

ECONOMIC ANALYSIS

INDIVIDUAL ASSIGNMENT

“GLOBALIZATION: IMPLICATIONS TO MANAGERS IN MEETING THE

CHALLENGES AHEAD”

PREPARED BY

AHMAD SAUFE NAWI (2009114839)

SUBMITTED TO

ASSOCIATE PROFESSOR DR AZIZ BIN SULAIMAN

MASTER IN BUSINESS ADMINISTRATION

GRADUATE BUSINESS SCHOOL

FACULTY OF BUSINESS MANAGEMENT

UNIVERSITI TEKNOLOGI MARA MALAYSIA

th
12 APRIL 2010
INTRODUCTION

Globalization refers to the increasing integration of economies around the world,

particularly through the movement of goods, services, and capital across borders. The term

sometimes also refers to the movement of people (labor) and knowledge (technology) across

international borders. There are also broader cultural, political, and environmental dimensions of

globalization. According to Tom G. Palmer (2008), he defines globalization as "the diminution

or elimination of state-enforced restrictions on exchanges across borders and the increasingly

integrated and complex global system of production and exchange that has emerged as a result."

In addition, globalization is democratization of economy that there wills no restriction in doing

the trading with other country. As a result also, resources needed for production will be low in

the price. A good part of globalization according to Saskia Sassen (2006) consists of an

enormous variety of micro-processes that begin to denationalize what had been constructed as

national — whether policies, capital, political subjectivity, urban spaces, temporal frames, or any

other of a variety of dynamics and domains.

Globalization is not only benefits the country in the term of low cost of resource, freedom

to possess foreign company or else, it also contributes to dark side of the county as a whole. In

addition, globalization can contribute to social problem within the overwhelming transfer of

western culture. As a result, the nationalism spirit of the citizen in the country that involve in the

globalization will be narrow. Rapid foreign capital and technology coming into the country not

just boosting the economic growth but it can cannibalize the infant industry at the country and
the situation become worst when most of the company owned by the foreigner – like being

colonize the western.

Globalization can be measure with different way. These are the main four elements of

measuring the globalization in a country; goods and services, e.g., exports plus imports as a

proportion of national income or per capita of population, labor/human capital, e.g.,

net migration rates; inward or outward migration flows, weighted by population, capital, e.g.,

inward or outward direct investment as a proportion of national income or per head of population

and technology, e.g., international research & development flows; proportion of populations (and

rates of change thereof) using particular inventions (especially 'factor-neutral' technological

advances such as the telephone, motorcar, broadband).

As explained above, globalization contribute positive and negative effect to a country as

general and specifically to manager in the organization. As globalization is sort of colonization

by the western over poor country, there are many implication can be found by the manager in an

organization in meeting the globalization challenges. The manager in an organization is not only

facing economic challenge because when we discuss about global it include other element that

might be effected by the globalization are in term of the culture, population, health, income

distribution, standard of living, human resource, cost of doing business, economic liberalization

and so on. As an effective manager, they should be more realistic and optimistic in meeting the

challenge ahead and retain their organization competitiveness in the globalization market by

enhancing their productivity and efficiency in their business.

GLOBALIZATION IMPLICATION ON MANAGER IN MEETING THE CHALLENGES AHEAD

As far as concern, globalization contributes such implication to the global manager in

meeting the challenges ahead. These implications both contribute to positive and negative side to

the country involve in globalization. Several positive implications identified from the

globalization to the manager in meeting the challenges ahead. They are;

Assist the Economic Growth

Entering in the globalization world will improve the economic growth of the country. In

another word, globalization promotes favorable economic growth for developing country.

According to International Monetary Fund (IMF), the value of trade (goods and services) as a

percentage of worlds GDP increased from 42.1 percent in 1980 to 62.1 percent in 2007. As a

result also, foreign direct investment increased from 6.5 percent of world GDP in 1980 to 31.8

percent in 2006.

For a global manager, they must be realistic in adapting the change in the rapid

economic growth caused by the globalization. In addition, they must be effective in planning the

organization’s mission and vision ahead in order to meet the globalize market. Retaining or

improving the organization’s competitiveness is the vital part of global manager must achieve in

meeting the globalization. Moreover, organization’s competitiveness can be achieved by increase

the productivity and focusing on doing the business in an efficient way. Producing outputs at
high level of productivity within implementing cost efficient may leads to the organization’s

competitiveness.

Competitive human capital

Global manager also must face with challenges of having competitive human capital in

the labor market. When it comes to globalization, there will be lots of supply of human capital

into the country. In an open market, there will be surplus of demand and supply of human capital

in the labor market. This problem however creates an advantage to the country in having

competitive human resource. As a result, the local will now compete with international worker

rather than competing among them before the globalization took it effect. It somehow helps the

local to be more competitive in entering the labor market.

