E143 - Globalization's Impact on Contemporary Business Issues

This essay examines the multifaceted impact of globalization on contemporary business issues, focusing on both advantages and disadvantages. It discusses the influence on individuals, particularly in terms of employment and lifestyle, highlighting the outsourcing trends exemplified by HSBC's IT operations shift to developing nations. The essay further analyzes globalization's effect on the global economy, noting the rise in international trade and investment, while also addressing environmental concerns such as e-waste and the importance of corporate sustainability initiatives like HSBC's Water Program. Finally, it touches upon the socio-cultural shifts brought about by globalization, including changes in values and lifestyles. The document is available on Desklib, a platform offering a range of study tools and resources for students.

Contemporary Business Issues in A Globalised
Environment
1

Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................4
Conclusion................................................................................................................................10
Reference list............................................................................................................................10
2

Introduction
Few decades’ earlier, virtual reality, artificial intelligence was mere myths. Technology has
improved significantly over the past years and has made many impossible, possible and
unseen, seen. The fast boom in technology has improved global communication and has
opened up multitudes of opportunities for the modern generation. However, globalization has
remained a widely debated topic till now and this diversity in views has made it unclear that
weather it is a blessing to modern civilization or a curse to humanity.
Most of theories have stated that globalization, which has amalgamated various cultures and
has made graphical representation of nations as mere shadow lines, is a major blessing to
modern civilization. This not only has benefited the young generation of modern era but also
has boost up global economy, paved way for more economical and infrastructural
development and has bought every nations in a single platform. Globalization has remarkable
impact on global economy, politics, environment, technology, legal system and others factors
of global business environment. In order to understand the advantages and disadvantages and
the cost of globalization, it is essential to analyze how this has impacted the global business
environment and the activities of organizations.
The following discussion would undertake this task by analyzing how globalization has
influenced interest of individuals, the profitability and functions of organizations and the
global business environment. The following section would conduct an analysis of major
factors of business environment. In order to make the analysis more convenient the following
section would narrow down its discussion by using the example of an organization that has
significant global existence and is influenced significantly by the phenomenon of
globalization.
For this purpose the following discussion would be evaluated on the framework of HSBC that
is one of the major multinational financial institutions and has a major contribution to global
economy. Originated in Hong Kong, this organization is the seventh largest financial
organizations in the world in terms of total assets. It has more than 6000 offices that are
located in more than 67 nations (HSBC.com., 2018). Globalization has quite a remarkable
impact on the activities of this organization due to its international existence; therefore using
the example of HSBC for the following discussion would be beneficial for understanding
how globalization has influenced global business environment.
3

Discussion
The benefit of globalization and its impact is considered as a controversial topic in this
modern era. It is still a question that if it has created opportunities for people or has
demolished the option for having a better living and lifestyle. One of the most apparent
influences of globalization on young individual is employment and job satisfaction. It has a
major influence on global labor market as outsourcing has come as a major result of
globalization. Organizations headquartered in developing nations have started depending
more on the labor market of developing nations. Therefore, it can be easily put forward that
this is creating a huge number of employment opportunities for the foreign market and
additionally, it is reducing employment opportunities in the domestic market. As the labor
wage is comparatively low in the foreign market, organizations are choosing to shift its non
core functions in the developing nations for reducing labor and operational cost (Mutalemwa,
2015).
The enhanced global communication has made this global trend easier. HSBC is also not an
expectation of this scenario. In 2016, the organization decides to lay off nearly 840 IT
workers as part of its major cost cutting move. It was part of the 5 billion euro cost cutting
more of the company. The organtsation decided to shift a major part of its IT operations in
developing nations like China, India and Poland. This outsourcing deal resulted into the
shedding of 595 jobs in Sheffield and with an addition of 245 posts In London, Birmingham
and Leeds. This decision that resulted into the elimination of 8000 British Jobs was the first
major such instance of the evil impact of outsourcing of the company (Inman, 2018).
However, the two sides of this scenario have to be judged for an impartial conclusion. This
decision also resulted into the creation of a huge number of jobs in the developing nations.
Despite this benefit, this decision can be considered as a major disadvantageous side of
globalization as the livelihood of a huge number of people became uncertain (Zajda, 2015).
This also deteriorates the quality of life as the wage remains low and unsatisfactory.
The impact of globalization on an individual is not limited to job satisfaction and
employment only. It has significant influence on the everyday lifestyle and preferences of
individuals. Due to globalization, multiculturalism has become a major feature of the culture
of every nation. Therefore, the cultural preferences of individuals has also influenced
immensely due to globalization.
4

