Impact Of Globalisation

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Leeds University
Business School

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Module Code: LUBS _____1100_____________

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Globalisation is a term that we always heard of in business and it has contributed greatly to the development of our world economies in various ways. The foreign influences of this phenomenon has also increased over time. It is not only affecting businesses in the world but also it has a great impact on human's quality of life which enable people to enjoy a greater variety, better quality and cheaper goods and services. In this essay will first have a brief explanation about globalisation and then will give an example of how it affects the multinational enterprises. Generally speaking, globalisation is the integration of world economies through the elimination of barriers to movement of goods, services, capital, technology, and people. (Daniels, J. D. et al. 2013) As a result, the world is now becoming more interconnected due to the huge increased in trade and cultural exchange around the world. There are some reasons that cause the increasing pace of globalization and those reasons have brought beneficial influences on global business and human. The first reason is the rapid development and application of technology which include the development of ICT, transportation, and communications. The successful development of technologies, for example, internet has provided a channel for people to have fast global communication and receive information all around the world which enables manager to oversee foreign operations. On the other hand, the development of transportation has enabled business to adopt the logistics system and therefore vast quantities of goods and commodities can be shipped across the world at extremely low cost. The next is the liberalization of cross-border trade. As citizens want to have a greater variety of goods and services at a more affordable price and on the other hand, domestic companies will face more competition from abroad with increasing trade activities which can push local products to improve the quality of products to enhance its competitiveness. Therefore, the World Trade Organisation promotes free trade to countries, which help to remove barriers between them and government will reduce its trade restrictions and reduce tariffs in order to induce other countries to reduce their trade barriers in turn. The third main reason is the increased significance of multinational enterprises. MNEs is companies with foreign direct investment in at least one country other than its home country and it controls most of the world investment. Therefore it increases the integration of the global economies as it uses labour, capital from developing countries, and it passes through the cultural barriers and increased international trade which as a result has speed up the process of globalisation. After explaining the reason of increasing trend of globalization, effects that were brought by this trend is also important to mention. For citizens, there are numerous job opportunities have been created in developing countries through MNE which recruit workers with cheaper wages to take part in off-shoring services. Secondly, consumers can enjoy goods with lower price and high quality due to the intense competition of global markets. For firms, they can reduce production cost by access to sources of cheap raw materials and specialise on certain production line in developing countries, and also selling products to international market to enjoy economies of scale due to an increase in production for higher demand of the products. As the cost has decreased, firms can either spend more on improving the products or
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