As a global manager, recruitment process maybe took in a harsh way because it creates

complexity of choosing the right person because the human capital is very competitive. As a

solution, stringent and high standard requirement for a job listing must be adapted by the

manager. Due to the labor market is competitive, high set of job requirement is vital to choose

the right person to the specific job.

The migration of human capital in human resource planning must also be considered by a

manager in meeting the globalization challenges. The effect of globalization must be control by

the government and just take globalization for granted. According to Malaysia’s 4th Prime
Minister, Tun Dr Mahathir in his launching speech at 30th anniversary of electronic industry in

Penang in 2002, he express that the government should play their important role in creating win

– win situation in the globalization world. Therefore, the globalization should be study carefully

in order to benefits both parties involved in the bilateral agreement.

Fast Technology and Communication Transfer

When it comes to globalization, everything will move faster and same goes to the

technology and communication. In the era of globalization, the manager should have the kind of

awareness regards the technology and communication change. The transfer of technology

become a compulsory in the globalization era, the county involved will receive advance

technology from the developed country rapidly. The cost of acquiring and adapting new

technology from the foreign country is cheap when it come to globalization and activities regards

such technology acquiring and transferring is much easier and fasters rather than the old day.

As a global manager, one must aware of new technology to be adopted by the

organization to make their organization more competitive in the open market. The acquiring of

new technology should be consider accordingly to stabilize between the usage of technology

(machinery) and human capital so there will be no shortfall of using the labor in the

organization’s operation.
 In the globalization era, the communication with be cheaper and faster. Due to

globalization took their effect on a country’s communication system; people are able to

communicate in fastest way and paying cheaper cost. Global manager awareness not just needed

in planning strategic strategy to the company in using the effective communication channel in

reaching their customer and clients, they should also be realistic in using the most effective

communication channel in communicating with their correspondent clients and customers.

Now, let discuss about the drawback implication of globalization that should be considered by

the manger in meeting the challenges ahead.

Poorer Countries Suffering Disadvantages

It is true that globalization encourages free trade among countries; there are also negative

consequences because some countries try to save their national markets. The main export of

poorer countries is generally agricultural goods. Larger countries often subsidize their farmers,

which lowers the market price for the poor farmer's crops compared to what it would be under

free trade.

The shift to outsourcing

The low cost of offshore workers have enticed corporations to buy goods and services

from foreign countries. The laid off manufacturing sector workers are forced into the service

sector where wages and benefits are low, but turnover is high .This has contributed to the

deterioration of the middle class which is a major factor in the increasing economic inequality in
the United States . Families that were once part of the middle class are forced into lower

positions by massive layoffs and outsourcing to another country. This also means that people in

the lower class have a much harder time climbing out of poverty because of the absence of the

middle class as a stepping stone.

Exploitation of foreign poor workers

The deterioration of protections for weaker nations by stronger industrialized powers has

resulted in the exploitation of the people in those nations to become cheap labor. Due to the lack

of protections, companies from powerful industrialized nations are able to offer workers enough

salary to entice them to endure extremely long hours and unsafe working conditions, though

economists question if consenting workers in a competitive employers' market can be decried as

"exploited". It is true that the workers are free to leave their jobs, but in many poorer countries,

this would mean starvation for the worker, and possible even his/her family if their previous jobs

were unavailable.

Weak labor unions

The surplus in cheap labor coupled with an ever growing number of companies in

transition has caused a declining of labor unions. Unions lose their effectiveness when their

membership begins to decline. As a result unions hold less power over corporations that are able

to easily replace workers, often for lower wages, and have the option to not offer unionized jobs

anymore.
Pandemic Disease

Globalization, the flow of information, goods, capital and people across political and

geographic boundaries, has also helped to spread some of the deadliest infectious diseases known

to humans. For instance, the pandemic disease such as H1N1 that starts at Mexico and America.

Modern modes of transportation allow more people and products to travel around the world at a

faster pace; they also open the airways to the transcontinental movement of infectious disease

vectors. One example of this happening is AIDS/HIV. Global manger should play their role in

planning for the future to overcome such disease in order to have sustainable growth .
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Floyd D. 2001. Globalization or Europeanization of business activity? Exploring the

critical issues. European Business Review (UK), 13(2)

International Monetary Fund, Globalization: A Brief Overview, 2008

Saskia Sassen (2006). Territory, Authority, Rights: From Medieval to Global

Assemblages. Princeton University Press

Tom G. Palmer (2008). Globalization is great!

Webb K A, Cahan S F, Sun J (2008). The effect of globalization and legal environment
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