Globalization has a major influence on the global economy. Imports and Exports account for
95% of Germany’s GDP , 63% for the UK –54% for China, and 30% for the USA (Hamilton
and Webster, 2015).
Some people in the developed nations in UK and USA may not have clear perception
regarding the third world nations that are the major source of the commodities they every day
use. It is observed that a major amount of cloths and daily commodities are manufactured in
nations like China and India. This fast intrusion of the emerging nations in the global market
is made possible due to globalization. Some of the major blessings of globalization on
economy is that the fast growth in global economic scenario (Milanovic, 2016). It has paved
the way for employment and created a huge number of job opportunities. Along with that, a
remarkable change in Foreign Direct Investment is witnessed over the past years and this has
helped in boosting up technology transfer, the growth of global companies.
Globalization has enabled several large size organizations to realize economics of scale that
is effectively reducing costs and prices and this in turn is supporting further economical
development and growth. However, this may have a minor impact on the small size
organizations that are trying to compete domestically. The optimistic nature of the global
economic scenario would prove the positive aspect of globalization. The GDP of major
global power is on rise. The GDP of United States is expected to grow to a major exempt and
would reach to 2.4 in the last quarter of 2018. The GDP of the emerging nations is also on a
upward growth and it is expected that the GDP of China would rise to 1.2 at the last quarter
of 2018 (Tradingeconomics.com, 2018).
5

Figure 1: Global Economic scenario
(Source: Tradingeconomics.com, 2018)
The global economic scenario proves that globalization has definitely boosted up the
economic scenario of nations. Globalization also has a major contribution to global
employment. This has created a huge number of job opportunities for the emerging nations
and has reduced the gap between the economy of developed nations and that of the developed
nation. This positive side of globalization has benefits the multinational organizations like
HSBC. It has enabled the organization to initiate major international deals and agreements
which further has enhanced the productivity of the company. In the year 2016, a USD43
billion deal was offered by China National Chemical Corp. (ChemChina) to buy Syngenta
AG which is a large Swiss pesticide maker. If this deal gets approved then it would be the
largest foreign takeover by a core Chinese organization. The organization is also witnessing
a major boost in the market of India. Regarding merger and acquisition Activities in India,
has is also witnessing an optimistic scenario. It has reached the highest record of USD 46
billion from January through September of 2016 in comparison with USD33.8 billion of 2015
(Gbm.hsbc.com, 2018).
This shows how globalization has benefited HSBC and enabled it to improve its global
dominance in the banking industry. Due to globalization it also is able to get effective
6

employees in a low labor wage. The organization uses foreign employees both for the core
and noncore functions of the company and a huge number of labors are also outsourced from
the foreign market (Amavilah et al., 2014).
Environmental factor is another external environmental factor that has witnessed the fast
change due to globalization. While industrialization is giving many opportunities to the
modern world, it is also impacting the base of humanity that is environment. With the
increasing concern of climate change, it has become a major factor for the organizations to
consider reducing native impact on environment (Efrat, 2014). Due to globalization,
industrialist activities are increasing significantly. The exploitation of natural resources, the
emission of harmful gas in nature, the use of non biodegradable materials have resulted into
the degradation of global environment. Globalization has also increased global transportation
which is a major reason for pollution and degradation of air quality. The increase of
greenhouse gasses like Carbon dioxide, Nitrous oxide, Methane, Ozone, CFCs and Water
vapor; incidents like deforestation, desertification, shortage of natural resources and reduction
in bio diversity has become dominant features of globalization and industrialization (Najam
et al., 2016).
Figure 2: Export of E-waste
(Source: Basel Action Network, 2018)
7

Organizations like HSBC must consider the evil side of this scenario. Such organizations has
become a major part of the factors that impacting environment. It cannot be overlooked that
such organizations are major contributor of global e-waste. Standing at the crossroads of
developed and developing status, nations in Asia and Africa have become major names in e-
waste crime. United Nations Environment Program has found out that nearly 40 million tones
of the global amount of e-waste finds its way to nations in Africa and Asia. It has to be noted
that HSBC has significantly position in such nations (Thai et al., 2017).
Therefore, it can be stated that globalization has cost nature severely. This deteriorating status
of the global environment has entrusts the Multinational organizations with the task of taking
effective measures to reduce impact on nature. Being one of the largest organizations in the
world, HSBC is bound with the responsibility towards environment. Water scarcity has
become a major dilemma of modern world. Due to globalization, the use of water resources
has become diversified and now it is not limited to serving the basic requirements of people.
Water resources are now required for several production, manufacturing and transformational
activities. Keeping the concern regarding globalization in mind, HSBC has developed 5 years
“HSBC Water Program”, with the partnership of Water Aid, Earth watch, and WW. Recently
the organization has extended it by three years, which is until the end of 2019
(About.hsbc.co.uk, 2018).
As part of this program, the organization has helped to protect nearly 1,826 kilometers of
river and 527,411 hectares of wetland. The organization has provided tanning to more than
8000 employees of HSBC regarding the methods for checking quality of freshwater in their
areas (About.hsbc.co.uk, 2018). Thus the organization is coming forward for a sustainable
development and contributing to managing ecological balance. In this way organizations are
coming forward in redeeming the negative impact that industrialization or globalization has
bought to the world.
Expect the ecological and financial factors; socio-cultural factor has also changed drastically
due to globalization. The major aspects of society are structure of employment, the living
and working conditions of people, the population of a particular region, and health as well as
education level of people. On the other hand, the cultural factors indicate to aspects like
believes of people, values and customers as well as behavior of people. Culture indicates to
collective programming of believers and behaviors of people that distinguishes one category
of people from the other type of people (Hamilton and Webster, 2015). Globalization has
bought an eye witnessing change in the cultural and social factors. For example, behavior and
8

lifestyle of people has changed significantly. For example, the values and believes of people
has changed significantly. People now have become more tolerant towards people belonging
from another religious and social background. People have become more and more mobile
and this has resulted into the mixture of people from different regional background. The gap
between different races is getting diluted due to globalization.
The major change that has come into the global socio-cultural scenario is the amalgamation
of different types of culture which has further resulted into multiculturalism. This cultural
amalgamation or the multiculturalism has both positive and negative aspects and this has
become one of the major characteristic of modern social system (Milanovic, 2016). This is
also evident in the case of multinational organizations like HSBC. This organization shares a
mixed culture that includes people from various backgrounds. The human resources of this
organization are culturally diversified in nature. Globalization has made the workforce and
organizational culture inclusive in nature that welcomes people from different backgrounds
(Efrat, 2014).
However, there is also another side of this scenario that shows a quite native situation.
Globalization has resulted into creating a huge gap between the upper and lower class people.
This is mostly evident in nations like China and India. Industrialization, that is major
consequence of globalization, has created mainly two classes of people that are the capitalist
class and the working class. The gap between these two class people is increasing
significantly and is showing no sign of change (Cleveland et al., 2016). The main financial
power has come under the hands of a limited number of people who are known as the
capitalists. This huge gap between the upper and lower class people can be considered as a
negative side of the phenomenon of globalization.
Expect the social, cultural, financial, and environmental factor. The legal and technological
factors are also major pillars of global environment. In this changing global scenario that is a
result of globalization, the importance of the technological and legal factors on organizations
like HSBC cannot be omitted or ignored. Legal factors like regulations for export and import,
regulation for managing competitive environment, employment regulations and others, vary
from place to place. HSBC has to be upgraded with different types of regulations of different
nations. The legal factors have considerable influence on the cross border business of HSBC
and other such international organization (HSBC.com., 2018). As this company is a financial
institution, it has to be upgraded with several legal boundaries and activities of nations.
9

However, due to globalization the legal factors of nations have become more or less similar
and this has benefited the organizations by reducing legal complications to a little extent.
Conclusion
The above discussion provides a comprehensive understanding of the cost of globalization by
analyzing its impact on individuals and a business organization. It also analyses the influence
of globalization on global business environment. It is observed that, the global financial
scenario has been impacted the most due to globalization. It mostly has positive impact on the
global economy. The global economy is on a sharp rise and the blessing of globalization has
become evident in the fast development and civilization. The international activities of HSBC
have been benefited immensely due to globalization. However, globalization has proved to
have harsher impact on the global climate. Organizations like HSBC are now considering its
negative impact on nature and are trying to redeem it by initiated several initiatives, chiefly
aiming at reducing exploitation of natural resources as much as possible.
10

Reference list
About.hsbc.co.uk. (2018). Community - About HSBC | HSBC in the UK. [online] Available
at: http://www.about.hsbc.co.uk/hsbc-in-the-uk/community [Accessed 10 Mar. 2018].
Amavilah, V.H., Asongu, S. and Andres, A., 2014. Globalization, peace & stability,
governance, and knowledge economy.
Basel Action Network. (2018). Safeguarding people & the planet from the global toxic trade..
[online] Available at: http://www.ban.org/ [Accessed 10 Mar. 2018].
Cleveland, M., Rojas-Méndez, J.I., Laroche, M. and Papadopoulos, N., 2016. Identity,
culture, dispositions and behavior: A cross-national examination of globalization and culture
change. Journal of Business Research, 69(3), pp.1090-1102.
Efrat, K., 2014. The direct and indirect impact of culture on innovation. Technovation, 34(1),
pp.12-20.
Gbm.hsbc.com. (2018). Globalisation | Insights | HSBC. [online] Available at:
http://www.gbm.hsbc.com/insights/technology/globalisation-external-forces-driving-
corporate-growth-and-expansion [Accessed 10 Mar. 2018].
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford
University Press, USA.
HSBC.com. (2018). HSBC Group corporate website | HSBC Holdings plc. [online] Available
at: http://www.hsbc.com [Accessed 10 Mar. 2018].
Inman, P. (2018). HSBC starts laying off 840 IT staff in UK. [online] the Guardian. Available
at: https://www.theguardian.com/business/2016/may/16/hsbc-job-losses-840-it-staff-uk
[Accessed 10 Mar. 2018].
Milanovic, B., 2016. Global inequality: A new approach for the age of globalization.
Panoeconomicus, 63(4), pp.493-501.
Mutalemwa, D.K., 2015. Does globalisation impact SME development in Africa?. African
Journal of Economic and Management Studies, 6(2), pp.164-182.
Najam, A., Runnalls, D. and Halle, M., 2016. Environment and Globalization: Five
Propositions (2010). The Globalization and Environment Reader, p.94.
11

Thai, K.V., Rahm, D. and Coggburn, J.D. eds., 2017. Handbook of Globalization and the
Environment. Routledge.
Tradingeconomics.com. (2018). GDP Growth Rate - Forecast - 2018-2020. [online]
Available at: https://tradingeconomics.com/forecast/gdp-growth-rate [Accessed 10 Mar.
2018].
Zajda, J., 2015. Globalisation and its impact on education and policy. In Second International
Handbook on Globalisation, Education and Policy Research (pp. 105-125). Springer,
Dordrecht.
12